Foreclosure Safe – MERS is Holding 62 Million Homes Illegally

Mortgages have been bundled into " Securities, " and have been a favorite investment by speculators around the world. Outside of the law, MERS bundlers are being held accountable for their illegal activity. The Mortgage Electronic Recording System was devised to be a convenience for the mortgage industry, but it is an offense to the law.

In California the courts have declared that the MERS Mortgage Electronic Recording System has no right to foreclose on a property.  The MERS was recently informed that Citibank can not transfer their beneficial interest of a Trust Deed to another.  Earlier cases with MERS prove that they cannot produce the original Promisory Note.

Ellen Brown  
Thur  Aug 19, 2010
Subject; Could 62 Homes be Foreclosure Proof

www.morningliberty.com

COULD 62 MILLION HOMES BE FORECLOSURE-PROOF?

Ellen Brown, August 18th, 2010

Over 62 million mortgages are now held in the name of MERS, an
electronic recording system devised by and for the convenience of
the mortgage industry. A California bankruptcy court, following
landmark cases in other jurisdictions, recently held that this
electronic shortcut makes it impossible for banks to establish
their ownership of property titles-and therefore to foreclose on
mortgaged properties. The logical result could be 62 million homes
that are foreclosure-proof.

Mortgages bundled into securities were a favorite investment
of speculators at the height of the financial bubble leading up
to the crash of 2008. The securities changed hands frequently,
and the companies profiting from mortgage payments were often
not the same parties that negotiated the loans. At the heart of
this disconnect was the Mortgage Electronic Registration System,
or MERS, a company that serves as the mortgagee of record for
lenders, allowing properties to change hands without the necessity
of recording each transfer.

MERS was convenient for the mortgage industry, but courts are now
questioning the impact of all of this financial juggling when it
comes to mortgage ownership. To foreclose on real property, the
plaintiff must be able to establish the chain of title entitling it
to relief. But MERS has acknowledged, and recent cases have held,
that MERS is a mere "nominee"-an entity appointed by the true owner
simply for the purpose of holding property in order to facilitate
transactions. Recent court opinions stress that this defect is not
just a procedural but is a substantive failure, one that is fatal
to the plaintiff's legal ability to foreclose. That means hordes
of victims of predatory lending could end up owning their homes
free and clear-while the financial industry could end up skewered
on its own sword.

California Precedent

The latest of these court decisions came down in California on
May 20, 2010, in a bankruptcy case called In re Walker, Case
no. 10-21656-E-11. The court held that MERS could not foreclose
because it was a mere nominee; and that as a result, plaintiff
Citibank could not collect on its claim. The judge opined: 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, this court is convinced that MERS had no interest it could
transfer to Citibank. Since MERS did not own the underlying note,
it could not transfer the beneficial interest of the Deed of Trust
to another. Any attempt to transfer the beneficial interest of a
trust deed without ownership of the underlying note is void under
California law.

In support, the judge cited In Re Vargas (California Bankruptcy
Court); Landmark v. Kesler (Kansas Supreme Court); LaSalle Bank
v. Lamy (a New York case); and In Re Foreclosure Cases (the "Boyko"
decision from Ohio Federal Court). (For more on these earlier cases,
see here, here and here.) The court concluded: Since the claimant,
Citibank, has not established that it is the owner of the promissory
note secured by the trust deed, Citibank is unable to assert a
claim for payment in this case.

The broad impact the case could have on California foreclosures
is suggested by attorney Jeff Barnes, who writes: This opinion
. . . serves as a legal basis to challenge any foreclosure in
California based on a MERS assignment; to seek to void any MERS
assignment of the Deed of Trust or the note to a third party for
purposes of foreclosure; and should be sufficient for a borrower
to not only obtain a TRO [temporary restraining order] against
a Trustee's Sale, but also a Preliminary Injunction barring any
sale pending any litigation filed by the borrower challenging a
foreclosure based on a MERS assignment.

While not binding on courts in other jurisdictions, the ruling
could serve as persuasive precedent there as well, because the court
cited non-bankruptcy cases related to the lack of authority of MERS,
and because the opinion is consistent with prior rulings in Idaho
and Nevada Bankruptcy courts on the same issue.

What Could This Mean for Homeowners?

Earlier cases focused on the inability of MERS to produce a
promissory note or assignment establishing that it was entitled
to relief, but most courts have considered this a mere procedural
defect and continue to look the other way on MERS' technical lack
of standing to sue. The more recent cases, however, are looking at
something more serious. If MERS is not the title holder of properties
held in its name, the chain of title has been broken, and no one may
have standing to sue. In MERS v. Nebraska Department of Banking and
Finance, MERS insisted that it had no actionable interest in title,
and the court agreed.

An August 2010 article in Mother Jones titled "Fannie and Freddie's
Foreclosure Barons" exposes a widespread practice of "foreclosure
mills" in backdating assignments after foreclosures have been
filed. Not only is this perjury, a prosecutable offense, but if
MERS was never the title holder, there is nothing to assign. The
defaulting homeowners could wind up with free and clear title.

In Jacksonville, Florida, legal aid attorney April Charney has been
using the missing-note argument ever since she first identified
that weakness in the lenders' case in 2004. Five years later,
she says, some of the homeowners she's helped are still in their
homes. According to a Huffington Post article titled "â•~Produce
the Note' Movement Helps Stall Foreclosures": Because of the
missing ownership documentation, Charney is now starting to file
quiet title actions, hoping to get her homeowner clients full
title to their homes (a quiet title action â•~quiets' all other
claims). Charneysays she's helped thousands of homeowners delay or
prevent foreclosure, and trained thousands of lawyers across the
country on how to protect homeowners and battle in court.

Criminal Charges?

Other suits go beyond merely challenging title to alleging
criminal activity. On July 26, 2010, a class action was filed in
Florida seeking relief against MERS and an associated legal firm for
racketeering and mail fraud. It alleges that the defendants used "the
artifice of MERS to sabotage the judicial process to the detriment
of borrowers;" that "to perpetuate the scheme, MERS was and is used
in a way so that the average consumer, or even legal professional,
can never determine who or what was or is ultimately receiving
the benefits of any mortgage payments;" that the scheme depended
on "the MERS artifice and the ability to generate any necessary
â•~assignment' which flowed from it;" and that "by engaging in
a pattern of racketeering activity, specifically â•~mail or wire
fraud,' the Defendants . . . participated in a criminal enterprise
affecting interstate commerce."

Local governments deprived of filing fees may also be getting into
the act, at least through representatives suing on their behalf. Qui
tam actions allow for a private party or "whistle blower" to bring
suit on behalf of the government for a past or present fraud on
it. In State of California ex rel. Barrett R. Bates, filed May 10,
2010, the plaintiff qui tam sued on behalf of a long list of local
governments in California against MERS and a number of lenders,
including Bank of America, JPMorgan Chase and Wells Fargo, for
"wrongfully bypass[ing] the counties' recording requirements;
divest[ing] the borrowers of the right to know who owned the
promissory note . . .; and record[ing] false documents to initiate
and pursue non-judicial foreclosures, and to otherwise decrease or
avoid payment of fees to the Counties and the Cities where the real
estate is located." The complaint notes that "MERS claims to have
â•~saved' at least $2.4 billion dollars in recording costs,"
meaning it has helped avoid billions of dollars in fees otherwise
accruing to local governments. The plaintiff sues for treble damages
for all recording fees not paid during the past ten years, and
for civil penalties of between $5,000 and $10,000 for each unpaid
or underpaid recording fee and each false document recorded during
that period, potentially a hefty sum. Similar suits have been filed
by the same plaintiff qui tam in Nevada and Tennessee.

By Their Own Sword: MERS' Role in the Financial Crisis

MERS is, according to its website, "an innovative process that
simplifies the way mortgage ownership and servicing rights are
originated, sold and tracked. Created by the real estate finance
industry, MERS eliminates the need to prepare and record assignments
when trading residential and commercial mortgage loans." Or as Karl
Denninger puts it, "MERS' own website claims that it exists for
the purpose of circumventing assignments and documenting ownership!"

MERS was developed in the early 1990s by a number of financial
entities, including Bank of America, Countrywide, Fannie Mae, and
Freddie Mac, allegedly to allow consumers to pay less for mortgage
loans. That did not actually happen, but what MERS did allow was the
securitization and shuffling around of mortgages behind a veil of
anonymity. The result was not only to cheat local governments out
of their recording fees but to defeat the purpose of the recording
laws, which was to guarantee purchasers clean title. Worse, MERS
facilitated an explosion of predatory lending in which lenders
could not be held to account because they could not be identified,
either by the preyed-upon borrowers or by the investors seduced
into buying bundles of worthless mortgages. As alleged in a Nevada
class action called Lopez vs. Executive Trustee Services, et al.:
Before MERS, it would not have been possible for mortgages with
no market value . . . to be sold at a profit or collateralized
and sold as mortgage-backed securities. Before MERS, it would not
have been possible for the Defendant banks and AIG to conceal from
government regulators the extent of risk of financial losses those
entities faced from the predatory origination of residential loans
and the fraudulent re-sale and securitization of those otherwise
non-marketable loans. Before MERS, the actual beneficiary of every
Deed of Trust on every parcel in the United States and the State of
Nevada could be readily ascertained by merely reviewing the public
records at the local recorder's office where documents reflecting
any ownership interest in real property are kept…. After MERS,
. . . the servicing rights were transferred after the origination
of the loan to an entity so large that communication with the
servicer became difficult if not impossible …. The servicer was
interested in only one thing – making a profit from the foreclosure
of the borrower's residence – so that the entire predatory cycle of
fraudulent origination, resale, and securitization of yet another
predatory loan could occur again. This is the legacy of MERS, and
the entire scheme was predicated upon the fraudulent designation
of MERS as the â•~beneficiary' under millions of deeds of trust
in Nevada and other states.

Axing the Bankers' Money Tree

If courts overwhelmed with foreclosures decide to take up the
cause, the result could be millions of struggling homeowners with
the banks off their backs, and millions of homes no longer on the
books of some too-big-to-fail banks. Without those assets, the banks
could again be looking at bankruptcy. As was pointed out in a San
Francisco Chronicle article by attorney Sean Olender following the
October 2007 Boyko [pdf ] decision: The ticking time bomb in the
U.S. banking system is not resetting subprime mortgage rates. The
real problem is the contractual ability of investors in mortgage
bonds to require banks to buy back the loans at face value if there
was fraud in the origination process.

. . . The loans at issue dwarf the capital available at the largest
U.S. banks combined, and investor lawsuits would raise stunning
liability sufficient to cause even the largest U.S. banks to fail
. . . .
Nationalization of these giant banks might be the next logical
step-a step that some commentators said should have been taken
in the first place. When the banking system of Sweden collapsed
following a housing bubble in the 1990s, nationalization of the
banks worked out very well for that country.

The Swedish banks were largely privatized again when they got back
on their feet, but it might be a good idea to keep some banks as
publicly-owned entities, on the model of the Commonwealth Bank of
Australia. For most of the 20th century it served as a "people's
bank," making low interest loans to consumers and businesses through
branches all over the country.

With the strengthened position of Wall Street following the 2008
bailout and the tepid 2010 banking reform bill, the U.S. is far
from nationalizing its mega-banks now. But a committed homeowner
movement to tear off the predatory mask called MERS could yet turn
the tide. While courts are not likely to let 62 million homeowners
off scot free, the defect in title created by MERS could give them
significant new leverage at the bargaining table.
———————————————————————-
Ellen Brown wrote this article for YES! Magazine, a national,
nonprofit media organization that fuses powerful ideas with practical
actions. Ellen developed her research skills as an attorney
practicing civil litigation in Los Angeles. In Web of Debt, her
latest of eleven books, she shows how the Federal Reserve and "the
money trust" have usurped the power to create money from the people
themselves, and how we the people can get it back. Her websites
are webofdebt.com, ellenbrown.com, and public-banking.com.

***********************************
"The real rulers in Washington are invisible
and exercise power from behind the scenes."
— Justice Felix Frankfurter

 
"The ruling class has the schools and press
under its thumb. This enables it to sway the
emotions of the masses."
— Albert Einstein
***********************************

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No Longer Tenants – Accept the Deed Robb Ryder

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12 Responses to “Foreclosure Safe – MERS is Holding 62 Million Homes Illegally”

  1. mark says:

    You can find a lot of hot tips oncountrywide property all over the web. Find the ones that will work for you and apply it in real life.

  2. David Nigro says:

    I have a home in foreclosure in Southern Oregon due for sale 2/22/2011?
    Is there a contact person for me in the area?
    Thanks for your article

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