Mortgage Electronic Registration Systems, Inc. better known as MERS won a significant victory in court on Tuesday as the U.S. Court of Appeals for the 11th Judicial Circuit validated its rights to assign a security deed and/or foreclose on secured property.  The decision upheld the decision of the U.S. District Court for the Northern District of Georgia in Smith V. Saxon Mortgage.

The plaintiff in the original case had contested the foreclosure of her home on the grounds that:

1).   The assignment of the security deed was invalid because MERS, as nominee of a defunct lender could not assign the documents of its own volition.

2.     The "splitting" of the mortgage and the note rendered the mortgage null and void and therefore notices of foreclosure were invalid as not coming from a secured creditor.

In the original District Court opinion in March 2011, U.S. Magistrate Judge Janet F. King pointed to the standard language in the Georgia security deed signed by all borrowers at closing which grants MERS the power to act on behalf of the current and future owners of the loan.  .   "Unless the instrument creating the power specifically provides to the contrary . . . an assignee thereof . . . may exercise any power therein contained," Judge King wrote. "[T]he Security Deed . . . transfers rights to MERS, and MERS' assigns may exercise any power contained therein."

The 11th District Court which has jurisdiction over federal cases originating in the states of Alabama, Florida and Georgia, agreed with Judge King's recommendation.  "It is not disputed that plaintiff executed the Security Deed which granted MERS the power to sell the Property, if plaintiff was not able to comply with the terms of the Note," Senior U.S. District Judge William O'Kelley wrote. "Furthermore, the Security Deed expressly states that it applies to MERS '[and] to the . . . assigns of MERS.' Pursuant to the terms of the Security Deed, MERS had authority to assign the Security Deed."

MERS issued the following statement in response to the District Court decision. 

"A significant body of clear and specific federal case law is coming together with this decision from the 11th Circuit Court of Appeals, along with favorable rulings from the First, Fourth, Fifth, Eighth, Ninth, and Tenth circuit appellate courts and U.S. District Courts in a number of states," said Janis L. Smith, MERSCORP's vice president of corporate communications. "The 11th Circuit's ruling underscores the soundness of MERS' business model by solidifying the legality of MERS' role in the security deed, explaining how that role came about, and clarifying MERS' power to act on behalf of the lender."