(CN) - A Boston federal judge has ordered the foreclosure of a woman's home by a labyrinthine mortgage-servicing system that courts have blasted for defining its role "in much the same way that the blind men of Indian legend described an elephant."
Oratai Culhane sued Aurora Loan Services to prevent the imminent foreclosure of her family's home in Milton, Ma. She argued that the property was not properly assigned from Mortgage Electronic Registration Systems (MERS), the original mortgagee, to Aurora, and therefore Aurora had no standing to foreclose on her home.
But U.S. District Judge William Young dismissed the case on summary judgment Monday, saying Aurora can proceed with the foreclosure.
Young's ruling made a "searching inquiry" of the MERS system, which he described as "the Wikipedia of land registration systems."
MERS maintains an electronic registry that stores information about who originates, services and owns mortgage loans. It "has a hand in 60% of the nation's residential mortgages," according to the judgment. MERS members pay a fee to access the registry, and they agree to name MERS as the "mortgagee of record" with respect to any mortgage registered on the database.
Courts have expressed bewilderment as to MERS' claim to be the mortgagee as well as "a separate corporation that is acting solely as nominee for the lender," Young wrote, noting that one said MERS defines its role "in much the same way that the blind men of Indian legend described an elephant - their description depended on which part they were touching at any given time."
But "the notion that MERS is pejoratively 'two-faced' derives" from a faulty understanding of MERS legal position, Young added. "By holding bare legal title to the mortgages for the purpose of recording them in its name, MERS allows for the underlying notes to be transferred freely and without clouding title."
Therefore, although "a MERS certifying officer is more akin to an admiral in the Georgia navy or a Kentucky colonel with benefits than he is to any genuine financial officer," Young found that "the MERS system supplies the thinnest possible veneer of formality and legality to the wholesale marketing of home mortgages to large institutional investors."
"Even strict compliance with the statutory terms does nothing to ensure that real property is not conveyed fraudulently," Young wrote.
"Homeowner-mortgagors, as non-parties to the assignments of their mortgages, are left with little recourse where they suspect impropriety," the 59-page decision states.