The United States Court of Appeals for the First Circuit recently affirmed the dismissal of a complaint filed by plaintiff homeowners and held that plaintiffs could not challenge the assignment of their mortgage by the Mortgage Electronic Registration System (“MERS”), and held that their mortgage was not obsolete under Massachusetts law despite having been accelerated more than five years earlier. See Hayden v. HSBC Bank USA, Nat’l Ass'n, as Tr. for Wells Fargo Asset Sec. Corp. Mortg. Asset-Backed Pass Through Certificates Series 2007-PA3, 956 F.3d 69 (1st Cir. 2020). In 2007, plaintiffs executed a mortgage identifying MERS as the mortgagee, acting “solely as a nominee” for the original lender and its successors and assigns. It eventually was assigned to defendant, as trustee for a trust. Plaintiffs defaulted in 2008 and, after a series of bankruptcy filings and a notice of foreclosure sale, plaintiffs sued defendant and claimed that (i) the mortgage was invalid both because MERS could not assign the mortgage without holding beneficial title to the underlying property and because the assignment violated the trust’s pooling and service agreement; and (ii) the mortgage was invalid under Massachusetts’s obsolete mortgage statute, which states that mortgages become obsolete and should be discharged five years after maturity. The District Court dismissed plaintiffs’ complaint, and plaintiffs appealed.
The Court affirmed. First, the Court found that the MERS assignments of the mortgage were valid, citing First Circuit precedent and holding that “a mortgage contract can validly make MERS the mortgagee and authorize it to assign the mortgage on behalf of the lender to the lender’s successors and assigns.” The Court likewise held that borrowers do not have standing to challenge whether an assignment violated a trust’s pooling and service agreement. Second, the Court rejected plaintiffs’ claim that the mortgage was obsolete under Massachusetts law. See Mass. Gen. Laws Ann. ch. 260, § 33 (“A power of sale in any mortgage of real estate shall not be exercised and an entry shall not be made nor possession taken nor proceeding begun for foreclosure of any such mortgage after the expiration of . . . 5 years from the expiration of the term or from the maturity date.”). The Court found that this statute did not apply and held that “[n]othing in the text of the statute supports [plaintiffs’] assertion that the acceleration of the maturity date of a note affects the five-year limitations period for the related mortgage.” (Emphases in original).