MERS DEATH – A FUNERAL FOR A MONSTER THAT RUINED MANY FAMILIES AND LIVES

It is now widely recognized that MERS facilitated fraud by lenders, servicers, foreclosers and securitizers. Even on the most charitable interpretation it is very difficult to believe that MERS was not fraudulent by design. So much of the story has already been told that we do not need to rehash all of it here. Let me first concisely summarize the two main problems, and then move on to the most recent developments that put the final nails in MERS’s coffin. I’ll conclude with my argument that there really was some “not so intelligent” design behind all of this. But it is coming back to bite the hand that feeds it. The big banks will not survive the monster they created.  According to the company’s Web site, “MERS was created by the mortgage banking industry to streamline the mortgage process by using electronic commerce to eliminate paper.” That role has changed in recent years, with MERS taking foreclosure actions on behalf of lenders and servicers nationwide, even becoming embroiled in the robo-signing scandal. MERS is the nominee for roughly half of the 60 million outstanding residential loans in the.U.S

If anyone ever had any legal documents signed by an Officer of MERS, please read the deposition below:MERS doesn’t have any real employees. It’s kind of a shell. MERS Treasurer William C. Hultman revealed as much during a deposition in Bank of New York v. Ukpe:

Q I thought, sir, there’s a company that was
formed January 1, 1999 [sic], Mortgage Electronic Registration
Systems, Inc. Does it have paid employees?
A No, it does not.

Q Does it have employees?
A No.

Q Does MERS have any employees?
A Did they ever have any? I couldn’t hear you.

Q Does MERS have any employees currently?
A No.

Q In the last five years has MERS had any
employees?
A No.

UPDATE APRIL 24, 2012-

UPDATE- MARCH 9, 2012- NEW YORK CONTINUES ATTACK ON MERS New York government officials are continuing their assault against foreclosure actions where Mortgage Electronic Registration Systems, Inc. (“MERS”) was the assignee of the mortgage, and challenges to foreclosures involving  MERS are increasingly gaining traction in New York courts. Recently, the New York State Attorney General filed a
complaint against MERS and several banks alleging fraud and deception in foreclosure proceedings. People v. JPMorgan Chase Bank N.A., No. 2012/2768 (N.Y. Sup. Ct. Feb. 3, 2012). In addition, three New York trial courts have decided motions involving standing and other issues in such actions. CIT Group/Consumer Fin., Inc. v. Platt, 33 Misc. 3d 1231(A) (N.Y. Sup. Ct. 2011); U.S. Bank N.A. v. Bressler, 33 Misc. 3d 1231(A) (N.Y. Sup. Ct. 2011); Bank of  New York Mellon v. Martinez, 33 Misc. 3d 1215(A) (N.Y. Sup. Ct. 2011). Two courts ruled against the foreclosing banks, finding they did not have standing to foreclose where MERS assigned a mortgage without express authority to do so or sufficient documentation evidencing that the note was also transferred. Although the third court dismissed a lack of standing defense, it did so solely for procedural reasons.

UPDATE FEB 23, 2012- 

United States Bankruptcy Judge Robert Grossman (NY) has ruled that MERS’s business practices are unlawful. He explicitly acknowledged that this ruling sets a precedent that has far-reaching implications for half of the mortgages in this country. MERS is dead. The banks are in big trouble. And all foreclosures should be stopped immediately while the legislative branch comes up with a solution

At each transfer, the note and mortgage are supposed to be “assigned” to the new owner; MERS claimed that because it was the “mortgagee of record” and the “nominee” of both parties to every transaction, there was no need to assign the “mortgage” until foreclosure. And it argued that since the old adage is that the “mortgage follows the note” and that both parties intended to assign the notes (even if they did not get around to doing it), then the Bankruptcy Court should rule that the assignments did take place in some sort of “virtual reality” so that there is a clear chain of title that allows the servicers to foreclose.

The Judge rejected every aspect of MERS’s argument. The Court rejected the claim that MERS could be both holder of the mortgage as well as nominee of the “true” owner. It also found that “mortgagee of record” is a vague term that does not give one legal standing as mortgagee. Hence, at best, MERS is only a nominee. It rejected MERS’s claim that as nominee it can assign notes or mortgages — a nominee has limited rights and those most certainly do not include the right to transfer ownership unless there is specific written instruction to do so. In scarcely veiled anger, the Judge wrote:

“According to MERS, the principal/agent relationship among itself and its members is created by the MERS rules of membership and terms and conditions, as well as the Mortgage itself. However, none of the documents expressly creates an agency relationship or even mentions the word “agency.” MERS would have this Court cobble together the documents and draw inferences from the words contained in those documents.”

Judge Grossman rejected MERS’s arguments, saying that mere membership in MERS does not provide “agency” rights to MERS, and agreeing with the Supreme Court of Kansas that ruled “The parties appear to have defined the word [nominee] in much the same way that the blind men of Indian legend described an elephant — their description depended on which part they were touching at any given time.”

He went on to disparage MERS’s claim that since in legal theory the “mortgage follows the note”, the Court should overlook the fact that MERS separated them. He stopped just short of saying that by separating them, MERS has irretrievably destroyed the clear chain of title

Some very interesting spin in this one from MERS spokesperson Janis Smith.

Her statement…

“The MERS System is not a legal system of record or a replacement for public land records. No interests are transferred on the system—they are only tracked,” Smith, Merscorp vice president of corporate communications, wrote in a response to emailed questions. “MERS does not have or maintain any document recording system, public or private, and does not do anything to compete with or supplant the public records for land located in the County records.”

She then goes on to say…

MERS is the true owner of the mortgage, and is not, in the complaint’s words, a “straw man” placeholder listed in public records.“The ‘owner of the loan’ is the party who has possession of the promissory note, but the promissory note is not, and has never been, and is not required to be disclosed or filed in the public records”

IN SIMPLE TERMS, THIS ADMISSION OF SEPARATING THE NOTE AND MORTGAGE CREATES A NULLITY WHICH IS UNENFORCEABLE.

Lenders Can’t Have Their MERS Cake And Eat It Too

UPDATE NOV,8, 2011-

The most recent lawsuit was filed by a county clerk in Florida, and seeks class action status to represent the state’s 67 counties. The complaint alleges the use of MERS does not comply with state property laws and has cost municipalities millions in unpaid recording fees.

Jim Fuller, the clerk of Duval County, filed suit against Merscorp Inc. and its wholly owned subsidiary, Mortgage Electronic Registration Systems, Inc., on Oct. 31, claiming civil conspiracy, unjust enrichment, as well as fraudulent and negligent misrepresentation. The suit also seeks a hearing to determine the validity of tracking note transfers on the MERS System and a court injunction to prohibit the use of MERS in Florida.

“MERS has usurped the rights and privileges of the Florida Clerks of Court by establishing, maintaining and inducing lenders to use its private recording system, which unlawfully interferes and competes with the public recording system,” the suit, filed in state circuit court, reads.

Merscorp spokesperson Janis Smith said the suit’s allegations are inaccurate and false.

“The MERS System is not a legal system of record or a replacement for public land records. No interests are transferred on the system—they are only tracked,” Smith, Merscorp vice president of corporate communications, wrote in a response to emailed questions. “MERS does not have or maintain any document recording system, public or private, and does not do anything to compete with or supplant the public records for land located in the County records.”

Tim Volpe, a Jacksonville, Fla.-based attorney serving as outside counsel for Duval County, claims that when MERS is named on county land records, it creates an illegal disconnect between the mortgage document and the promissory note that allows the owner of the promissory note to change without being recorded in land records—keeping borrowers in the dark about who holds their debt.

“Both the note and mortgage are to be recorded. The principle issue we’re trying to get at is the punitive distinction of MERS being the mortgagee while the note is shifted from one to another up through the typical securitization process,” Volpe said in a phone interview. “The principle concern about the disconnect is that the public records are not complete insofar as the true beneficial owner of the mortgage is not reflected in the public records.”

In previous challenges to mortgage liens filed in the name of MERS, the Reston, Va.-based company has relied on agency laws to defend its position as both the legal holder of the mortgage, and as an agent acting on behalf of the owner of the promissory note.

Smith said MERS is the true owner of the mortgage, and is not, in the complaint’s words, a “straw man” placeholder listed in public records.

“The ‘owner of the loan’ is the party who has possession of the promissory note, but the promissory note is not, and has never been, and is not required to be disclosed or filed in the public records,” she wrote.

Following a subpoena issued against MERS earlier this year, on Oct. 27, Delaware Attorney General Joseph “Beau” Biden filed a lawsuit claiming MERS engages in deceptive trade practices. The complaint cites a review of 100 foreclosures in New Castle County during 2010 that showed discrepancies between MERS records and the entities that participated in the foreclosure.

In a press statement, Smith said the claims in the Texas case are without legal or factual merit and that MERS complies with state laws. In a separate statement about the allegations in Delaware, Smith said the MERS business model is “straightforward and transparent,” adding that “[T]he lawsuit they filed was unexpected, and we disagree with the allegations made in their complaint.”

UPDATE OCT 30, 2011- SOMEONE FINALLY FIGURED IT OUT- 

Commissioners in Cleveland County, OK, have filed a class-action lawsuit against multiple financial corporations, alleging the companies have used a private electronic registration system to file mortgages to avoid paying county filing fees.

NORMAN — Cleveland County commissioners have filed a class-action lawsuit against multiple financial corporations, alleging the companies have used a private electronic registration system to file mortgages to avoid paying county filing fees.

Named as a defendant in the lawsuit, along with the financial institutions, is Mortgage Electronic Registration System, also known as MERSCORP

11 Headaches for MERS

Here is a list of legal issues relating to MERS with which courts are wrestling or will be likely to confront in the near future. One needs to examine these issues in connection with the affected audience, investor, owner in foreclosure, investor and trustee of a mortgage backed securities trust.

1. 1.       Assignments were made by “officers” of MERS using delegations of authority of no longer existing MERS predecessor corporations.
2. 2.       The MERS Assignment is deficient because it omits an assertion that the assignor is the holder under the MERS registry for the MIN number of the mortgage being assigned and the transfer is being recorded on the MERS registry.
3. 3.       An interest in a mortgage cannot be conveyed by an endorsement of the mortgage note in blank.
4. 4.       The Officers of MERS who are allegedly authorized to sign documents on behalf of MERS are not “officers” of the corporation as the term officer of a corporation is legally defined.
5. 5.       Because MERS is a mere custodian with no legal or beneficial interest in the mortgage note, MERS cannot assign a mortgage note to an assignee.
6. 6.       Because MERS is a mere custodian with no legal or beneficial interest in the mortgage note, the mortgage has been divided from the note rendering the mortgage unenforceable.
7. 7.       MERS holding of the note endorsed in blank as nominee of  a mortgage sold to a mortgage backed securities trust is a violation of REMIC requirements.
8. 8.       MERS holding of the note endorsed in blank as nominee of  a mortgage sold to a mortgage backed securities trust is a violation of warranties and representation contained in the master pooling and servicing agreement and prospectus.
9. 9.       MERS was created to perform a service with an illegal purpose, namely to circumvent the recordation of assignments and payment of recording fees. The issuance of assignments in furtherance of such an illegal purpose is unenforceable.
10. 10.   An assignment of the mortgage note from MERS to the servicer of a note is of either of no legal effect or an illegal conversion of the note.
11.  Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, MERS did not own the underlying note, it could not transfer the beneficial interest to another. Any attempt to transfer the beneficial interest without ownership of the underlying note is void law.

Critically, as noted, the PSA provided that for a MERS mortgage such as this, assignments of mortgages did not have to be prepared or delivered to the buyer of the loans. As is endemic with most securitized mortgages, the participants in the securitization did not deliver and record any assignments documenting such transfers, instead, relying on the internal MERS registration system, which is out of the public records view. Throwing this provision back in the lenders’ faces, the judge basically said “you can’t have your cake and eat it too” — rendering his ruling that the mortgage itself (as opposed to the underlying loan) was never transferred through the securitization system from entity A, B, C, to Deutsche Bank, and that MERS had always held, and never relinquished, “legal title” to the mortgage. Accordingly, the judge held, Deutsche Bank was never the owner of the mortgage in the first place, could not foreclose in its name, and its foreclosure sale was null and void

1. MERS, which is the acronym for Mortgage Electronic Recording System, is a total fraud and is completly illegal and decoupled from the legal system of recording property transferrs in the local court house as required by law!

2. Look on your mortgage document and see if you are in the MERS system.

3. If so, call or write your mortgage company and tell them you would like verification in writing of:

A. Any title assingments to third parties
B. Verification that your payments are going to the current holder of your note.
C. A “blue ink” copy of your original agreement

After the stammering stops on the other end, I think you will find that mortgages in the MERS system are a complete fraud. Not only do you not know if your payments are going to the correct party, the mortgage company, more than likely, never recorded your title assignment in the local court house. This means they have no legal document to make you pay or to foreclose on your property.

O’Brien fears that this fraudulent behavior is only the tip of the iceberg and feels strongly that lenders and mortgage servicers should be held accountable for their actions.  Actions which he originally only thought involved a scheme to circumvent the land recordation system by creating a private, for profit cyber-registry to benefit the big bank’s pocketbooks.  Now it seems that MERS, and its member banks may have added fraud to their repertoire of services that they offer.

Register O’Brien questions if a good portion of this foreclosure mess could have been avoided in the first place, if the big banks did what they were supposed to do and recorded assignments like other lenders do. Register O’Brien believes: 1) Homeowners deserve to know who owns their mortgages; 2) Assignments should be recorded in the appropriate registry of deeds, each and every time a mortgage is sold, to provided transparency and public disclosure of ownership; and 3) Any and all documents should be signed by an authorized authority at the entity that actually owns and holds the note secured by the mortgage

UPDATE AUGUST 28, 2011-

State and federal officials negotiating a settlement with the nation’s biggest banks over shoddy foreclosure practices are hung up on how they should deal with a Reston-based company that has acted as a proxy for financial firms throughout the country for more than a decade.

Some officials refer to the dilemma as the “MERS morass,” referring to Mortgage Electronic Registration Systems, whose vast but controversial registry contains roughly 65 million mortgages.

 During the housing boom, millions of homeowners got easy access to mortgages. Now, some mortgage lenders and government officials have taken action after discovering that many mortgage documents were mishandled.

The pending multibillion-dollar settlement with banks centers on “robosigned” documents and court filings and other problems related to mortgage servicing that caused a national uproar last fall. Much of that flawed paperwork flowed through MERS.

Meanwhile, the same system helped make possible the boom in mortgage-backed securities that fueled the housing crisis by allowing banks to quickly and cheaply transfer the ownership of loans. Questionable securitization practices have sparked other state and federal investigations, but they are not the focus of the current settlement talks.

Given the broad reach that MERS has into every aspect of the mortgage and foreclosure process, officials have been grappling with whether they can address one element of the MERS business model in the current settlement while leaving other aspects open to future investigation. In part, they say, the patchwork of conflicting laws and court decisions in different states makes a one-size-fits-all solution difficult. In addition, they are facing pressure from banks that already stand to pay billions of dollars in penalties and would prefer to steer clear of the MERS problem altogether in the current negotiations.

Several people familiar with the negotiations said that officials leading the talks have no intention of releasing MERS­CORP, the parent company of MERS, from liability claims. The trickier question is how to address MERS-related foreclosure cases that involve the banks under scrutiny.

“We’re really wrestling with MERS. Does it need to be part of this?” said one official who spoke on the condition of anonymity because the talks are ongoing. “MERS is a bit of a swamp.”

Illinois Attorney General Lisa Madigan acknowledged in an interview that the issue remains unresolved. She said there are “differing opinions” about how to deal with it.

The MERS quandary is one in a long line of thorny topics that state and federal officials have spent much of the past year wrestling with, as they seek to reach a settlement with five of the nation’s largest banks, including Bank of America. Other dicey issues have included how much they should demand in penalties — the current estimate stands at about $20 billion — as well as how the banks should overhaul their mortgage servicing procedures and whether they should be forced to write down loan balances for some troubled borrowers.

Just this week, a rift over how broad a release the banks should receive from future liability claims in exchange for agreeing to settle boiled over when Iowa Attorney General Tom Miller removed New York Attorney General Eric Schneiderman from the committee overseeing the talks on behalf of all 50 states, saying he had actively undermined the group’s efforts to reach a deal. Schneiderman and several others have resisted a quick settlement on servicing problems alone, arguing that all aspects of the mortgage crisis should face a full investigation before moving forward.

That personal tug of war and the other high-profile issues have kept the MERS problem under the radar. But a final settlement is unlikely to materialize until it is resolved.

Some attorneys general have said they would not support a settlement that grants immunity on issues related to MERS and securitization. Massachusetts Attorney General Martha Coakley has been among the most vocal and has undertaken an inquiry into MERS.

“We will make sure, at least here in Massachusetts, that we do not reach an agreement that, for instance, gives relief for securitization issues that still need investigation or for fraudulent servicing around the use of MERS,” Coakley said at a news conference this month. “We will not settle an issue until we know all of the facts and we know all of the damage.”

UPDATE AUGUST 23, 2011- 

UPDATE AUGUST 16, 2011- MERS CASE REACHS U.S. SUPREME COURT- 

A controversial case challenging the ability of Mortgage Electronic Registration Systems to foreclose on a California man was filed with the Supreme Court Monday, making it the first major MERS case to reach the nation’s highest court.

If the Supreme Court agrees to hear Gomes v. Countrywide, Gomes’ attorney, Ehud Gersten, says the court will have to decide whether a lower court stripped his client, Jose Gomes, of due process by allowing MERS to foreclose without ensuring the registry had the noteholder’s authority to foreclose.

“I believe this to be the first case in the country to take MERS to our Supreme Court,” Gersten told HousingWire. His claim could not be immediately verified.

“Ultimately, what this case is saying is if you are going to be taking someone’s home away from them, do you have the proof or the right to do so?” Gersten said.  ”If the Supreme Court starts to question MERS, and its business structure, it is going to have an effect on every MERS case in the country.”

MERS, the electronic registry at the center of the foreclosure crisis, has been under fire nationwide as foreclosure attorneys purport the firm, and its parent company Merscorp Inc., illegally foreclosed on properties.

Gersten, meanwhile, said MERS has a brief period of time to respond before the Supreme Court decides whether it will accept the case (click here for the filing).

Attorneys familiar with the Gomes case are not optimistic about its chances of being heard by the Supreme Court.

“While recent statistics show that the Supreme Court takes on average less than 3% of cases on certiorari, it takes even a smaller percentage of those advanced by private litigants, as opposed to the government,” said Patton Boggs attorney Anthony Laura. “Also it takes fewer cases out of the state court system than it does out of the federal Courts of Appeals.”

“So, the likelihood that this case will be taken is slim indeed,” Laura adds. “I believe those slim odds are even slimmer because the argument Gomes is making to the U.S. Supreme Court is one he did not previously raise.”

Laura said that, as a premise for invoking the jurisdiction of the Supreme Court, Gomes claims that the court below abridged his 14th Amendment rights.

“My recollection is that Gomes never made a Constitutional argument below, neither in the California Court of Appeals nor in the petition for review to the California Supreme Court,” he said. “In my view, the U.S. Supreme Court will look skeptically on his just raising that argument now.”

The original plaintiff, Jose Gomes, appealed to the nation’s highest court after California’s Supreme Court decided not to review the 4th Appellate District Court of California’s decision in favor of MERS.

Gomes’ petition says he’s challenging the foreclosure because MERS “did not have the current noteholder’s authority to foreclose.”

Gersten argues his client “was entitled to proof that the loan servicer, trustee or an entity such as MERS, either named in the deed of trust or acting through assignments of interest, had legal authority on behalf of the promissory note’s current holder to foreclose.”

The 4th Appellate District Court’s decision, which Gomes wants overturned, held MERS had the authority to initiate a foreclosure on Gomes because the deed of trust “explicitly provided MERS with the authority to do so,” according to court records.

The state appellate court also ruled in favor of MERS after finding the deed of trust contained no language to suggest the “lender or its successors and assigns must provide Gomes with an assurance that MERS is authorized to proceed with a foreclosure,” according to court records.

MERS chose not to comment on the case, but a spokeswoman said the company is aware of the filing with the Supreme Court.

UPDATE AUGUST 1, 2011- 

Take a look at this 2009 MERS Rules of Membership under Rule 8, Section 1) (c) on page 25.

(c) In the State of Florida, the authority to conduct foreclosures in the name of MERS granted to a Member’s Certifying Officers under Paragraph Three of the Member’s MERS Corporate Resolution is revoked. Effective June 1, 2006, the Member shall be sanctioned $10,000.00 per violation for commencing a foreclosure in Florida in the name of MERS. 

On your mortgage, you will have language that gives the “Lender” the right to assign the mortgage.  If the party doing the foreclosing is the servicer, then the servicer will need to prove standing.  The Servicer is not “the lender”.  These are two different parties.

On some mortgages, it might give MERS the right to assign the mortgage.  You could bring this 2009 MERS Membership Rule into evidence to say, the Mortgage gave MERS the right as Beneficiary…not the Servicer.  The Servicer is not the Lender nor the Beneficiary, therefore, does not have ANY RIGHT to foreclose, unless they can prove otherwise.

Remember, the Plaintiff bears the burden of Proof

UPDATE: MERS AGREES TO COMPTROLLER OF THE CURRENCY (OCC) CEASE AND DESIST ORDER: http://www.scribd.com/doc/52972728/MERS-AND-MERSCORP-AGREE-TO-A-CEASE-AND-DESIST-ORDER-OCC-INVOLVED-4-13-2011

UPDATE: 

Sunday, April 17, 2011

However, the first week of February,  2011. a Federal Judge in New York issued the following: 

The Court recognizes that an adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States. However, the Court must resolve the instant matter by applying the laws as they exist today. It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This Court does not accept the argument that because MERS may be involved with 50% of all residential mortgages in the country, that is reason enough for this Court to turn a blind eye to the fact that this process does not comply with the law.

In other words, take your “too big to be judged unlawful” argument and shove it up your a**!

After that opinion chief counsel of MERS, Mr. Anderson  said  that banks have been settling cases where MERS is at risk of getting an unfavorable judgment. As he wrote: 

That’s not unexpected behavior–better to cave with small dollars than to lose plus have adverse law become embedded in the case law for an entire federal district. That makes it appear to non-specialists that the jurisprudence in favor of lenders/MERS is static.

I want to make sure everyone UNDERSTANDS the SIGNIFICANCE of the above Statement!!!!!!!

MERS themselves have added a change in their Membership Rules to “adjust” to the quickly changing environment they create, a copy of memo is attached hereto:

Announcement
Number 2011-01
Page 1 of 2
To: All MERS Members February 16, 2011
Re: Foreclosure Processing and CRMS Scheduling MERS is providing the following guidance to all Members to strengthen business practices, and minimize reputation, legal and compliance risk to MERS and its Members. In recent months legal challenges have arisen regarding alleged inadequacies and improprieties in the foreclosure process including allegations of insufficient or incorrect supporting documentation and challenges to the legal capacity of parties’ right to foreclose. MERS is committed to reevaluate and strengthen its systems and procedures to protect against these types of legal challenges. Consistent with this approach we have enhanced the Corporate Resolution Management System (CRMS) and instituted related policies and procedures designed to strengthen MERS’ business practices and limit compliance risks. To comply with this guidance, MERS Members should implement the following practices, effective immediately.
1. MERS is planning to shortly announce a proposed amendment to Membership Rule 8. The proposed amendment will require Members to not foreclose in MERS’ name. Consistent with the Membership Rules there will be a 90-day comment period on the proposed Rule. During this period we request that Members do not commence foreclosures in MERS’ name. If a Member determines that it will commence a foreclosure in MERS’ name during this 90-day period, two weeks advance notice must be given to MERS to permit verification of the appointment and current status of the Certifying Officer proposed to participate in the foreclosure. No foreclosure may be processed in MERS’ name without first obtaining this verification. We encourage Members to bring foreclosures only in the name of the holder of the note, in the name of the trustee or the servicer of record acting on behalf of the trustee.
2. MERS Members shall have a MERS Certifying Officer (also known as MERS Signing Officer) execute assignments out of MERS’ name before initiating foreclosure proceedings. Assignments out of MERS’ name should be recorded in the county land records, even if the state law does not require such a recording (see MERS Membership Rule 8).
3. For all future assignments and the execution of other documents in the name of MERS, Members must use a MERS Certifying Officer who has been appointed under our new certifying officer process, which, after November 1, 2010, uses a new form of corporate resolution. Under our new process, all Certifying Officers are also being tested and appointed under the enhanced CRMS. Only Certifying Officers appointed under the new form of corporate resolution, tested, and transitioned onto CRMS after November 1, 2010 should execute assignments. We are in the process of ensuring that all Members are transitioned onto CRMS in compliance with our new policy, and we will work with all Members to ensure the transitions can be accomplished in an orderly and expeditious way. For those Members who have not undergone this transition onto the CRMS, you will receive login credentials and further instructions from MERS on how to complete this process. It is important that you follow all instructions and that you complete this process as quickly as possible. MERS will be communicating with you to notify you when your Company will be transitioned onto the CRMS under our new policy. Once your Company has access to the CRMS, all of your existing and potential Certifying Officers should work quickly to complete the certification process. Once all of your existing and potential Certifying Officers have successfully completed the certification process, you will need to submit your request to MERS for approval. Submissions from your Company will only be accepted during the phase-in period assigned to you. Because it will take some time to transition under our new policy, Certifying Officers can continue to execute documents in MERS’ name under existing resolutions until the new corporate resolution is issued to your Company. However, if your Company does not submit the request to MERS through the CRMS in the timeframe assigned to you, you will not be issued a new corporate resolution and any prior corporate resolutions issued to your company will be revoked.
Page 2 of 2
4. MERS Members should ensure the accuracy of the information in the complaint and foreclosure affidavit that addresses, where applicable, the authorization under which a MERS Certifying Officer validly assigned the mortgage to the foreclosing note-holder.
5. Other business practices Members should perform on a periodic basis include:
· Conduct a review of employees designated as Certifying Officers and reconcile to the CRMS to ensure MERS has an up-to-date and accurate list of Certifying Officers;
· Ensure employees designated as Certifying Officers receive appropriate training to carry out their duties and responsibilities as Certifying Officers; and
· Reconcile with CRMS to update corporate resolutions and signing authority agreements to ensure appropriate Certifying Officers are validly appointed.
If you have any questions regarding this announcement, please contact the MERS Law Department at mers@mersinc.org, or call the MERS corporate office at 703-761-1270 and ask for the MERS Law Department. The MERS Help Desk will not be able to assist in this matter.

  http://www.mersinc.org/news/details.aspx?id=288

NOW FOR SOME “SCARY” NEWS- MERS WAS AWARE IN 2006 THAT THEIR BUSINESS MODEL WAS FAULTY AND ILLEGAL. MERS PUBLISHED A MEMO TO THEIR MEMBERS TO THAT EFFECT. THE MEMO CAN BE VIEWED AT: http://www.ritholtz.com/blog/2011/02/changes-to-mers-foreclosure-procedures-2006/

Yet they continue.

MERS claims that over 50 million mortgages in the US have been registered on its system. Given the action MERS took  it will be much harder now for lawyers to argue in court that assignments made only on the MERS registry are legally valid. Unfortunately, for any of these 50 million mortgages that were securitized, chances are the various assignments along the way to the trustee were not recorded on local government records. This now means the chain of title is “clouded”, and such uncertainty affecting tens of millions of mortgages is the last thing the housing market needs. Sellers and buyers don’t know if the title will be clear of any other claims should they engage in a transaction, and homeowners might not even know if they are making monthly payments to the right bank.

Similarly, trillions of dollars of mortgage backed securities are now clouded too, because they aren’t backed by mortgages. MERS is effectively admitting that these securities are uncollateralized, which means investors now have a sound legal claim that the banks issuing the securities should buy them back at 100% of face value. There are, in fact, reasonable claims already being made by some investors against, for example, Wells Fargo and JP Morgan Chase, that these banks perpetrated a fraud by selling so-called “mortgage backed securities” which they should have known were uncollateralized

Whenever those who are critical of MERS and the banksters post blogs about the multiple frauds, we are attacked by commentators — presumably industry hacks — who try to obfuscate the issues. But recent court cases as well as testimonies before elected representatives confirm our two main claims. First, many or most foreclosures that are taking place are illegal because those doing the foreclosing do not have legal standing. And, second, the practices that created the foreclosure problems also mean that the mortgage backed securities are actually unsecured debt. That means banks must take them back, so they are toast. It all comes back to MERS’s business model: it destroyed the chain of title.

Much of the rest of the fraud and scandal we are witnessing follows on from that because the banks want to foreclose the properties before the securities holders put back the fraudulent securities. The problem is that the destruction of the clear chain of title makes it impossible to foreclose, so the banks used robo-signers to forge documents in the hope they could paper over their home thefts. But homeowners, courts, legislators, securities investors, and title insurers have caught on to the scam. In addition to the forgeries, MERS and bank officials and lawyers are committing perjury in court in the hope that they can confuse the issues sufficiently that they can complete the home thefts.

However, improper foreclosures produce houses that cannot be sold legally — so the can is just kicked down the road to the next crisis, which will reveal that those who have purchased foreclosed homes have no legal title to them. And so their debts will also be unsecured. MERS has created a disaster that will not be resolved for at least a decade, perhaps a generation. Given the scale of foreclosures (projected at 13 million by 2012), future home purchasers face a pretty good chance that if they are buying pre-owned housing, their title to the property is dubious.

Let us quickly review recent developments as reported by www.foreclosureself-defense.com earlier this week.

Notice of Default Robo-Signing. About half the states are “nonjudicial states” (including California, Nevada, and Arizona — important states so far as the foreclosure crisis goes). As Kate Berry writing for the American Banker argues, the foreclosure process in these states begins with a formal “notice of default” (NOD) letter sent to the delinquent homeowner; this is followed up by a notice published in a local newspaper. The NOD is supposed to be signed by an agent of the “party of interest”–the company with legal standing to foreclosed. By signing the letter, that agent certifies that she has reviewed the relevant documents to determine, most importantly, that the homeowner had defaulted on payments and that the company for which she is acting as agent really does have standing to foreclose. But in practice, these letters are Robo-signed by people who never look at documents. They do not even seem to know for whom they are acting as agent!

For example, as earlier reported by FORECLOSURE DEFENDER , Stanley Silva (a title officer at a title firm) gave a deposition asserting that he never reviewed documents before signing NOD letters. Further, he said he was acting “on behalf of Ticor Title of Nevada, who is agent for LPS title, who is agent for National Default Servicing” who is “apparently” agent for Fidelity National, which is “apparently” a servicer for Wilshire, which acted as agent for Wells Fargo, which claimed to have standing to foreclose! Now that is a nice “daisy chain” that successfully hides the party of interest from the homeowner trying to avoid foreclosure! Heck, the homeowner would need a sleuth better than Sherlock Holmes to find out who holds the interest in the mortgage.

Improper foreclosures and fees imposed on active military personnel. JPMorgan-Chase was caught stealing homes from military personnel. The bank admitted 14 improper foreclosures. It is illegal to foreclose on active duty personnel–and who knows how many other cases there are that JPMorgan and the other fraudster banks have not yet acknowledged. The bank also admitted that it overcharged 4000 active duty personnel–jacking up their mortgage interest rates to 9 or 10 percent even though those serving our country are supposed to get 6% rates. The bank now says it feels their pain — “we feel particularly badly about the mistakes we made here” said bank officials in a statement. But routine overcharges are the business model at the big banks. Then they pile on late fees when families cannot afford the overcharges — the overcharges ensure that homeowners cannot possibly catch up (that is the purpose of the late fees — the banks simply want to speed foreclosure). Finally, the fraudsters take the homes and throw the owners out onto the streets. When caught, the bank says it is sorry and promises it will do better in the future. Now, it is perfectly plausible that this horrendous treatment of those serving our country resulted from incompetence, not fraud. Clearly, they did not. At best they are certifiably incompetent; more likely they are certifiably criminal.

Freddie and Fannie force securities “put backs”. Bank of America agreed to settle with Freddie and Fannie for $127 billion securities sold by Countrywide (taken over by BofA) that they claimed to be faulty. The problem was that the underlying mortgages did not meet the “reps and warranties” the bank had provided. BofA paid Freddie $1.28 billion and Fannie $1.52 billion — a measly 2+% of the value of the fraudulent mortgages the bank sold. Four Democratic members of Congress rightly objected — how could this settlement represent “the best possible recovery of funds available to taxpayers”? Obviously, it cannot. It is just more subsidizing of Wall Street using Uncle Sam’s funds. Meanwhile, Freddie posted 5 straight quarters of losses, receiving $63 billion in aid from the Treasury to cover its bad deals with banks like BofA. Apparently the deal with BofA was pushed through by Treasury Secretary Geithner, who continues to protect Wall Street.  BofA will be sued again and again over fraudulent mortgages. The problem is not just the “reps and warranties”–an even bigger problem is that the securities are not backed by mortgages.

Citi still sells trashy mortgages. A recent audit disclosed that 15% of the mortgages Citi sold to Freddie in 2010 were frauds. These are not old mortgages originated during the boom, rather these were all new originations, underwritten between February and May of 2010. The loans are rated “not acceptable quality” because they are missing documents, the properties were not properly appraised, the incomes of homebuyers did not meet requirements, and the homes did not qualify. In other words, they had the same litany of problems that all the junk mortgages had back in 2005. Citi has learned no lessons from the fiasco it helped to created. Indeed, Sanjiv Das, CEO of CitiMortgage (that originates loans for Citi) bragged that with “only” a 15% rate of fraudulent mortgages, that qualifies as “one of the most outstanding stories” of Citi’s business model–a “fantastic job” he claimed. True, it is down from a 30% fraud rate in the fourth quarter of 2009. But 15%? Sold to government? What kind of confidence can that build in the minds of investors, homebuyers, regulators, or legislators? Yes, the Banks are still dangerous and only insane public policy would keep them open to permit them to continue to perpetrate fraud. As in the BofA case, this is a “reps and warranties” problem, not directly related to MERS but it does help us to understand why the banks should be shut down along with MERS.

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Q I thought, sir, there’s a company that was
formed January 1, 1999 [sic], Mortgage Electronic Registration
Systems, Inc. Does it have paid employees?
A No, it does not.

Q Does it have employees?
A No.

Q Does MERS have any employees?
A Did they ever have any? I couldn’t hear you.

Q Does MERS have any employees currently?
A No.

Q In the last five years has MERS had any
employees?
A No.

Q I thought, sir, there’s a company that was
formed January 1, 1999 [sic], Mortgage Electronic Registration
Systems, Inc. Does it have paid employees?
A No, it does not.

Q Does it have employees?
A No.

Q Does MERS have any employees?
A Did they ever have any? I couldn’t hear you.

Q Does MERS have any employees currently?
A No.

Q In the last five years has MERS had any
employees?
A No.