Devastating Analysis of MERS

We’ve tended to think the securitization industry is in for a world of hurt even before you get to the legal and practical mess created by MERS. A national registry done correctly could have been a very useful, but “correct” was apparently too hard (as in costly) to be seen as attractive to the mortgage industrial complex. And the stripped down version is proving to be a disaster.

I’ve read a number of legal analyses of MERS, and this is one of the tidiest I’ve seen of what is so wrong headed about it. I try to avoid long extracts with limited commentary of my own, but I think you’ll see why I’m treating this selection as worthy of your consideration. The full paper, “The MERS Mortgage in Massachusetts” was sent by the author Robert Ludden to 4ClosureFraud, and you can download it there.

A “continuity” made of smoke and mirrors. In the MERS model, the mortgage doesn’t pass by assignment from one owner to the next by formal assignment; in fact, it really doesn’t pass at all, at least not in any ordinary sense that would involve time and a sequence of events. Rather, in the Mersian world there is a kind of simultaneity of time and event in which all ownerships of the mortgage exist ab initio by virtue of the MERS membership agreement and do not have to be independently established. It is very much a framework of interrelationships in the form of a venn diagram. Let’s say that a particular mortgage changes hands three times before it is foreclosed— which would mean a total of four owners. And let’s use a circle to represent each of the four owners. In the MERS model, these four circles are arranged symmetrically so that each one overlaps the other three in equal measure to form a common area at the center. That common area is MERS acting, as Arnold has said, as a “common agent” with respect to that mortgage. Because each owner is already tied conceptually to the mortgage, there is no need for an assignment and MERS, in its capacity as agent, may therefore simply remain the mortgagee of record at the local land office. Indeed, the MERS model is in many ways quite elegant. But the complex and recondite nature of the thing has served well to obscure its falsity under well-settled principles of agency and contract law.

There is a point about which we must be very clear from the outset, and it is one that has been overlooked in a number of foreclosure cases: what is “common” to MERS members is the use of MERS as their agent—not the ownership of the mortgage itself. Membership in MERS cannot and does not establish a joint ownership of the mortgage. Given the functional identity between principal and agent and the fact that MERS is acting in a representative capacity, ownership of the mortgage must still pass from Lender A to Owner B regardless of whether or not they happen to be using the same agent. The same principle would apply to any subsequent transfer, as, say, from Owner B to Owner C, all the way down to the foreclosing entity. There is no legal authority in Massachusetts that stands for the proposition that the mere use of a common agent serves to transfer ownership of the mortgage with regard to which the agency has been established.

Putting absurdity aside, let us nonetheless assume for argument’s sake that the opposite is true. There is yet a further problem: the MERS model, like our venn diagram, is spatial, but the twin realities of ownership and representation are both spatial and temporal; thus the MERS model is unavoidably static, while the transactional reality it seeks to control is dynamic.

Stated less abstractly, before MERS can represent Lender A with regard to the mortgage, Lender A must in fact own the mortgage. The point is elementary and applies in equal measure to all subsequent owners: the ownership of the mortgage by the principal must precede, in time, any authority the agent may have to act with regard to that mortgage. This follows from the well-settled principle that an agent cannot do what the principal herself cannot not do.33 However, the MERS model turns the reality on its head by asserting that ownership of the mortgage passes without the need for an assignment precisely because the agency relationship was established first in time via the MERS membership agreement.

A somewhat overlapping problem is this: In the MERS model, there is again no need for a written assignment anytime the mortgage changes hands—unless the mortgage is going to be foreclosed by someone other than Lender A or removed from the MERS system. An unavoidable side-effect of this is that Lender A remains the mortgagee of record at the local land office, albeit with MERS acting on its behalf. In other words, the clear implication is that Lender A’s status as mortgagee at the local land office somehow survives the multiple transfers of the note that take place along the road to securitization. But MERS cannot have it both ways: the MERS model is designed in its own way to tie ownership of the mortgage to ownership of the note—which means that once Lender A has sold the note it has no further interest in the mortgage and its continuing status as mortgagee in the land office records34 is at best a negligent misrepresentation and at worst an act of fraud. It is also in any event a breach of the complete transparency required under G.L. c. 244, § 14.35 This “personality disorder” has a further consequence as well.

Because Lender A remains the mortgagee of record, any subsequent assignment of the mortgage must name Lender A as the grantor in order not to memorialize a discontinuity in the chain of ownership and thus cast a cloud on the title; if Lender A (with MERS as it agent) is the mortgagee of record there cannot be an assignment from the true present owner of the mortgage, say, Owner C. And here we meet the same conundrum: if we accept the validity of the “common agent” device by which MERS avoids the need for assignments, Lender A no longer owns the mortgage and has nothing left to assign; thus an assignment directly from Lender A is also at best a negligent misrepresentation and at worse an act of fraud. Its failure to name the true grantor would be contrary to existing law.36 If the assignee happened to be a part of the mischief, it would further diminish her authority to foreclose the mortgage.37 Again, the assignment would violate the statutory requirement of transparency. It is upon this bedrock of sober fact that the mortgage industry and registry officials must weigh the integrity—and indeed the legality—of every recorded assignment directly from MERS as nominee for the originating lender to the foreclosing entity in a case where there have been interim owners.

There is yet another wrench in spokes of the MERS model. Even if the “common agency” mechanism could somehow allow Lender A’s role as mortgagee to survive multiple transfers of the note on the secondary market, and if, as Arnold has said, the mortgage follows the note, the agency relationship vis-à-vis the mortgage ends when the note is transferred; like Lender A’s status as mortgagee, it cannot survive the transfer. This owes itself to a few basic principles of agency law. Without an interest to assign, the agency relationship between MERS and Lender A that was established in order to act with regard to that mortgage interest necessarily ends; Lender A’s circle is in effect removed from the Venn diagram previously mentioned.

What has happened is that the purpose for which the agency relationship was created no longer exists with regard to that particular mortgage; there has been “an occurrence” the effect of which is to terminate the agent’s authority.38 Once the originating lender, Lender A, has divested herself of her interest in the mortgage, she can no longer be the mortgagee and therefore MERS can no longer act as mortgagee on her behalf vis-à-vis that mortgage. Notice of the termination need not be expressly given to MERS;39 rather its actual authority “may terminate upon the occurrence of circumstances under which the agent should reasonably conclude the principal would no longer assent to the agent’s taking action on the principal’s behalf. If the principal has engaged the agent for a particular task, its completion is such a circumstance.”40 Surely, MERS, with its sophisticated tracking system, is presumptively aware of any termination…

The persistence of MERS as Lender A’s agent in the public record in effect accomplished with smoke and mirrors—and it conjures a host of evils. Yes, every MERS member establishes its own agency relationship with MERS. But immediately upon transfer of the mortgage from Lender A the agency relationship between MERS Lender A ends. The agency between MERS and Owner B is in fact a new and distinct agency relationship—and, given the functional identity between principal and agent, a new and distinct “MERS” as well. Again, in the absence of a valid assignment, the status of MERS as the mortgagee in the public records becomes a misrepresentation of material fact at the very instant the mortgage is assigned by Lender A, and from that point on the mortgage industry is, in effect, using a ghost to do its bidding—and one of dubious character at that. Only the name “MERS” remains; the “continuity” is a chimera, an illusion, the purpose of which is to make an end run around the need for a formal assignment. It has also served as a red herring, distracting courts from the sober fact that the role of MERS as a “common agent,” for all of its theoretical elegance and self-proclaimed validity, simply cannot in its present form be fit into the framework of existing law without inflicting collateral damage upon the very principles of fairness and transparency on which that framework has been built over many years and through many efforts and sacrifices. What this all boils down to it this: in order for MERS to remain the mortgagee of record at the local land office without fraudulently misrepresenting itself as such three things must occur.

First, since an assignment of mortgage is a conveyance of an interest in land that requires a writing signed by the grantor,41 there must in fact be an assignment of the mortgage from Lender A to Owner B. If the public record indicates that the mortgage is being held by MERS on behalf of Lender A, the assignment must be from MERS on behalf of Lender A. Second, the assignment must make clear that the mortgage will be held by MERS in its capacity as agent for Owner B; that is, it must say something to the effect that “MERS, solely as nominee for Lender A, hereby transfers its interest in the mortgage to MERS, solely as nominee for Owner B.” This distinction is not an easy one to draw, but it is essential to knowing the substance of the transaction. And third, to avoid discontinuity in the land office records and allow for proof of ownership in the event of foreclosure, the assignment must be recorded. The same would apply to a subsequent transfer from Owner B, and so forth all along the chain of ownership.

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  1. R Foreman

    Soooo… who owns the note ? I’m kind of disposed to the idea of squatters rights, adverse possession, or something along this vein. :)

  2. Siggy

    The meaning of this is that if MERS is styled as the holder of the mortgage, the PSA has probably not been followed and the holders of the mortgage backed bonds do not have recourse to the hard asset.

    As the holders of the MBS assumed the risk, even if they thought they bought into a very low risk vehicle, they get to absorb the loss. So, who are the holders of the MBS?

    1. bill

      The only thought I can add is a cautionary one. I’m guessing that if the senate tries to retroactively legalize this fraud, and the president signs it into law, things will deteriorate rapidly in many areas of life. The populace will not condone or allow such bold faced treachery. I donty know how it plays out, i only know that covering fraud with more of the same is not a good or safe idea. Not to say compromise and solution cannot be found. They just cant be found in the dark backrooms of the senate. The homeowner should have a seat at the table. afterall, its their thirty years you are throwing around so casually.

    2. Ray Phenicie

      “e PSA has probably not been followed and the holders of the mortgage backed bonds do not have recourse to the hard asset.”

      Thank you for bringing this up-I’ve said the same thing about 50 times here-well maybe 5 times.

      Yves has responded somewhat obliquely by saying that the investors are a cautious lot, by stating they don’t wish to push too hard on what they know to be a creampuff for fear it will crumble into a soggy mess and finally, they are waiting for the State AGs’ offices to move as the point at law criminality in this is really at the state level of statutes-or that’s what I gather.

      I can understand the caution, and like a kid that doesn’t really want to know if the Easter Bunny exists, I can understand not wanting to wait around on Easter eve to see if a bunny in waistcoat and top hat delivers baskets.

      Sooner or later some very prestigious money managers in the markets will need to do just that however and watch mom or dad place the baskets out and then will know-the MBS lock box is not only a legal fiction, it is empty as well.

  3. PL

    Very insightful. Note that the recommended steps for MERS to avoid fraudulently misrepresenting itself while holding a mortgage (assignments & recording,)conflicts with one purpose of MERS (avoid assignments & recording unless foreclosing.) As courts catch on to MERS and uphold longstanding recording requirements, will it go the way of the dodo?

      1. R Foreman

        Meanwhile all the existing properties with clouded titles and multiple claims of ownership, can only be fixed with a massive cash infusion from your good Uncle Sugar, in the amount of, oh, $500 Billion ?

        I like this game of throwing around other peoples’ money.

          1. F. Beard

            Good question. Unless the clouded ownership is only a problem during foreclosure in which case a general bailout of the entire population would ease matters.

            So will the banks themselves become the biggest supporters of a general bailout?

      2. MikeJake

        I don’t think so. I think Congress will certainly try at some point. But what lame Commerce Clause justification can they make to steamroll the real property laws of 50 different states? I don’t see it happening.

        1. ReaderOfTeaLeaves

          I wonder how all the local governments and recorders and land title offices feel about Corker doing the bidding of the banisters, thereby telling them their jobs are mostly meaningless and that local governments should continue losing revenue so that it can be siphoned to big banks via MERS?

          Corker obviously believes this is a political win for him.
          Exhibit 101 of Political Expedience.
          Assume blowback.

          1. Maximilien

            “bankster” auto-corrected to “banister”? Funny. “Bankster” not yet in the MW online dictionary? Sad.

        2. Yves Smith Post author

          Yes, there are over 100 years of Supreme Court decisions declaring real estate to be “dirt” and hence state law. Plus “legalizing” it can’t solve the PSA problems described in the piece.

          And if you could get the Tea Party types to wrap their minds around this, it’s the sort of thing that ought to get them wound up big time.

          1. Procopius

            “Yes, there are over 100 years of Supreme Court decisions declaring real estate to be “dirt” and hence state law.” How is this a barrier to them? We had over 100 years of Supreme Court decisions that corporations are not people and are not allowed to make political contributions, and the Roberts/Alito court threw it all in the waste basket with Citizens United.

          2. Justicia


            I grant that the ethical standards of certain members of the current Court are about as low as a snake’s belly, but if Scalito-Roberts-Kennedy were to sanction such an enlargement of federal power they’d be negating the foundation of their doctrinal position on a host of issues.

          3. Tiercelet


            Foundational principles? The only foundational principle of their doctrine is that the government exists to serve and enrich the powerful. Oh, sure, Scalia’s a little more absolutist about his beliefs than that, but he’s a slippery little weasel, he’d find some justification or another to come up with the decision that supports his class prejudices.

        3. ajax

          I’m wondering if any of the 50 states, or else a
          local government authority, have gone to court to file
          a complaint related to the MERS way of (allegedly)
          transferring ownership (or something) of the
          notes, the IOUs?

          1. Observer

            Yes. Beau Biden (Joe’s son) in Delaware. From the Delaware Attorney General’s website: The suit asks the Court of Chancery to impose various sanctions on
            MERS, including requiring it to audit its records to ensure accuracy, stop foreclosing on homes
            without divulging the true owner of the mortgage, and correct records filed with county Recorder
            of Deeds that do not list the entity that owns the mortgage. The suit seeks a civil penalty against
            MERS of up to $10,000 for each willful violation of the Deceptive Trade Practices Act, as well
            as restitution to borrowers who were harmed by these violations. The exact amount will be
            determined during trial.

          2. PL

            Yes, individual counties looking for revenue have begun to sue MERS. They’ve become cash starved following the real estate bust for several reasons: reduced transfer tax revenues from fewer property sales; more property owners filing tax assessment appeals because home values have dropped; fewer mortgage assignments being recorded.

      3. psychohistorian

        Thanks Paul,

        I have said in comments multiple times that I fully expect our bought congress critters to memorialize the MERS problem away. They are owned by the financial sector and the financial sector is owned by the global inherited rich that I keep saying that we should laugh into rooms at the Hague.

        It says it all in the first three words of the 3rd paragraph quoted, “Putting absurdity aside…..”

        We know who the enemy is but do we have the social will to do something about them?

        1. Paul Tioxon

          I hope you get a chance to read this, but in Philly, the Green Party got 6.5% of the vote for the Sheriff’s office, whose chief job is overseeing real estate foreclosures. The woman who ran was a long time homeless advocate and political activist who broke into HUD properties that were kept heated during the winter so pipes would not freeze, but people could freeze because they were homeless. She was arrested over and over, but this take over tactic of foreclosed and abandoned properties has been used over the years in Philadelphia, and eleswhere. I consider the occupation a wasted resource worth copying by Occupy America Movement.

      4. PL

        Court clerks already have begun suing MERS for failing to record assignments and pay recording fees. For example, Montgomery County PA; El Paso County TX; Duvall County FL; Dallas County TX; Washington County PA on behalf of 67 counties; etc. There will be a show down between those who want to legalize MERS via sweeping legislation such as Senator Corker and discrete counties throughout the country looking for recording fees. We can’t count out local level clerks yet, and if they win, MERS loses.

  4. lambert strether

    Sound like the schema is a one-to-many relation between MERS (the agent) and the owners (many), simplifying freely.

    Unfortunately, there’s no way to map the technical relation to the legal relation, because in fact a “chain” of title is made of one-to-one relations between each link.

    Then again, you could retroactively make the legal relation match the technical relation, and give MERS and those used it for looting retroactive immunity. In a way, that is exactly what was accomplished with FISA, where Congress (Obama voting yes) retroactively legalized a technical implementation that was clearly illegal.

    So the real issue is “What is the law?” And in these two cases, it seems to me that the law is a software implementation, and whoever owns the software implementation owns the law. And the statutes and the rules and the regulations follow after.

    NOTE I would think that the same ideas could be applied to high frequency trading.

    1. ReaderOfTeaLeaves

      Wow… The implications…

      In database design, it is possible to create a ‘one-to-many’ relationship; one car company may have many distributors; one vendor may offer many products, etc cetera.

      But there is also a one-to-one relationship: price:item; word:dictionary entry description; patientName:dateOfBirth, et cetera.

      So let us suppose, in view of your comment, that MERS is a bigSh!tpIle of badly designed, buggy software. The architecture should have stipulated 1:1 design, yet who told the programmers to implement 1:many?

      So are all the laws supposed to be revised because MERS wrote buggy software based on questionable (and ‘questionable’ is my most courteous term) database design?!

      The logical extension is that we will henceforth override our laws to accommodate sh!tty, buggy software — provided the banks, hedge funds, or whoever else shrieks that if we fail to comply with the logic of their buggy software by crying Uncle and retroactively accommodating our laws to enable their … !errors…the economic world as we know it will end?

      Without more judges like Rakoff, with principles, smarts, and a spine, we’ll be in the legal maw of predators who designed software in order to specifically enable plausible deniability and rampant fraud.

      Having read Prof William Black’s observations about the corruption of legal education ( which ECONned also covers) makes clear there is an uphill battle to educate the courts.

      I am quite certain there are serious programmers who read here daily, and I hope a few will note their reactions.

      Mine is that the courts should eviscerate MERS for trying to claim that their buggy software is in any way ‘legal’. And politicos who comply with MERS requests for retroactive absolution should be ridiculed from office.

      1. psychohistorian

        I have 40+ years in systems work. One of the first things you do in system design is develop a logical database design based on entity/relationship diagrams incorporating the 1:1 and 1: many relationships inherent in the proposed system…..a short version.

        Don’t blame me , I’m just the piano player.

      2. liberal

        I just skimmed the stuff that Yves excerpted, but it sounds like it’s not the fault of the database model, but rather the legal/financial model. The latter is craptastic; the former probably just faithfully follows the latter.

        1. ReaderOfTeaLeaves

          The law requires 1:1 at each point in time. So at every frame on a timeline there is a 1:1 relationship.
          MERS appears to have substituted 1:many.

          Last I recall, Moses brought tablets with written * law*, not programming code, down from Sinai.

          The law may be craptastic ( or not) but precedes database design by hundreds, nay thousands, of years.

          Or perhaps I misread your comment?

      3. black dog barking

        If I’m tracking this discussion with comprehension, the existing property/mortgage recording structure requires a 1:1 connection (authorized and documented by wet ink signatures) for every transfer. MERS streamlines the process by moving from paper and ink to the much more pliant environment of electronic bits.

        It looks to me like MERS tries to finesse the 1:1 problem (and the attending requirement to physically record transactions at the local courthouse) by substituting a scripted computer process for the existing wet ink document, recording each transfer as a 1:1 transaction between two of its members. Instead of asking the county clerk who currently owns a given property one instead queries the MERS function and MERS spits out the current state and current owner. If MERS is a perfect black box process then we save oodles of time and money at no loss of accuracy.

        That’s a pretty big if.

        1. readerOfTeaLeaves

          Well, it would be easier to draw sketches than type, but here goes.

          MERSville seems to have four overlapping, concentric circles. Because they overlap, there’s a central region covered by all, called ‘MERS’. We’ll call the circles A, B, C, and D. Because they are all **members** of MERS, the system seems to claim that is some sort of sufficient qualifier for switching ownerships around.

          Except – just for starters – as you point out, how in heck would a county clerk know? There ownership changes were never recorded with the local jurisdictional authority. Which means as I understand this post that MERS is committing fraud — after all, they have not notified the clerk to update the records, so the clerk at the local level may say that ‘A’ is the owner, yet it’s already been transferred to B, then C, then D. But MERS never notified the local land recording entity, so how does anyone know this?

          Then also, the author Yves quotes points out that the shifts in ownership are actually a very temporal, dynamic process.
          In other words, a static Venn diagram of four intersecting circles doesn’t cut it.
          To accurately represent, then write the code for these changes in ownership, you’d start with a timeline and each ‘frame’ (t) of that timeline has a designated ‘key’ (t1, t2, t3, t4… tX).
          So at t1, the ownership might belong to Citi (t1=Citi).
          And at t2, the ownership might belong to JPMorgan (t2=JPMorgan).
          And maybe nothing changes until t755, but then it belongs to WellsFargo, so (t755=WellsFargo).

          At each change in ownership, by failing to alert the local recording offices, MERS committed fraud in the sense that what was written locally was not accurate — not because it was the county recording agent’s errors! It was MERS not notifying them.

          So for MERS to shrug and say that membership in MERS absolved them from having to notify local recording agents is just… beyond strange. Maybe I misread the piece, but if I’m reading it correctly, MERS used its setup to absolve itself from recording to local agencies what was really going on with ownership of title.

          Sorry if this comment was unclear.
          I have more questions than answers on this one.
          MERS is definitely a mess, and to me it is highly suspicious.

          If it is true, as another commenter points out, that Mozillo was involved in its creation then it’s more evidence that it was designed for fraudulent activity, with the added bonus of ‘plausible deniability’. The politicians and agency people who let this mess go through were either complicit, or else duped.

          1. skippy

            ReaderofTeaLeaves, If I may add, they created a multi-dimensional time machine, with the ability to create multiple reality’s. From the point of time which represents a true sale reality T1 (damn any fake sales?), they can without possibility of audit, change the time line any way they like (robo signing et al). Hell they can even temporally and spatially manipulate boundaries by exporting to other geographic locations MBS / CDO / CDS sold world wide. Then leverage the hole taco through the exchanges, all upon other time machines like HFT, and to top it all off running around the planet via black box nodes like a particle accelerator.

            Skippy..sorry its so ruff, could not be bothered filling out. Yet all the liquidity problems remind me of low mass events…I want my Mommy…NOW…tell me its all bad dream…please…tea?

            PS. know wonder they had to get rid of the physical component – wet ink – you can’t go through time with physical mass, too energy constrictive.

          2. readerOfTeaLeaves

            Yes, Skippy. I mostly agree with you.

            Hell they can even temporally and spatially manipulate boundaries by exporting to other geographic locations MBS / CDO / CDS sold world wide.

            While I doubt they could combine the MBS with HFT (which appears to focus on stocks and commodities), I share your suspicions that MERS made it all too easy – and untraceable – for someone to change the ‘ownership’ on a MERS mortgage entry so that they could toss it into their CDO pool and then claim a swap when the mortgages failed.

            It would only require looking up ‘mortgages over 30 days late’ to start culling a search of target houses/mortgages. Then, with the fraudclosure groups incentivized to foreclose, all the more pressure to deliver those ‘failed mortgages’ and cash out at 30:1 odds on a Credit Default Swap gambling they’d fail.

            However, this is a suspicion; I don’t have enough familiarity with the system to know whether it could work this way — but everything that I’ve managed to read about it does suggest that given the large numbers of people who could access MERS, given the near-zero security, and given the financial incentives on CDOs, there was certainly a lot of potential for what you describe to occur.

            Which is why understanding – and prosecuting – MERS matters.

          3. PL

            “I share your suspicions that MERS made it all too easy – and untraceable – for someone to change the ‘ownership’ on a MERS mortgage entry so that they could toss it into their CDO pool and then claim a swap when the mortgages failed.”

            It’s true that MERS records are unreliable because many people may access them. Your theory means this is not a design defect, but rather an intentional feature.

          4. skippy

            RE/CR MBS was the mass* (*validity, dirt, tangibility, et al) to_drive_the credit events, rampant consumption (future demand brought forward), Investing[!], juice up the entire market thingy. This in turn ramped the entire market, physically and emotionally (see talking heads and Bernays).

            I could use words like accelerant but, feel it does not convey its true purpose.

            Skippy…wish I could bet some system architecture on this stuff, pass it on to some quantum guys at Uni, newly minted engineers with some work under their belts. Ta, for the reply.

          5. ReaderOfTeaLeaves

            PL, it seems likely that *if* the system was as easy to access and overwrite as has been reported, then it requires explanation. Companies put major resources into security, yet MERS enabled countless people to sign on with ability to alter mortgage data…? It’s just not credible.

            Now, if you knew there was a gigantic, completely unregulated swaps market – but to get the swaps to pay out, you’d need a way that appeared innocent, that was hard to trace who came and went, that was big enough to hold so much data that you had a damn good shot at creating a subset of mortgages that met your criteria… And this is all happening *after* the FBI had warned about massive mortgage fraud, yet not given resources… There is a way to look at this thing that suggests the design fit a very specific set of purposes related to CDS payoffs.
            Or as you put it, ‘intentional design’.

            I doubt Skippy and I are the only ones with these suspicions.
            I’d love to be wrong, but this thing is screwy in a way that would favor manipulation.

            Ta backacha Skippy.

          6. Ray Phenicie

            Look around on this web site for court dialogue that goes something like this-vastly simplified I may add:
            Judge: So who do you represent today, Bank A or Bank B, the purported holder of the note?
            Attorney for Bank A: I’m here on behalf of Bank A but in dialogue with Bank B.
            Judge: Again, who do you represent today?
            Attorney: Uhh . . . . I’ll get back with you.

  5. Daniel Pennell

    What would be interesting to read is something on the broader implications to other areas were the MERS theories be upheld.

    If courts accept theMERS legal theories, where else might those theories create havoc?

    1. PL

      If MERS is upheld, it will undermine race AND notice recording statutes. A race statute says that the first person to record a deed is the legal owner of a property. A notice statute says whoever records a deed without notice of another person holding an ownership interest is the legal owner of the real estate. The hybrid race/notice recording statute says the first person to record a deed without notice of another person holding an ownership interest is the legal owner. MERS trashes these legal concepts because it allows transfers to occur without reference to race or notice. Moreover, it contorts the meaning of “bona fide good faith purchaser for value.”

  6. Jim Elliot

    I have an uneasy feeling that the “system” has decided it just can’t take the shock. If not something like that, where are the courts?

    One exception I suspect the idea that Real Estate Transaction has to be in writing. I don’t believe that is so. I think there are exceptions to the “statute of frauds” rule, where if the parties after the fact, proceed to act “act” on a “verbal” agreement, the agreement can be upheld. Around Agency problems, who would have standing to challenge the “smoke and mirrors” agencies of MERS?

    1. Brian

      Not when the note is a security and must be transferred under the proper codes, both UCC 3 and 9. MERS was very helpful transferring the appearance of owneship of a note (that more than likely could not exist with the circle of 4 owners) so that the alleged trusts can suddenly produce a document alleging the note is within their sphere. This has been blown up more than a few times by having MERS support ownership claims of multiple parties, which in the real world, means multiple notes, deeds, mortgages.
      You can’t have 5 of something that can only exist as 1.

  7. indio007

    There was a court case out of Florida in which a lender was suing MERS for recording writing their system a transfer from them to someone else. However this Lender didn’t give anyone permission to transfer anything. According to the complaint I read MERS basically stopped answering any correspondence when the lender demand they fix it. They also refued to transfer it out of their clutches. The bottom line was the MERS will effectuate a transfer of a mortgage in their system without little or no verification. A self serving phone call from a MERS member claiming it has been transferred to them.

    I really wish I could remember the case. It was filed in 2009. If it comes to me I wil post it here. It will blow everyone’s mind.

    Secondly, all these transfers fly under the radar of the IRS. These notes are valuable assets and if all these sales are occurring they should all be taxed. Needless to say they are not.

    Thirdly according to the UCC , a negotiable instrument is considered money not chattel. Could MERS be basically a money laundering operation? The securitization scheme has always been suspect in my mind.
    Is the Depositor from the PSA buying certificates using these notes as a cash-item? This has always ate at my mind. I’ve never seen an accurate explanation of the true flow of funds. There is no mortgage until the borrower gets investor money. BUT there are no MBS certificates until the mortgages are assigned to the trust. What came first the chicken or the egg?
    Are there profits (and taxes)made when the Depositor purchases certificates for mortgage notes?

    Next up, MBS are basically taking a private security , doing legal magic and turning it into a public one. There is not full disclosure of the underlying security. I don’t think some inaccurate spread sheet cuts it especially when it isn’t even in the Prospectus. This is basically abuse of the 144A rule of the SEC’s.

    The whole thing is a sleazy game that needs to be flipped inside out.

    1. ReaderOfTeaLeaves

      FWIW, I’ve assumed it was/is some kind of money laundering setup, although I can’t quite decipher the structure.

      1. LifelongLib

        I thought MERS was set up because the securitization process (for some legal reasons) required several transfers of ownership to convey the mortgage from the originator to the entity selling the securities, and the various parties didn’t want to spend the time and money it would take to record each transfer at the locality where the property was. It was basically a device to reduce expense. How would it be used to launder money?

        1. indio007

          Negotiable instruments ARE money dude. Federal Reserve Notes are negotiable instruments.

          From the Uniform Commercial Code
          Section 1-201(24) (Official Comment); “The referenced Official Comment notes that the definition of money is not limited to legal tender under the U.C.C. The test adopted is that of sanction of government, whether by authorization before issue of adoption afterward, which recognizes the circulating medium as a part of the official currency of that government. The narrow view that money is limited to legal tender is rejected.”

          You have to realize that all these mortgage notes are signed “without recourse”.

          From Judicial and Statutory Words and Phrases

          Many authorities say that the transfer of a note or bill without recourse is a sale.
          Brittin v. Freeman, 17 N. J. Law (2 Har.) 191, 227

          Technically what we have are foreign currency exchanges. Notes for Notes.

          These trusts are a blackhole that no one an look in. The trustees can unilaterally declare the pool in default arbitrarily . Unless you have over 50% of the outstanding certificates you have no right to verify ANYTHING.

        2. Cynicor

          Not as much a money laundering scheme as a tax avoidance scheme, since each of those local transfers has a fee attached to them. If you keep flipping the mortgage around, who wants to pay all those pesky fees?

    2. LucyLulu

      The money for the borrower’s mortgage isn’t coming from the investors who purchase the certificates. The certificates may not be sold until a couple months or even later. The funds often come from the B in the A-B-C-D chain of title. So if I want to buy a home, a typical arrangement might be ……. I go down to Main St. Mortgage (A) and arrange for a loan. Before closing, Main St. has arranged with Wells Fargo (B) to purchase the loan and provide the funding, with Main St getting a cut. Wells Fargo then pools 1000 30 yr. fixed rate conventional loans together it has similarly arranged with other lenders and in-house and sells them to Fannie Mae (C) who puts together an offering of MBS certificates to investors. The trust with the certificate shares of ownership becomes (D). Wells Fargo would most likely remain the servicer and custodian of the loan documents. (And Fannie trusts are based in DE, not NY, thus can be endorsed in blank.)

      You would need to verify this from the PSA, but typically 25% of certificate holders are required to force the hand of the trustee (e.g. disclosure).

  8. Susan the other

    It will be very interesting to see what Schneiderman’s investigation of MERS reveals and what Biden’s lawsuit rules. Fannie and Freddie, in all of their obliviousness, have just issued new MERS “guidelines” which do not even come close to addressing the legal irregularities of the MERS system but merely continue to blabber on about how best to utilize MERS in the mortgage securitization process. Apparently it makes no difference to the MIC that MERS as it is used actually used is just a tautology based on a false premise. It will take some serious legal action to stop them. And the attempt to do so in various state courts has proven up inconsistent results. Many judges have literally kicked the MERS’ “legal” arguments out of their courts, but some courts have said effectively that there is “no law here (whatever state) that says MERS cannot be an agent for the banks.” Thus avoiding the issue altogether. The above article was so cogent, it is hard to imagine that all judges don’t get it.

      1. 2little2late

        David, I’m not Susan, but I have the link:

        The ice cold truth is that while many of us have been arguing exactly the above for years on end, millions have been introduced to the curb thanks to a judiciary content with the status quo. In MN for example, MERS even brought in their ace legal team into the capitol and wrote their own statute, affectionately known as “the MERS statute”, that gave them a platinum card in the court houses across the state. The pitch should be, “Don’t take a home without it.”

        MERS has been working in MI to accomplish the same thing, even though it doesn’t take a high school education to see that the entire business model is built upon theft by deception. As long as the judge is looking at the right hand that is holding a self-serving assignment from a defunct originator, the left hand steals the house. Couldn’t be easier.

        How many more millions will be introduced to the new retirement village known as Tent City USA? With 10.5 million in the pipeline and a government happy as the Great Enabler, ask yourself….feeling lucky borrower?

      2. Susan the other

        David, sorry I went off to read the Links. I found the F and F guidelines on Living Lies this morning.

  9. Hugh

    Put simply MERS is a criminal conspiracy used to defraud governments of the taxes and fees they are due and the end holders of securities created from the MERS system.

    It goes to how corrupt our judiciary is that MERS based foreclosures weren’t immediately thrown out at the time for wont of standing and referrals made for fraud. This has been going on for years. Yet many courts and many judges have preferred to screw over homeowners rather than stopping this criminal enterprise in its tracks.

  10. Eric

    I keep thinking that there is some confusion between the situation of fraudulent foreclosures and the more general questions of title owing to transfer practices involving MERS. It is quite possible to allow that people victimized by fraudulent foreclosures have been harmed and deserve justice and that it is proper for legislatures, if they think it wise, to change laws to reestablish legal foreclosure rights undone by the use of faulty transfer practices. Borrowers gave foreclosure rights to their lenders and further gave these rights understanding that such powers could be transferred. If the end result of new legislation is that non-foreclosed borrowers again have an identifiable party that holds foreclosure rights on their property exerciseable in event of default, how are such borrowers harmed? That is the state of affairs that they agreed to when they borrowed.

    1. Hugh

      Lenders and securitizers, i.e. the banks had the knowledge, professional expertise, and experience to know the law and follow it. They chose not to. In not doing so, they defrauded local government of fees, state and federal government of taxes using tax shelters to which they were not entitled, and investors to whom they sold MBS without disclosing their multiple failures to adhere to the law and the consequences of that non-adherence.

      The no harm no foul argument you propose is flawed because as stated above there was harm. More, under this theory, are we to let unsuccessful bankrobbers go because they did not actually rob anyone? A hallmark of kleptocracy is a two-tiered justice system where the 99% face draconian penalties for even minor infractions and kleptocrats face no sanctions for criminal acts that run into the trillions and affect millions.

  11. greggp

    The law has been “muddied” in a lot of states because so many homeowners, with the benefit of some truly bad advice from “foreclosure advocates” fought foreclosure pro se, and made sweeping arguments about mortgages being “null and void” for every possible reason. There is now a large body of truly bad decisional law that hobbles the foreclosure defense lawyers: we have to spend extra time sifting through and distinguishing arguments that should never have been made.

    However, as the initial wave of foreclosure litigation ebbs, even judges in “fraud theory” (formerly title theory) states are beginning to see that there may be merit to certain arguments. For the time being, the magical, immortal agency argument continues to prop up MERS’ defense.

    I believe that in fraud theory states, you will be seeing a shift away from omnibus wrongful foreclosure lawsuits by borrowers as plaintiffs, to an ejectment defense strategy. In a typical ejectment case based on foreclosure, the tenant (and that’s how the law treats the borrower in these suits – as a tenant at sufferance) can finally make the argument that the lender who foreclosed lacked standing because it isn’t the owner. It’s at this point that the MERS shenanigans may finally come to light.

    If the defense is successful, it can mean that the elaborate paper trail that was developed is defective, and won’t support anyone’s ownership of the property and the mortgage; the courts may be very skeptical of a whole new set of documents. The lender may be reduced to the status of an unsecured creditor, a bad place to be if the borrower decides to file Chapter 7.

    1. JP Warchild

      Yes, that’s the defense I used against ejectment and it worked for me. I also found in the relevant PSA, a section that stated a procedure in the event of foreclosure for JPM to release the mortgage file containing the note, etc. So I used a subpoena duces tecum to demand that the note be brought to court. That didn’t happen, they didn’t even show up and the case was dropped.

  12. LillithMc

    MERS is one example of how a fraudulent offer written by a real estate agent/loan officer could be funded and no one ever know. I have a file with 14 offers partially completed with no deposit, no down-payment that could be funded in 2006. The agent/fake buyer would receive about $20,000 in kick-backs in the offer plus commissions. Never underestimate the extent of the mortgage crime spree. Before I quit in disgust, I could go on my home computer to the county assessor and pull up copies of recordations against a property. The reason for the suppression of this problem is that it is even larger than the too-big-to-fail bank collapse. The party and MERS continue to function.

  13. rjs

    a response from a correspondant i sent this article to:

    Thanks for the article. This is really Real Estate 101. Of course, if someone’s not in real estate and doesn’t know what a straw buyer is, it’s a pretty good explanation.

    MERS was set up for the express purpose of avoiding recording fees and allowing the banks to sell junk loans and make money. The banks were NOT forced to make these loans (at least not very many) by Clinton as many conservatives believe. In fact, it was Bush, Sr. who came up with the idea of pushing home ownership for the poor. I had an article about it, but I can’t find it on the net any more. Probably took them all off. This real estate “bubble” was all planned many years in advance.

    Whole problem could have easily been solved by not allowing loans to be sold, or at least, making the lender of origin keep the loan for a year or two.

    What many people don’t understand is that the expensive title policy that the seller has to provide the buyer does not protect either one if the transfer of ownership has not been recorded properly or at all. Standard title policies only protect what is on the public record. So the seller could be sued by his buyer for selling a property with clouded title. If they pass this “get the banks off the hook” legislation, then the damaged seller could only sue MERS for not keeping the chain of title. Since MERS has no money, this is yet another shift of debt to the public.

    What’s so sad is that every administration had to know this was illegal since MERS was set up. Who okayed this MERS thing? I’ve read that Mozillo and a bunch of them came up with it in 1993 and then implemented it in 1995. It was obviously illegal and everyone looked the other way. In real estate, most of us had never heard of MERS.

    They passed all these silly “conflict of interest” laws and blamed so much on the realtors. Some deserved it, but the laws were silly. We couldn’t accept a box of chocolate at Christmas from any of the title companies because that was a conflict of interest! If the bank came in with a higher interest rate at closing than they had told their client all along (a favorite tactic of BofA) then you couldn’t close for three days. It didn’t change anything but screw up the closing date since it gave no recourse to either side. A buyer can always simply not sign the papers at closing, but at that point they have hundreds or thousands of dollars invested already in fees for appraisals, etc. Not to mention the moving van circling the block.

    Closing a deal is always traumatic, this made it extremely stressful for no reason at all. Instead of simply telling the lenders that they couldn’t commit fraud and come in with a higher interest rate when there are only a couple hours until closing.

    There is no easy way to resolve this mess and it’s a very big deal. It would be like in a criminal case where the chain of evidence is broken. Nobody can prove anything. Nobody knows who the real owner of the property is. All of the investors in all the mortgages that were in a package have a right to the remedy, which is the foreclosed house. But MERS made that impossible for them to get their money back and impossible for a new owner to really own the property.

    1. LeonovaBalletRusse

      You are dead right that the real estate *bubble* was planned for years, and you have named the godfather of the enterprise, carried through by his son. Connect the dots to the S&L scandal and Enron. Even unto FEMA stripped, well in time for Brownie-Blackwater bosses to profit from Hurricane Katrina and the Flood of 2005. The legions of Florida flippers making a killing from blueprints alone after Katrina was legendary in New Orleans. This was super-hot money for insiders *FIFO* Ponzi-style. Connect dots: insiders WAY long in gold, ready to prosper *apres le deluge* in 2008. Bushie = Louis XIV, and all for daddy.

  14. Bravo

    Siggy asks a good question…so who are the holders of MBS?
    I fear that the answer is that the vast majority are now owned by Fannie, Freddie, or the Federal Reserve…a cleverly designed backdoor bailout that the general public will never connect the dots on if the banksters continue to have their way.

    1. indio007

      Well my pet theory is that the reason none of these notes made into MBS’s is because they are pledged to the FED via the Discount Window’s Borrower In Custody Program.
      This is how these loans where originally funded. Funds straight out the discount window. This is legally permissible via Public Law 106-122. This law allows the FED to use residential mortgages as collateral for NEW Federal Reserve Note issuance. Now before people start saying Discount window is short term read up on the Borrower in Custody program. audits of original notes and mortgages are supposedly yearly. That doesn’t sound short term to me.

      The other fishy thing about the BiC program is whenever collateral is pledged to the FED a UCC 3 financing statement is to be filed against the pejorative owner of the mortgage.

      Well UCC statements are searchable in most states. I have never found anything EVER pledged to the FED. Now either the program has NEVER been used or there is a massive fraud taking place.

      Now let’s just back up and think about this for a second.

      I want to buy house. I sign a note and mortgage. The bank takes them and pledges them to the FED via BiC program. The Fed literally prints new notes (or electronic entry)and gives them to the bank who in turn pays the seller with these new notes.

      My signature just backed a new note issue , literally.

      This is where the scam gets crazy though.
      The seller gets a check and deposits it in a FED member bank. Basically the FED just got a free house that I will have to pay for because the seller will never get any reall substance for that check. The substance that backs it is the house he just sold!!!!!!

      1. PL

        I don’t see how that is possible. If you are correct, then closings would take far longer than an hour or two. At the vast majority of closings, the borrower signs a note and mortgage while funds are simultaneously being wired to the closing agent. There’s not enough time to send an executed note and mortgage to the Fed and wait for new money to be printed (or electronically entered) and transmitted to the bank.

        1. LeonovaBalletRusse

          PL, maybe this will suggest something to you when it comes to timing:

          About a week after the Act of Sale in my case was signed by both parties, everything properly closed, I was told by the buyer that she discovered that her BANK had SOLD her mortgage BEFORE the Act of Sale/closing; that is to say,that this *elite* bank SOLD a mortgage it did not yet own to a slice&dice bank in Ohio in 2006. Moreover, the *elite* bank had forced her to insure the property VIA the mortgage-holding bank, whereby she had to forsake her direct relationship with her insurer. She complied.

          Does this make the picture clearer to anyone?

        2. indio007

          Not necessarily, the documents don’t need to sent to the FED. Hence Borrower in Custody


          BIC Guidelines and Forms

          Borrower-in-Custody (BIC) of collateral arrangements may be used when physically transferring the collateral to a Federal Reserve Bank would be impractical because of the high volume of assets involved.
          To qualify for a BIC arrangement, institutions must be in sound financial condition, maintain appropriate document-storage facilities and have an acceptable automated record/reporting system.

          This part is from
          F E D E R A L R E S E R V E B A N K O F N E W Y O R K
          The BIC program provides qualifying institutions with the ability to increase the amount of collateral pledged for discount
          window purposes while avoiding the costs of physically delivering notes, loan agreements and other documentation in respect
          of the pledged mortgage loans to the Federal Reserve Bank of New York.
          Before accepting pledges of one-to-four
          family mortgage loans from an institution, the Federal Reserve Bank of New York will require that the institution complete a
          BIC pre-qualification form. At its discretion the Federal Reserve Bank of New York may also require an inspection of the
          collateral site before accepting an institution into this program.

          But like I said the strange part is there are no UCC financing statements in favor of the FED that I can find in ANY state . However the Fed requires this.

          “It is normal policy of the Federal Reserve Bank of New York to file UCC
          financing statements with respect to pledged collateral.”

          Why don’t these financing statements exist????

          Seriously read Public Law 106-122 and section 10b of the Federal Reserve Act.

          Public Law 106–122
          106th Congress
          An Act
          To amend the Federal Reserve Act to broaden the range of discount window loans which may be used as collateral for Federal reserve notes. <<<<<———
          Be it enacted by the Senate and House of Representatives of
          the United States of America in Congress assembled, That the
          third sentence of the second undesignated paragraph of section
          16 of the Federal Reserve Act (12 U.S.C. 412) is amended by
          striking ‘‘acceptances acquired under the provisions of section 13
          of this Act’’ and inserting ‘‘acceptances acquired under section 10A,10B, 13, or 13A of this Act’’.
          Approved December 6, 1999.

          Section 10B
          Notwithstanding the foregoing, any Federal Reserve bank, under rules and regulations prescribed by the Board of Governors of the Federal Reserve System, may make advances to any member bank on its time notes having such maturities as the Board may prescribe and which are secured by mortgage loans covering a one-to-four family residence. Such advances shall bear interest at a rate equal to the lowest discount rate in effect at such Federal Reserve bank on the date of such note.

          This stuff is right there in black and white. The FED can use residential mortagegs as collateral for new notes. It used to be limited to gold , gold certificates, Special Drawing rights and Treasury Bonds.

          Isn't any wonder how this mess happened now?

          This section was originally attempted to be inserted into the Community Reinvestment Act via amendment but was shot down.

          1. LeonovaBalletRusse

            Voila the *raison d’etre* for liar’s loans: collateral for $$$$US. It’s so simple a reason for the greatest fraud scheme *in the history of the world*. The S&L scandal and Enron were just rehearsals for *Armageddon* banker-style.

            How many scammers took long positions in gold, in anticipation of 2008? There is a connection there. Let’s hope that Bill Black will dig deeper still.

            “O what a web we weave when first we practice to deceive.” The web covers the whole world.

          2. LeonovaBalletRusse

            Nice sleuthing, indio007. Moreover, doesn’t this mean then that the New York Fed is the real owner of the mortgage, and that the MERS racket was just a shell game on the side? Or was the MERS racket a strategic *cloak of invisibility* meant to obscure *reality* and bring in the suckers?

            The key word is *racket*. Bring RICO.

          3. LeonovaBalletRusse

            AND, for the cherry on top: the top dogs who profitted most from the rackets are the ones who brought us hyperfast trading. If you go back to the crash in the 80’s as seen through the eyes of Ruckeyser on *Wall Street Week* the trouble was due to automated trading (the early days).

            Imagine the permutations and possibilities for compound (fraud+error) in *high speed trading* today, all those *flash crashes* they never account for. And where does the money go? Think S&L, Continental Illinois, Enron, Olympus in Japan and BAC in USA!USA!

            Embezzlement by any name stinks to high heaven. RICO!

          4. indio007

            That’s why i call it my pet theory. :D

            Nothing has provably done. The underlying mechanics are there that’s all.

            It can probably never be proven because dicount window operations are shhhhhhhh… secret

  15. John Hunt

    I noticed that a commenter asked what the broader implications might be if MERS’ legal theories were accepted. One idea that I am exploring (with coauthors) is that the broad powers MERS must claim in order to prevail in lawsuits against borrowers create a risk that the mortgages registered on MERS would enter MERS, Inc.’s bankruptcy estate under Sec. 544(a)(3) of the Bankruptcy Code if MERS, Inc. were to enter bankruptcy. Use of MERS may therefore create a significant risk to the “bankruptcy remoteness” of MERS securitizations.

    Borrowers’ lawyers tend to argue that MERS is a weak agent, and if they are right then MERS has problems. But if MERS is a strong agent as it claims, it may have equally big, though less obvious, problems. This may help explain why MERS uses the equivocal language of “nominee” status in its documents.

    Our paper, which can be found here, is under revision and we would welcome informed comment, which can be directed to me at the UC Davis e-mail address on the paper.

  16. Santa Fean

    Did I see mention of “MERS CONSENT ORDER ” here? I did not think so…

    Anyway Google the above to really see what trouble MERS is in. The Comptroller of the Currency, The Federal Home Finance Authority and the Federal Reserve Board ALL have a thing or two to say about MERS. MERS, in my guess, will be put into receivership much like Fannie and Freddie Mac. Don’t worry thought. We, the public will pay for it all.

  17. Westcoastliberal

    When the county recorder (I believe in NC) brought suit against MERS I wrote my local office here in CA to ask when I could expect something similar. The answer I got was shocking; basically that I received an answer at all told me they’re aware of the fraud that MERS represents, and second their answer stated that they’re not charged with deciding if a document is legal before recording it.
    So bottom line, even if they know it’s all smoke and mirrors they don’t care.

    1. leapfrog

      I got the same uninformed reply from a clerk at my county recorder’s office too. I tried several times to contact the recorder himself to no avail. I then contacted my county supervisor and explained the problems with MERS and included links from several articles, including the various recorders who were suing MERS. He investigated the matter and told me that the county recorder had in fact joined suit against MERS. Unfortunately, this was the California qui tam action that got dismissed. We need to pressure Harris to sue MERS, just like Biden is doing.

  18. LeonovaBalletRusse

    The mortgage disease injected into the body politic by the banksters is INCURABLE. The *cloak of invisibility* thrown over this international fraud, including compound derivatives spinning more profit to insiders, was enlarged after Hurrican Katrina and the Flood of 2005 (after which Brownie and Blackwater invaded New Orleans). The insider participants in this collossal scam were tantamount to a national organized crime syndicate within an international frame of collusion for profit by winners and losers.

    What I came to know about *hot* real estate in Louisiana and Florida I dare not tell. But, whatever may happen with regard to perpetrators of “the greatest criminal fraud in the history of the world” (or similar words from Bill Black, who also recognizes the links to the *S&L* crisis and *Enron*), it remains that the mortgage disease spread by bankster/insurance is INCURABLE. That is why I have called for a *Year of the Jubilee* with regard to mortgage and other *debt* held by the People. To overturn centuries of real estate law in the United States by *fiat* in the Senate would be to COMPOUND the fraud: a criminal act.

  19. LucyLulu

    One of the problems with a federal or universal fix for the MERS problem, other than real property being governed by state law, is that each state has very different laws. This article addresses, Massachusetts, which is one of the states with stricter requirements. For example, MA requires that all mortgage assignment transfers be recorded in the land records.

    Contrast that with where I live in NC. There is no requirement to ever record any mortgages. Typically, the initial mortgage assignment (to originator) is recorded and then the next assignment is either the foreclosing party or the satisfaction party. Deeds of trust are used, and rarely will one find an intervening “successor trustee”. Also, in NC, the current trustee, may assign the deed of trustee to himself and need not designate intervening successor trustees. Any type of agency or nominee status may be used for foreclosures, whether servicers, lender attorneys, shoeshine caddies, whatever….. Assignment into the MERS system becomes a moot point, it never need be even brought up in the foreclosure paperwork. AFAIK, there has been only one successful defense to a foreclosure suit in NC (won on appeal, argued Deutsche was not holder of note because endorsed to Novostar).

  20. Anonymous Commenter

    Can someone please explain why the legal opinion concerning the validity of MRESCORP, INC.’s eRegistry System does not mention the jurisprudence cited below? (Opinion available at

    Sunderland v. U.S., 266 U.S. 226 (1924), citing U.S. v. Fox, 94 U.S. 315, 320-321 held that the “general rule is not to be doubted, that the tenure, transfer, control and disposition of real property are matters which rest exclusively with the State where the property lies.” See also, In re Davis, 170 F.3rd 475 (5th Cir. 1999) (en banc) (Jones, J.), cert denied, sub nom, Davis, Sandra v. Davis, Thomas Cullen, No. 98-2008, U.S. Supreme Court, (10/4/1999) where in a bankruptcy context the 5th Circuit said courts must apply “a presumption that areas of law traditionally reserved to the states, like police powers or property law, are not to be disturbed absent the ‘clear and manifest purpose of congress.'” 170 F.3rd 482, quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947).

  21. So Cal 7

    Here’s some California ‘dirt’ law that is exactly what the author is talking about:

    More specifically California Civil Code 2934a states:
    “(a)(1)The trustee under a trust deed upon real property or an estate for years therein given to secure an obligation to pay money and conferring no other duties upon the trustee than those which are incidental to the exercise of the power of sale therein conferred, may be substituted by the recording in the county in which the property is located of a substitution executed and acknowledged by: (A) all of the beneficiaries under the trust deed, or their successors in interest, and the substitution shall be effective notwithstanding any contrary provision in any trust deed executed on or after January 1, 1968; or (B) the holders of more than 50 percent of the record beneficial interest of a series of notes secured by the same real property or of undivided interests in a note secured by real property equivalent to a series transaction, exclusive of any notes or interests of a licensed real estate.

    Further, for any interested, facing foreclsure, etc., the Deed of Trust is also specific and MERS consistently violates the DOT. Look at your DOT around paragraph #24 (could be before or after) as most in Cal are the same. It states that it is mandatory the the “Original Lender” must be named in any substitution of Trustee. MERS NEVER does this…largely for the reasons outlined in the excellent article above.

    What a debacle.

  22. davidgmills

    Never underestimate a courts’ ability to sidestep any issue that it hot. Procedure is their favorite trick. In my own case where I sued MERS in TN (I was not in default, just challenging the validity of the MERS lien) the appellate court held that I had failed to show there was a legitimate case or controversy and the TN Sup. Ct. refused writ.

    Just an awful decision but the court basically held that so long as I was paying my mortgage there was no problem. No problem = no case or controversy.

    Never could find out who held my note. That was apparently no problem.

    Never could find out why I didn’t get my note returned on my second lien that I had paid off. That was apparently no problem.

    Never could find out how two entities I didn’t owe, my original lender and MERS, were allowed to keep a lien on my property without me owing either one a dime. That was no problem either.

    Never could find out whether my servicer had any authority from the noteholder to demand payments of me every month. That was not problem either.

    Never could find out why a strawman lienholder — MERS — can now stand in the place of the real noteholder and can turn a public transparent deed recordation process into a private secretive process. That was no problem either.

    Nothing in TN to see here folks. Just move along.

  23. Roy Blizzard

    There is one Glaring issue with MERS and this whole Securitization Problem, The Banks etc are taking a Loan Note which is basically a Promissary note and converting it to “Stocks” without the owners permission. They can’t trade loan notes on the stock market so they must convert them to stock certificates. Therefore they must not sign the notes or they destroy them -hence the vast number of loan notes in whereabouts unknown- so that no one can trace the fraud. When someone wants to buy a property or pay one off, they just recreate a new note and no one is the wiser. Herein lies the heart of the fraud. Go to Homeowners Against Mortgage Servicing Fraud on Facebook for more info.

  24. Alex

    Wake up! MERS was designed to enable multi-pledging. No more no less. Everything else is commentary! The loan originators ‘originated many separate loans to many different lenders with MERS obfuscating it all. The securitization, and allowed for the money laundering, tax evasion, etc. This is simply about a sophisticated organized crime racket.
    IMHO, the Atlanta VA Loan Guarantee office loan fraud is the ONLY case that is clear and present and because it is a FEDERAL GOVERNMENT AGENCY/EMPLOYEE, is fully prosecutable, unlike FDIC, Fredi Mac and Fannie Mae, that are not federal employees. The VA Loan guarantee officer fraud is IT! Demand prosecution! Strip the beast of its cover!

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