DC AG Issues Opinion Letter Affecting MERS, DC Nonjudicial Foreclosures

Washington, D.C. Attorney General Peter Nickles issued an opinion letter asserting that certain notices used to commence foreclosures in DC may supposedly mislead homeowners and allegedly violate DC's consumer protection law. According to the DC AG, "a foreclosure may not be commenced against a DC homeowner unless the security interest of the current noteholder is properly supported by public filings with the District’s Recorder of Deeds."


A copy of the opinion letter is available at:

http://newsroom.dc.gov/show.aspx?agency=occ§ion=2&release=20673&year=2010&file=file.aspx%2frelease%2f20673%2fforeclosure%2520statement.pdf

According to the DC AG, "[a] noteholder’s security interest in a DC home should normally be reflected in the public land records maintained by the District’s Recorder of Deeds. Under District law, in contrast to the laws of many states, each deed or other document transferring a mortgage interest must be recorded with the Recorder of Deeds within 30 days of execution. This requirement is not satisfied by private tracking of mortgage interests through the Mortgage Electronic Registration Systems (MERS)."

As you may recall, DC has a non-judicial foreclosure process that begins with a Notice of Foreclosure on a form prescribed by the Recorder of Deeds. The form requires identification of a “Holder of the Note” and a “Security Instrument recorded in the land records of the District of Columbia.”

According to the DC AG, “[t]he homeowner who receives such a notice is entitled to presume that the recordation of the security interest complies with District law, and that each intermediate transfer of the security interest between the original maker of the note and the current holder of the note is documented in the public record. ...When a foreclosure sale notice misrepresents to a homeowner that the foreclosing noteholder has a recorded security interest, the homeowner may fail to seek legal help in determining whether there may be a good basis for challenging the foreclosure in court. Misrepresentations of material facts, when made to homeowners or other consumers, violate the District’s Consumer Protection Procedures Act, which is enforced by the attorney general."

The enforcement statement invites “homeowners or their advocates” to inform the Office of the Attorney General (OAG) if foreclosures “continue to be commenced or pursued with deceptive foreclosure sale notices” in order that the Office may consider bringing enforcement actions to stop foreclosure proceedings and seek restitution for consumers.

MERS issued a press release response, which is available at:

http://www.mersinc.org/news/details.aspx?id=250