Banks’ Right To Foreclose Challenged

Rebecca Niday v. GMAC Mortgage, LLC

*Please be sure to read the disclaimer at the bottom of the page*

This landmark court case is being fought in Oregon at the state level and pertains to Banks’ mortgage servicing practices and calls into question whether a given bank has met the criteria required for it to pursue a non-judicial foreclosure. With the logic following that if the Bank cannot prove that it is the beneficiary then of course it cannot foreclose on a borrower for non-payment. The Niday case argued that Mortgage Electronic Registration System (MERS for short) was a tool used by banks to exploit a loophole because MERS didn’t actually own the loan. At the risk of oversimplifying, banks would name MERS as the owner of a mortgage with county and then sell “interests” in that mortgage to various groups without re-conveying the note at the county.

MERS: How To Sell A Mortgage Without Actually “Selling” It

Initially it appeared that GMAC had won however as of 01/08/2013 the case was being heard in the Oregon Supreme Court. According to, the heart of the matter is this: “any assignments of the trust deed by the trustee or the beneficiary” must be “recorded in the mortgage records in the counties in which the property described in the deed is situated.” ORS 86.735… And it looks like banks just filled in MERS as the beneficiary so they could trade bundled mortgages around on Wall Street without the hassle of actually assigning the loan at county.
Dept Of Justice Niday in The Oregon Supreme Court

Judicial Foreclosure

Oregon has traditionally been a non-judicial foreclosure state (since 1959) which basically means that a bank can foreclose through an out of court process known as a trustee’s sale as long as it meets certain requirements. Niday maintains that the bank did not meet those guidelines due to bank’s selling loans on the secondary market without recording the transfer in the county of the property. This non-judicial foreclosure process was favored because it takes strain off the public court system and is also simpler for banks to process (with the assumption that consumers would save money as a result of banks saving money… yeah, right).

How Does This Affect Us?

No one can say for sure but the fact that hundreds, perhaps thousands of foreclosures were halted over the summer leads myself and many others to believe that prices may settle when those foreclosures start working through the traditional, judicial foreclosure system. Essentially, it seems that the bank can still foreclose on the house, they just can’t use the streamlined Trustee’s Sale. However, it seems that the final word hasn’t been spoken on where this will go at the Oregon Supreme Court.

*Disclaimer: We are Real Estate Brokers, not attorneys. This article is opinion and is written with multiple citations so that consumers may fact-check and educate themselves. This article in no way replaces legal counsel from a lawyer. Borrowers unsure of their situation are encouraged to contact an attorney or we can refer you to a few. Those wishing to complete a short sale are strongly encouraged to call us.