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Foreclosure Defense Florida

MERS’ Role in Massive Foreclosure Fraud Nationwide- A Peek Behind Their Shady Curtain

From the beginning of our nation’s history real property ownership was very simple.   If you owned a property or held a mortgage on a property, the deed or mortgage was recorded with the county clerk.   Anyone wanting information about that property or any owner or holder of a mortgage need only go to the county and obtain copies of that recorded interest and ownership or debt was conclusively and clearly established.   A lender seeking to foreclose could quickly obtain his mortgage, file that with the court and that lender could usually proceed quite quickly with his foreclosure.

MERS- The Shifty, Shady, Smoky Backroom Dealer of Mortgages

Although the local system of property recording and ownership worked well for hundreds of years and continues to function quite well even today, this system grew out of favor with a group of major lenders and investors.   The primary reasons were the system was open and accessible to the public and the local clerks and courts were very attentive to important details like making sure the mortgages were properly recorded.   Rather than work within the system a group of major lenders got together in 1998 and formed MERS, the Mortgage Electronic Registration System.   According to the MERS website:

MERS is 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.

Cutting right to the chase this “innovative process” means the mortgage and banking industry found a nifty way to sell, trade, steal, manipulate and mismanage the mortgages held on virtually every homeowner’s home in America.   Although “eliminating the need to prepare and record assignments” sounds efficient, the problem is the purpose of preparing and recording assignments of mortgages in the county where the property is located is to confirm and insure proper and legal ownership of the mortgage debt.   The MERS system is about to collapse as courts around the country, circuit courts, federal courts and federal bankruptcy courts have called into question the legitimacy of the MERS system.

Two Cases That Call Into Question the Long Term Viability of MERS- Kessler and Azize

There are a volume of cases from across the country that are calling into question the long term viability of MERS and its processes, but I will focus on two here today.   One from Kansas (Kesler v. Landmark) and one from right here in good old Pinellas County, Mortgage Electronic Registration v. Azize) 965 So. 2d 151 (Fla. Dist. App. 2007)

Kesler is a nifty opinion because in it, the Kansas Supreme Court found that because MERS did not own the mortgage in that case (MERS doesn’t own any mortgages), it was not a necessary party to a foreclosure and had no rights in the foreclosure case….

  • MERS had no right to the underlying debt repayment secured by the mortgage; MERS did not even act as the servicing agent to receive the payments and remit them to the lender. MERS’s right to act to enforce the mortgage was strictly limited: if “necessary to comply with law or custom,” MERS could foreclose the mortgage or enter a release of the mortgage. MERS certainly could not act at odds to its principal, the lender. Its role fits the classic definition of an agent: one “‘authorized by another to act for him, or intrusted with another’s business.'” In re Tax Appeal of Scholastic Book Clubs, Inc., 260 Kan. 528, 534, 920 P.2d 947 (1996) (quoting Black’s Law Dictionary 85 [4th ed. 1968]).
  • Only one Kansas case has discussed the meaning of nominee in any detail. In Thompson v. Meyers, 211 Kan. 26, 30, 505 P.2d 680 (1973), the court noted that the meaning of the term may vary from a pure straw man or limited agent to one who has broader authority.   But whatever authority the nominee may have comes from the delegation of that authority by the principal. In its ordinary meaning, a nominee represents the principal in only a “nominal capacity” and does not receive any property or ownership rights of the person represented. See, e.g., Cisco v. Van Lew, 60 Cal. App. 2d 575, 583-84, 141 P.2d 433 (1943); see also Applebaum v. Avaya, Inc., 812 A.2d 880, 889 (Del. 2002) (referring to nominees “as agents of the beneficial owners”). The Millennia mortgage does not purport to give MERS any greater rights than normally given a nominee. The mortgage says that MERS acts “solely as nominee for Lender.” There is no express grant of any right to MERS to transfer or sell the mortgage or even to assign its duties as nominee. Nor does MERS obtain any right to the borrower’s payments or even a role in receiving payments.

Azize is a fantastic case for consumers and foreclosure defense in general, but you’ve got to dig a little deep into it to figure out and understand why.   (The full opinion can be found here.) A few years back here in good old Pinellas County a beloved judge, Judge Logan became infuriated at the number of foreclosure cases filed in his circuit with “MERS” as the Plaintiff.   Problem was MERS would file these cases then attorneys would appear in his courtroom and have no idea who the real owner or party in interest in the mortgage was or who had any entitlement to to collect the debt.   Judge Logan became infuriated and consolidated 20 pending MERS cases and directed that attorneys from MERS come into his courtroom to explain how MERS was the Plaintiff in all these foreclosures when they had no ownership interest in the cases.   The attorney’s explanation reads like a script from Alice in Wonderland but the net result was Judge Logan determined that MERS had no interest and he dismissed all the MERS cases that were currently pending in Pinellas County.   Now the problem is Judge Logan’s Azize opinion was subsequently overturned by the Second District Appellate Court.   Great news for MERS right? MERS can get right back in the business of filing their suits again right?   MERS will cite this appellate court decision to support their continued practice right?

WRONG!   and Here’s why….

The Azize opinion is almost never cited by the banks or lenders and their attorneys because the opinion contains a footnote that points to an even bigger problem….

Here, MERS’s counsel explained to the trial judge at the hearing that, in these transactions, the notes are frequently transferred to MERS for the purpose of foreclosure without MERS actually obtaining the beneficial interest in the note.

Although the complaint does not allege how or why MERS came to be the owner and holder of the note, the trial court’s dismissal was not based on this deficit. Since the trial court did not base its ruling on this issue, we offer no opinion as to whether the complaint fails to properly plead a cause of action without this information being alleged.

And that’s the key, because MERS does not allege how or why they came to be the owner and holder of the underlying note, they cannot properly plead a cause of action!

One more fun thing before I go….if you want a peek behind the MERS curtain, go here to their website and you can track their own information about who owns or services a note.   It’s nifty information when they come before the court asserting one party “owns and holds” a note when their own website shows another!



5 Comments

  • Ken Morrison says:

    In Dec 09 my mortgage company filed a foreclosure case against me and count 1 read “This is an action to re-establish a promissory note under Section 673.3091 Florida Statutes.”

    In the document mortgage definition (C) reads, “MERS is Mortgage Electronic Registration Systems, Inc. MERS is a separate corporation that is acting solely as a Nominee for the Lender and Lender’s successors or assigns. MERS is the Mortgagee under this Security Instrument. MERS is organized and existing under the laws of Delaware, and has and address and telephone number of PO Box 2026, Flint MI 48501-2026, tel,888-679-MERS.”

    You did refer to the Pinnellas ruling in your blog of 1/8/10 and I cited this ruling among my 9 Answer and Affirmative Defenses.

    I rang the court a few days ago to find out if a hearing date has been set. The clerk replied that the other party’s lawyers have to decide what to do next and when.

    Thanks for the blog it was very helpful to know about MERS,

    Regards
    Ken Morrrison

    • Good job thus far and congratulations. Having said that, whoever the judge is, there is about a 90% chance he or she will ultimately rule against you when the Plaintiff sets it for hearing. The rules are technical and complex and even when an experienced attorney goes before a judge I know well and appear in front of often, and plead everything technically correct, it is a real uphill fight. I applaud you for your efforts thus far, but be aware of the reality going forward.

  • DW says:

    Matthew,

    Thank you for posting this information. From your responses it sounds as if it really does not matter if a homeowner proves his/her case. If that is the case it seams that anyone could claim thier neighbor house and foreclose???? Why are judges so opposed to upholding the law? I don’t get the motivation….

    • Judges are just overwhelmed. Court budgets across the country are just cut to the bone and a judge that had 2000 cases and one assistant may have 4000 cases and still just one assistant. In the vast majority of cases, the Defendant doesn’t put up any defense at all and judges just sign off on judgments giving houses to whomever the attorney claims is entitled to it. I have the feeling that many judges know this is a real problem and they don’t like where it could be heading, but it’s like staring up at a 40 foot wall of water as it starts to crash down upon you….sort of a helpless feeling. I’m clearly a passionate advocate here, but I really don’t know what the solution is. If the problems that we’re identifying were addressed, I’m not sure where that leaves us other than in a bigger mess than we have now.

  • mike griffith says:

    Matthew,
    I’m not sure I understand this comment? Where do Judges think this is heading. Is this a comment about case load or about cleaning up the mortgage conflict between deed of trust and promisory note.

    (Your comment judges are overwhelmed)

    Judges are just overwhelmed. Court budgets across the country are just cut to the bone and a judge that had 2000 cases and one assistant may have 4000 cases and still just one assistant. In the vast majority of cases, the Defendant doesn’t put up any defense at all and judges just sign off on judgments giving houses to whomever the attorney claims is entitled to it. I have the feeling that many judges know this is a real problem and they don’t like where it could be heading, but it’s like staring up at a 40 foot wall of water as it starts to crash down upon you”¦.sort of a helpless feeling. I’m clearly a passionate advocate here, but I really don’t know what the solution is. If the problems that we’re identifying were addressed, I’m not sure where that leaves us other than in a bigger mess than we have now.

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