Excerpted from Infobytes, a weekly electronic newsletter on developments in financial services law from BuckleySandler LLP. For the full issue of Infobytes, click here: http://www.buckleysandler.com/infobyte-detail/infobytes-july-27-2012
On July 19, the Oregon Supreme
Court accepted certified questions arising from four cases pending
in the U.S. District Court for the District of Oregon related to the role of an
electronic mortgage registry as beneficiary. Brandrup v. ReconTrust Company,
N. A. (S060281) (question certified from D. Or. Case No. 3:11-cv-1390-JE).
The judge in those matters asked Oregon's highest court to determine whether
under state law (i) such a registry, that is neither a lender nor successor to
a lender, may be a "beneficiary," (ii) an electronic registry may be
designated as beneficiary where the trust deed provides the registry holds only
the legal title to the interests granted by the borrower, but, if necessary to
comply with law or custom, the registry has the right to exercise any or all of
those interests, (iii) the transfer of a promissory note from the lender to a
successor results in an automatic assignment of the securing trust deed that
must be recorded prior to the commencement of nonjudicial foreclosure, and (iv)
an electronic registry can retain and transfer legal title to a trust deed as
nominee for the lender, after the note secured by the trust deed is transferred
from the lender to a successor or series or successors. The court's decision on
these questions may also have implications for a recent decision in which the a state appellate
court held that, under Oregon law, the term beneficiary can only mean the
person named or otherwise designated in the trust deed as the person to whom
the secured obligation is owed. Niday v. GMAC Mortgage LLC, No. CV
10020001, 2012 Ore. App. LEXIS 893 (Or. App. Ct. Jul. 18, 2012). As such, the
court held, a beneficiary that uses an electronic registry, and does not
publicly record assignments of a trust deed, cannot avail itself of the state's
nonjudicial foreclosure process. That holding is contrary to substantial Oregon
Recently, in matters pending in California regarding similar issues, two appellate courts rejected challenges to an electronic registry's role as beneficiary brought by borrowers as a defense in their foreclosure actions. Taasan v. Family Lending Services, Inc., No. A132339, 2012 Cal. App. Unpub. LEXIS 5073 (Cal. Ct. App. 1st. Dist. Jul. 10 2012); Skov v. U.S. Bank N.A., No. H036483, 2012 Cal. App. LEXIS 779 (Cal. Ct. App. 6th Dist. Jun. 8, 2012). For example, in Taasan, the court held that the foreclosing entity need not have physical possession of the note in order to initiate a nonjudicial foreclosure.
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