Brandrup v. ReconTrust Co.

Under the Oregon Trust Deed Act, (1) MERS cannot act as the “beneficiary” under the OTDA unless it is a lender’s successor in interest; (2) a “beneficiary” under OTDA is lender owed the obligation secured by the trust deed; (3) OTDA does not require that assignments resulting from the transfer of a promissory note be recorded before a non-judicial foreclosure; and (4) MERS cannot hold or transfer legal title to a trust deed because it holds neither a beneficial interest nor the legal interest of the trustee.

The United States District Court for the District of Oregon received several cases dealing with issues surrounding the Oregon Trust Deed Act (OTDA) and its application regarding assignment of mortgage contracts to a third-party corporation called Mortgage Electronic Registration Systems (MERS). The District Court certified four separate questions to the Oregon Supreme Court. Under ORS 86.705(7), a trust deed is a deed executed under the OTDA that "conveys an interest in real property to a trustee in trust to secure the performance of an obligation the grantor or other person named in the deed owes to a beneficiary." MERS is a national electronic database that tracks changes in mortgage ownership throughout the country, as well acts as the designated mortgagee or beneficiary for all mortgages and trust deeds registered in the database. In each identical case, a homeowner financed a home mortgage through a lender participating in MERS and signed a Deed of Trust that split the beneficiary's role in the agreement between MERS and the lending institution. In the following years, each homeowner allegedly defaulted on his or her mortgage, MERS, acting as a beneficiary, then assigned the trust deeds to the reputed ultimate successor in interest of the original lender. The Oregon Supreme Court held that (1) MERS cannot act as the “beneficiary” under the OTDA unless it is a lender’s successor in interest; (2) a “beneficiary” under OTDA is a lender owed the obligation secured by the trust deed; (3) OTDA does not require that assignments resulting from the transfer of a promissory note be recorded before a non-judicial foreclosure; and (4) MERS cannot hold or transfer legal title to a trust deed because it holds neither a beneficial interest nor the legal interest of the trustee. Certified questions answered.