Withdraw Of Non-judicial Foreclosure Sale Renders Injunction Moot But Oregon Court Warns That Because Mers Was Not A Beneficiary Of The Note The Assignment Of The Note Requires It Be Recorded

In Bangs v. Quality Loan Services Corp., of Washington, 6:12-CV-1543-AA (D. Or. Mar. 8, 2013), the Plaintiffs brought suit to enjoin a non-judicial foreclosure sale alleging that the loan servicer has not complied with Oregon’s foreclosure laws. They alleged that they obtained a loan from New Freedom Mortgage Corporation and signed a deed of trust to secure the mortgage loan, which identified Mortgage Electronic Registration Systems (MERS) as the beneficiary under the deed. When the servicer began foreclosure, Plaintiff’s sued asserting that MERS was not a proper beneficiary and that its purported assignment was improper. They also alleged that the original lender never recorded an assignment of its interest in the deed so a nonjudicial foreclosure could not take place where all the assignments of the deed of interest in the trust have not been recorded. In response, Defendant voluntarily elected not to pursue a non-judicial sale and successfully moved to dismiss plaintiff’s suit because the voluntary dismissal of the non-judicial foreclosure rendered the injunction action moot. In considering whether to award Plaintiffs fees and costs, the court observed that the Plaintiffs did have a strong chance of prevailing because of the servicer’s failure to follow the recording requirements of Oregon law. The court relied on the most recent pronouncement on this issue by an Oregon state court, _Niday v. GMAC Mortq., LLC_, 251 Or.App. 278 (2102), which held, as a matter of first impression, that MERS is not a beneficiary so the assignment of the promissory note requires it be recorded. The court further observed that the complaint demonstrates why proper recording is important because [w]hen the loan and the deed of trust are split in such a manner, it becomes difficult for the mortgagor to negotiate a modification that is beneficial to the real parties who hold a financial interest in seeing that the mortgage is paid. It concluded that [w]hile it could be argued that plaintiffs incurred expenses necessitated by defendant’s failure to rescind the notice until after the filing of the complaint and after the granting of temporary relief, under the totality of the circumstances, the court declines to award costs and certainly attorney’s fees.

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