State Appeals Court Rules that Tax Lien Purchasers Must Give Notice to MERS
Reston, Virginia – May 15, 2013 – (RealEstateRama) — MERSCORP Holdings, Inc. today announced that a three-judge panel of the Arizona Court of Appeals reversed a trial court decision, which granted quiet title, or outright ownership, of an Arizona property to an individual who was granted an interest in the property after paying the delinquent property taxes.
In Delo v. GMAC Mortgage, LLC, Presiding Judge Garye L. Vásquez and Judges Philip G. Espinosa and Virginia C. Kelly unanimously ruled that “those who purchase tax liens and seek to foreclose on them must give MERS notice of the foreclosure proceedings when they are identified in the deed of trust.”
In this case, Delo, the tax-lien purchaser, failed to name MERS, the record beneficiary of the deed of trust, a defendant in his tax-lien foreclosure lawsuit against the borrowers and original lender or subsequent quiet title action against the loan servicer, GMAC Mortgage and note owner, U.S. Bank (the “GMAC Parties”). Delo claimed that he was not required to name MERS in either action because MERS was only an agent of the original lender, who he named and received a judgment against in his tax-lien lawsuit. In the quiet title action, the GMAC Parties claimed that their interest in the property was superior to Delo’s interest and argued that Delo should have given notice to MERS in both actions, however the trial court disagreed and found that the GMAC Parties were given adequate notice of Delo’s tax-lien lawsuit and their claims in this second lawsuit were now barred. The GMAC Parties appealed the trial court decision and MERS intervened in the present court of appeals matter.
The Court of Appeals found that the deed of trust “not only expressly identifies MERS as the nominee for the lender, but also beneficiary, and the holder of legal title to the Property.” The Court found that Delo should have provided notice of the tax lien foreclosure lawsuit to MERS because MERS’ interest in the property was acquired before Delo had acquired his interest. Therefore, the Court ruled that the trial court should have rendered judgment in favor of the GMAC Parties because their interest in the property was protected by MERS’ record interest.
“It’s important to note that MERS as the designated lender’s nominee under the deed of trust, protects the interests of its members who service or own the particular mortgage loan secured by a MERS security instrument,” said MERSCORP Holdings’ Director for Corporate Communications Jason Lobo. “Many times, as was the case here, homeowners default on their property taxes before defaulting on their mortgage loan. Tax lien purchasers and the taxing authorities should be aware of MERS’ right to notice as agent for the original lender and its successors and assigns.”
For descriptions of cases and other materials pertaining to MERS’ business model and role in U.S. housing, please visit www.mersinc.org.
MERSCORP Holdings, Inc. is a privately held corporation that owns and manages the MERS® System and all other MERS® products. It is a member-based organization made up of thousands of lenders, servicers, sub-servicers, investors and government institutions. Mortgage Electronic Registration Systems, Inc. (MERS) serves as the mortgagee in the land records for loans registered on the MERS® System, and is a nominee (or agent) for the owner of the promissory note. The MERS® System is a national electronic database that tracks changes in mortgage servicing and beneficial ownership interests in residential mortgage loans on behalf of its members.
Email: jasonl (at) mersinc (dot) org