The focal point of their efforts is Mortgage Electronic Registration Systems, or MERS, the controversial, privately run electronic database that is used by practically every lending institution and investment company to track the transfer of the ownership of mortgages as they are packaged into securities and traded at lightning speed around the globe.
But MERS does more than just track the trading of loans. In the vast majority of mortgage documents at local courts and offices across the country, it is listed as the holder of the loans. That allows the financial industry to trade mortgages as much as it wishes without spending the time and money to refile the paperwork.
The industry is seeking legislation that would effectively affirm MERS’s legality and block any bill that would call into question what MERS does. MERS has spent more than $1 million in lobbying since fall 2008, when lower courts around the country began to rule against it. But MERS had kept its name under the radar until the recent uproar over foreclosures revealed broad problems in mortgage paperwork.
Of course it is.
But let’s analyze this.
First, there are two parts to a mortage – and MERS only tracks one. That is, the deed – the recorded part of the mortgage – is what MERS tracks. The promissory note is not recorded, and MERS does not track that.
But there is a long line of court decisions that have held that the mortgage itself is an incidental component of the whole. That is, it serves as little more than a means of providing notice of a lien (and who holds it), but not the terms. For privacy reasons (among others) the note is not recorded.
Then there’s the general view of agency in the law. That is, if I have a right I can assign to you that right and have you execute things on my behalf. For instance, I can give you permission to foreclose on my behalf.
But to do that, I have to have the right I am going to assign to you. If I have no rights, then I cannot assign anything since I have nothing to assign.
The issue MERS has as an institution/company is that there are jurisdictions that require that an actual person or identified entity be the holder of a recorded interest. That is, the “opaque” nature of MERS is repugnant to the laws of those jurisdictions. This is what the lobbying effort is attempting to override.
This is a serious State’s Rights issue. That is, it is a matter of long-settled law that land titles and similar are a state function. To usurp this authority of the states would be an inherent violation of the separation of state and federal powers and is repugnant to the Constitution.
Such an act is therefore no law at all, and an attempt to enforce a law that is facially void would be worthy of the strongest response – assuming it succeeds through to the Supreme Court (and it almost certainly would get there toot-sweet.)
But none of this bears on the true underlying problem: A so-called assignee of a promissory note, who holds the real interest, cannot grant to MERS rights they do not hold.
If the notes were not transferred into the trusts as required by the Pooling and Servicing Agreement, with said PSA being a private contract that amends and in fact requires stricter conformance with procedure than the UCC, then the “Trust” holds nothing and thus cannot grant to MERS the right to do anything!
Notice how few people are talking about the real underlying issue? There are a few – Mr. Garfield being one, I being another, Yves being a third and, I might add, Arthur Levitin.
This is where the attention has to be focused – by Congress, by the OCC, and by everyone else looking into this matter.
Before we can reach into the propriety of what MERS is doing, we first must establish that the alleged Trust which gives MERS “nominee” status actually has rights it is legally able to delegate.
The evidence currently available to us strongly suggest that the Trusts in point of fact have no such rights, as the PSA’s requirements for actual transfers into the trust, along with the ministerial requirements of both the REMIC sections of the IRS code and NY Trust Law, were not complied with.
Once again I ask: If all these notes were actually endorsed over as required and tendered into the trusts at the time of the establishment of the trust, as is required by both the PSA and REMIC rules, why is it that neither I or anyone else that I’m aware of has actually seen any properly-conveyed notes?
IF THEY EXIST, WHERE ARE THEY AND WHY DO THE SERVICERS CONTINUALLY REFUSE TO PRODUCE THEM?