Higgins v. BAC Home Loans Servicing, LP, No. 14-6168 (6th Cir. 2015)
Annotate this CaseKentucky’s statutes require that assignment of a mortgage must be recorded within 30 days. Plaintiffs, landowners with mortgages, argued that, for purposes of that requirement, a transfer of a promissory note is an assignment of a mortgage securing the note, and must be recorded. The issue arose because of the use of the Mortgage Electronic Registration System (MERS), a private company that operates a national electronic registry to track servicing rights and ownership of mortgage loans. When a home is purchased, the lender obtains promissory note and a mortgage naming MERS as the mortgagee (as nominee for the lender and its successors). The borrower assigns his interest in the property to MERS, and the mortgage is recorded in local records with MERS as the named mortgagee. When the note is sold in the secondary mortgage market, the MERS database tracks that transfer. MERS remains the mortgagee of record, avoiding recording and other transfer fees and continues to act as an agent for the new owner of the note. The district court agreed with plaintiffs. The Sixth Circuit reversed. The text, structure, and purposes of Kentucky’s recording statutes (KRS 382.365(5)) indicate that transfer of a promissory note is not, itself, an assignment of a mortgage securing the note.
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