Building on a string of victories in the state courts, Mortgage Electronic Registration Systems, Inc. (MERS), the national mortgage nominee, has now won a ruling from a federal appeals court that upholds its right to foreclose.

In a previous legal alert, we noted that trial judges have consistently rejected claims by borrowers that MERS doesn’t enjoy the same legal right to foreclose as a lender. With decisions from state appellate courts in California, Utah and Michigan, we reported that the trend was starting to solidify.

Now, the 10th Circuit Court of Appeals has declared that MERS must be granted the right to foreclose. The December 23 opinion comes in a consolidated appeal of three decisions by federal judges in Utah that rejected all of the borrowers’ arguments to the contrary.

In Commonwealth Property Advocates LLC v. MERS, the 10th Circuit held that “by the clear language of the deeds of trust, MERS has the authority to foreclose and sell the property on behalf of both the original lender and the ‘lender’s successors.’”

The 10th Circuit panel relied heavily on a decision from the Utah Court of Appeals in which Ballard Spahr had successfully represented the defendants.

The borrowers pointed to a Utah statute to argue that MERS lacked authority under state law to foreclose. But the 10th Circuit flatly rejected the argument. “The statute merely says the transfer of a debt operates as the transfer of the security,” U.S. Circuit Judge Bobby R. Baldock wrote for the unanimous three-judge panel. “It says nothing about who is or is not authorized to foreclose on a trust deed.”

Judge Baldock noted that the Utah Court of Appeals reached an identical conclusion when it held that “the Deed of Trust explicitly gave MERS the right to foreclose on behalf of ‘Lender and Lender’s successors and assigns.’”

Ballard Spahr’s Consumer Financial Services Group has substantial experience in defending financial institutions against the kinds of claims advanced by borrowers in this case. The group is nationally recognized for its skill in litigation defense, its guidance in structuring and documenting new consumer financial services products, and its experience with the full range of federal and state consumer credit laws throughout the country. For more information, please contact Practice Leader Alan S. Kaplinsky, 215.864.8544 or; Practice Leader Jeremy T. Rosenblum, 215.864.8505 or; or Anthony C. Kaye, 801.531.3069, or

The Consumer Financial Services Group also produces the CFPB Monitor, a blog that focuses exclusively on important news about the Consumer Financial Protection Bureau. To subscribe, use the link provided to the right. The group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). 

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