Fannie Mae Says No More Foreclosures in MERS’ Name

Check out Fannie Mae’s Miscellaneous Servicing Guidelines Changes for March 30, 2010, here.

On Page 3, Fannie Mae says:

“Effective with foreclosures referred on or after May 1, 2010, MERS must not be named as a plaintiff in any foreclosure action, whether judicial or non-judicial, on a mortgage loan owned or securitized by Fannie Mae.

MERS is the mortgagee of record when either a mortgage names MERS as the original mortgagee and is recorded in the applicable land records, or a completed and recorded assignment names MERS as the mortgage assignee. Therefore, when MERS is the mortgagee of record, the servicer must prepare a mortgage assignment from MERS to the servicer, and then bring the foreclosure in its own name, unless Fannie Mae specifically requires that the foreclosure be brought in the name of Fannie Mae. In that event, the assignment must be from MERS to Fannie Mae, in care of the servicer at the servicer’s address for receipt of notices. In all cases, the assignment from MERS to the servicer or Fannie Mae must be recorded before the foreclosure begins.

Fannie Mae will not reimburse the servicer for any expense incurred in preparing or recording an assignment of the mortgage loan from MERS to the servicer or to Fannie Mae.

If an assignment has been recorded from MERS to either the servicer or Fannie Mae and the borrower reinstates the mortgage loan prior to completion of the foreclosure proceedings, the servicer need not re-assign the mortgage to MERS and re-register the mortgage with MERS. Re-assigning and re-registering the mortgage with MERS is not required by Fannie Mae and any such action will be at the discretion and expense of the servicer.

The servicer should consult its foreclosure attorney to determine if any other legal requirements apply when conducting foreclosures of mortgage loans in which MERS is the prior mortgagee of record.”

Christine here. It’s interesting that Fannie Mae is issuing these instructions, but apparently no one’s told them that a servicer isn’t a real party in interest. If this assignment is attacked, the entire foreclosure could be derailed by the borrower.

If Fannie Mae is concerned about MERS’ involvement and losing cases, I wonder why they didn’t just instruct servicers to foreclose in Fannie Mae’s name. If Fannie Mae is the investor on the loan, they would be the real party in interest, not the servicer.

Fannie Mae is probably just trying to convey the message that they don’t want servicers foreclosing in MERS’ name. They probably aren’t hip to the legal problems with respect to these assignments….at least not yet!

Thanks to Deontos for sending this to me.

DISCLAIMER:

****CHRISTINE SPRINGER IS NOT A LICENSED ATTORNEY. THIS BLOG IS COMPRISED OF HER OPINIONS, OBSERVATIONS AND INTERPRETATIONS AND IS NOT INTENDED TO BE CONSTRUED AS LEGAL ADVICE. PLEASE CONSULT WITH AN ATTORNEY BEFORE RELYING ON OR TAKING ANY ACTION BASED ON THE INFORMATION IN THIS BLOG.****

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