In Texas we have noticed foreclosures in the name of MERS have suddenly become VERY rare.  We haven’t run across one in several months.

Does this mean MERS has vanished? 

Nope, but the mortgage servicers are downplaying the role of MERS and trying to shield MERS and themselves from the bright light.

This means you need to dig a little deeper to uncover really what is going on behind the curtain.

The article below from Reuters highlights MERS’ recent announcement to its members and 20,000+ “officers” that they need to leave out MERS’ name in foreclosure proceedings.

If you or someone you know is facing a mortgage hardship or foreclosure contact our office immediately.

- The Bank Slayer

Exclusive: Facing criticism, MERS cuts role in foreclosures

(Reuters) – MERS, the electronic mortgage registry that faces multiple investigations for its role in thousands of problematic foreclosure cases, changed its rules to lower its profile in court-supervised foreclosures.

MERS, a unit of Merscorp Inc. of Reston, Virginia, owns the computerized registry, Mortgage Electronic Registration Systems. Mortgage loan giants Fannie Mae and Freddie Mac and several of the largest U.S. banks established MERS in 1995 to circumvent the costly and cumbersome process of transferring ownership of mortgages and recording the changes with county clerks.

In rule changes announced to MERS members on July 21, the company forbade members to file any more foreclosure actions in MERS’s name.

It also required mortgage servicers to obtain mortgage assignments and record them with county clerks before beginning foreclosures.

Mortgage-loan servicers perform routine duties for the investment trusts that own pools of mortgages, including collecting mortgage payments and, when necessary, filing foreclosures.

Although these trusts are legally required to own the mortgages when they file to foreclose, the servicers in many cases did not obtain documents known as assignments on their behalf until weeks or months after launching a foreclosure action in court, a recent Reuters Special Report found. (link.reuters.com/kyb72s)

Since the collapse of the housing boom, many foreclosure cases were filed in MERS’s name, even though the registry doesn’t really own either the mortgage or the promissory note, the document which states the terms of the mortgage loan.

MERS’s role in foreclosure cases has made it a lightning rod in recent months in court decisions which have held that loan servicers’ use of the registry violates basic real estate and mortgage laws.

In the last week, state attorneys general in Massachusetts and Delaware have announced investigations of MERS, and several other states have broader inquiries into foreclosure practices that include MERS.

It is unclear how much the rule changes will help MERS with its legal problems.

Under the new rules, servicers are required to stop filing foreclosures in MERS’s name, but MERS’s role in foreclosures won’t actually be eliminated. The servicers will continue to obtain the needed mortgage assignments from MERS. In past cases examined by Reuters, such assignments have included ones of questionable legitimacy, such as mortgages owned by now-defunct lenders.

O. Max Gardner III, a North Carolina lawyer who is specialist in foreclosure actions in bankruptcy courts, said the change will have the effect of making MERS’s role in assigning mortgages invisible in court.

The assignments will still come from MERS, but “they just won’t be in the court files any more,” he said.

MERS spokeswoman Janice Smith said the new rules make mandatory a trend that already was under way.

She noted that Fannie Mae, Freddie Mac and several large banks already had stopped filing foreclosures in MERS name. Smith said the change would avoid confusing homeowners facing foreclosure by eliminating MERS, a company they had never heard of, from court documents.

She also said that MERS’ s original purpose was to keep track of changes in servicers and mortgage ownership. “Foreclosure really was not central to MERS’s core business,” she said, adding that MERS received no income from foreclosures.

Mortgage-law specialists say that lenders and servicers for a long time relied heavily on bringing foreclosures in MERS’s name. This helped make possible foreclosures that otherwise might not have taken place because the necessary original documents were missing.

MERS says that it is the holder of record of 32 million, or 60 per cent, of U.S. mortgages. But it has only a handful of employees. Instead, it has designated some 20,000 employees of banks and other servicers as MERS “officers.”

Some courts and homeowners’ lawyers have criticized this system because in effect it enables servicers to assign mortgages to themselves whenever they needed one to foreclose.

The rule change also comes amid a growing movement against MERS among county clerks around the U.S. They have been pressing state attorneys general and local prosecutors to investigate MERS for allegedly failing to record documents with them and pay the associated filing fees. The rule change, by requiring servicers to record mortgage assignments sooner and pay recording fees, will partly address the clerks’ concerns.

(Editing by Michael Williams)

MERS is the bane of homeowners who simply want to know who really owns their loan and who might really have their Promissory Note.

The article below from the The New York Times highlights the flaws and misconduct that is going on behind the scenes and helps explain (in part) why you can’t easily determine who owns your mortgage.

For example,

MERS’ board gave its senior vice president, William Hultman, the rather extraordinary power to deputize an unlimited number of “vice presidents” and “assistant secretaries” drawn from the ranks of the mortgage industry.

The “nomination” process was near instantaneous. A bank entered a name into MERS’s Web site, and, in a blink, MERS produced a “certifying resolution,” signed by Mr. Hultman. The corporate seal was available to those deputies for $25.

Can you the homeowner log onto MERS and see who they claim owns your loan.  Sure –>  Go HERE.

The reality turns out to be a lot messier. Federal bankruptcy courts and state courts have found that MERS and its member banks often confused and misrepresented who owned mortgage notes. In thousands of cases, they apparently lost or mistakenly destroyed loan documents.

Destroyed?  Huh?

…not even the mortgage giant Fannie Mae, an investor in MERS, depends on it these days.

“We would never rely on it to find ownership,” says Janis Smith, a Fannie Mae spokeswoman, noting it has its own records.

If you want to negotiate from a position of strength you will need to file suit against your lender and force them to come forward with proper authority.  Don’t let them hide behind MERS and its smoke screen.

Click here to see & hear from one of the attorneys we recommend from The Gore Law Firm as he speaks about MERS during a live interview on CBS Radio.

MERS discussion with Randall Macchi from The Gore Law Firm

- The Bank Slayer

MERS? It May Have Swallowed Your Loan

By MICHAEL POWELL and GRETCHEN MORGENSON at The New York Times

While most folks know the name of the Servicer of their mortgage it now identifies the INVESTOR of the loan as well.

It’s easy to look up your loan and see if Freddie, Fannie or some other “investor” claims ownership of your loan.

There are several ways to look up your loan.

First and best way to look up your loan is to use the MIN # (MERS Identification Number)

1. First look at your mortgage documents.  Look for the Deed of Trust (Not the Warranty Deed) or go online and look yours up in the property records.

2. Locate the MIN number in the top right hand corner of the document.

3. Go to https://www.mers-servicerid.org/sis/

4. Search by MIN, or if you do not have your MIN number, Go for the 2nd way to search –> Search by Property Address/Borrower Details (not as accurate)

5.  It should list your servicer and your investor.

But what if it doesn’t find your loan?

Then either you have no MIN and you are not in the MERS system or you entered it incorrectly.

If you are not in the MERS system you can still check the Fannie Mae & Freddie Mac websites to see if they claim to own your loan.

- The Bank Slayer

Bank of America “accidentally” foreclosed on someone again!    It has been a couple of months since they last did this so give them a break.

We can get your house too!

Thanks to 4closureFraud.org for the awesome graphic!

This poor guy bought a house, in CASH, which used to have a Bank of America mortgage and obviously that was good enough for BofA to take the house and convey it to Fannie Mae.

Read on below…

- The Bank Slayer

South Florida Sun-Sentinel.com

Foreclosure crisis

Man’s home sold out from under him in foreclosure mistake

By Harriet Johnson Brackey, Sun Sentinel

September 22, 2010

When Jason Grodensky bought his modest Fort Lauderdale home last December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage.

Grodensky knew nothing about the foreclosure until July, when he learned that the title to his home had been transferred to a government-backed lender. “I feel like I’m hanging in the wind and I’m scared to death,” said Grodensky. “How did some attorney put through a foreclosure illegally?”

Bank of America has acknowledged the error and will correct it at its own expense, said spokeswoman Jumana Bauwens.

Grodensky’s story and other tales of foreclosure mistakes started popping up recently across South Florida. This week, GMAC Mortgage — one of the nation’s largest mortgage servicers and a major mortgage lender — told real estate agents to stop evicting residents and suspend sales of properties that had been taken from homeowners in foreclosure. The company said it might have to “correct” some of its foreclosures, but was not halting those in process.

In Florida courts, which have been swamped with foreclosure cases for several years, mistakes “happen all the time,” said foreclosure defense attorney Matt Weidner in St. Petersburg. “It’s just not getting reported.”

And the legal efforts required to resolve a foreclosure mistake are complicated. “Unwrapping it is like unwrapping Fort Knox,” said Carol Asbury, a Fort Lauderdale foreclosure attorney. “It’s very difficult.”

The process is under increasing scrutiny, as Florida’s court system struggles with the mountain of cases that have resulted from the housing crisis.

Grodensky said he spent months trying to figure out what happened, but said his questions to Bank of America and to the law firm Florida Default Law Group that handled the foreclosure have not been answered. Florida Default Law Group could not be reached for comment, despite several attempts by phone and e-mail. Grodensky said he has filed a claim with his title insurance company, but that, too, has not resulted in any action.

It wasn’t until last week, when Grodensky brought his problem to the attention of the Sun Sentinel, that it began to be resolved.

“It looks like it was a mistake in communication between us and the attorneys handling the foreclosure,” said Bauwens.

Court records show Countrywide Home Loans filed a foreclosure case in Broward County civil court against the former owner of the home on Southwest 14th Street in 2008. Bank of America took over Countrywide at the end of that year.

The following year, Grodensky and his father Steven bought the house for cash as an investment property. Jason Grodensky’s brother Kenny Sloan lives in the house now. They negotiated a short sale, which means the lender agreed to accept less than the mortgage amount. Documents show the sale proceeds were wired to Bank of America. The sale was recorded in December 2009 at the Broward County Property Appraiser’s Office.

But in court, the foreclosure case continued, the records show. There was a motion to dismiss the case in July, followed the next day by a motion to re-open it. A court-ordered foreclosure sale took place July 15. The property appraiser’s office recorded the transfer of the title to the Federal National Mortgage Association (Fannie Mae) the same day.

Bauwens said the lender would go back to court to rescind the foreclosure sale.

Broward Chief Judge Victor Tobin, who set up the county court’s foreclosure system, said this is the first he’s heard of this type of mistake. “From the court’s point of view we have no way of knowing that someone sells a house unless they tell us,” said Tobin. “The bank would first have to tell the lawyers and the lawyers would presumably ask the court for an order dismissing the case.”

Tobin said this is the first he’s heard of this type of mistake. The court system is under pressure to clear up its foreclosure backlog. This year, the state court system pumped $6 million into the effort, hiring more temporary judges and staffers.

Some say there’s too much effort aimed at simply disposing of the cases.

“The evidence doesn’t matter, the proof doesn’t matter, due process doesn’t matter,” said Asbury, the attorney. “The only thing that matters is that they get rid of these cases.”

Mindy Watson-Cintron of Century 21 Tenace Realty said she was unable to stop a foreclosure even though she had a willing buyer for a Coral Springs home last summer. Watson-Cintron had a letter from GMAC Mortgage, agreeing to sell the house in a short sale. The letter indicates the deal would be accepted through Aug. 20.

Watson-Cintron said she called, pleaded and even spent three hours one day in the lobby of the law offices of David Stern in Plantation trying to get someone to agree to put the foreclosure on hold. Stern’s office is one of the nation’s largest foreclosure firms and, Watson-Citron said, represented GMAC in the foreclosure case.

But the foreclosure continued. The lender took back the home and now has it listed for sale – at a lower price than Watson-Cintron’s buyer offered. “The bank’s not talking to the attorneys and the attorneys are not talking to the courts,” she said.

Stern could not be reached for comment despite several attempts by phone and email to his office. A spokesman for GMAC Mortgage promised to look into the case.

Florida Attorney General Bill McCollum is investigating Stern’s firm, Florida Legal Default Group, based in Tampa, the Law Offices of Marshall C. Watson in Fort Lauderdale and Shapiro & Fishman, which has offices in Boca Raton. Officials have said the investigation centers on whether foreclosure documents submitted by these firms were false, misleading or inaccurate.

In announcing its decision this week to halt evictions and suspend sales in foreclosure cases, GMAC cited a deposition by Jeffrey Stephan in a Palm Beach foreclosure case in which Stephan said he did not verify all the documents and did not sign them all in the presence of a notary. Stephan said he signed as many as 10,000 documents a month.

Some foreclosure defense attorneys have questioned whether similar practices involve other lenders as they push huge numbers of foreclosures through the courts. In one South Florida foreclosure case, Chase Home Finance executive Beth Cottrell said in a deposition in May that her team of eight supervisors signs 18,000 documents a month. Chase’s spokesperson did not comment.

This is really an unbelievable story but sadly, if you work in foreclosure defense, it’s all too often these types of railroading of people’s lives occurs.

The folks at 4closureFraud.org did an OUTSTANDING job at digging into the screw job a disabled veteran got when a house he was renting was foreclosed.

Of course the story has all the typical players:  large national bank, MERS and a foreclosure mill.

Here’s a photo of the guy who got TWO days notice before being tossed out.

“Harris had lived in the house for several years and tried repeatedly to buy it, first from the previous owner through a short sale and later from the bank that bought the foreclosed property, he and his real estate agent said.

Harris said he received a notice on Tuesday that he would be evicted on Thursday. He scrambled to line up a federal loan and cash to help him buy the house, but the bank’s lawyer told him it was too late, Harris said.”

You can read this excellent article in full and see the goods 4closureFraud dug up here

- The Bank Slayer

It’s simple, follow the money.   Everyone understands the purpose of a compensation plan.  Develop a plan that uses money to motivate a certain behavior.

For the past several years we’ve been saying that the banks/servicers WANT to foreclose properties.   It is the fastest way for them to generate fee income as well as convert a home to cash.

4closure fraud.com and Mandelman matters posted a great article about an interview with a past JPMorgan Chase employee.    He echos some of the same things that one of our employees who used to work for IndyMac/OneWest states…

While GSE’s like Fannie & Freddie tout efforts to slow foreclosures… and “Fannie Mae guidelines allow for modifications to be considered...Seemed like more than 95% of the time, the instruction came back ‘proceed with foreclosure…”

While homeowner after homeowner is ready to sell their soul to save their house the reality as this employee states is  “They’re [sp] whole focus is to foreclose, not to modify.  They put the borrower through every hoop and obstacle they can, so that when something fails to get done on time, or whatever, they can deny it and proceed with the foreclosure.  Like, ‘Hey we tried, but the borrower didn’t get this one document in on time.”

Face the reality that you need to take matters into your own hands and fight hard if you are going to win versus a large and powerful bank.

- The Bank Slayer

JP MORGAN INSIDER – “CHASE is in the Foreclosure Business, NOT the Modification Business.”

“JPMorgan CHASE is in the foreclosure business, not the modification business’.”  That, according to Jerad Bausch, who until quite recently was an employee of CHASE’s mortgage servicing division working in the foreclosure department in Rancho Bernardo, California.

I was recently introduced to Jerad and he agreed to an interview.  (Christmas came early this year.)  His answers to my questions provided me with a window into how servicers think and operate.  And some of the things he said confirmed my fears about mortgage servicers… their interests and ours are anything but aligned.

Today, Jerad Bausch is 25 years old, but with a wife and two young children, he communicates like someone ten years older.  He had been selling cars for about three and a half years and was just 22 years old when he applied for a job at JPMorgan CHASE.  He ended up working in the mega-bank’s mortgage servicing area… the foreclosure department, to be precise.  He had absolutely no prior experience with mortgages or in real estate, but then… why would that be important?

“The car business is great in terms of bring home a good size paycheck, but to make the money you have to work all the time, 60-70 hours a week.  When our second child arrived, that schedule just wasn’t going to work.  I thought CHASE would be kind of a cushy office job that would offer some stability,” Jerad explained.

That didn’t exactly turn out to be the case.  Eighteen months after CHASE hired Jared, with numerous investors having filed for bankruptcy protection as a result of the housing meltdown, he was laid off.  The “investors” in this case are the entities that own the loans that Chase services.  When an investor files bankruptcy the loan files go to CHASE’S bankruptcy department, presumably to be liquidated by the trustee in order to satisfy the claims of creditors.

The interview process included a “panel” of CHASE executives asking Jared a variety of questions primarily in two areas.  They asked if he was the type of person that could handle working with people that were emotional and in foreclosure, and if his computer skills were up to snuff.  They asked him nothing about real estate or mortgages, or car sales for that matter.

The training program at CHASE turned out to be almost exclusively about the critical importance of documenting the files that he would be pushing through the foreclosure process and ultimately to the REO department, where they would be put back on the market and hopefully sold.  Documenting the files with everything that transpired was the single most important aspect of Jared’s job at CHASE, in fact, it was what his bonus was based on, along with the pace at which the foreclosures he processed were completed.

“A perfect foreclosure was supposed to take 120 days,” Jared explains, “and the closer you came to that benchmark, the better your numbers looked and higher your bonus would be.”

CHASE started Jared at an annual salary of $30,000, but he very quickly became a “Tier One” employee, so he earned a monthly bonus of $1,000 because he documented everything accurately and because he always processed foreclosures at as close to a “perfect” pace as possible.

“Bonuses were based on accurate and complete documentation, and on how quickly you were able to foreclosure on someone,” Jerad says.  “They rate you as Tier One, Two or Three… and if you’re Tier One, which is the top tier, then you’d get a thousand dollars a month bonus.  So, from $30,000 you went to $42,000.  Of course, if your documentation was off, or you took too long to foreclose, you wouldn’t get the bonus.”

Day-to-day, Jerad’s job was primarily to contact paralegals at the law firms used by CHASE to file foreclosures, publish sale dates, and myriad other tasks required to effectuate a foreclosure in a given state.

“It was our responsibility to stay on top of and when necessary push the lawyers to make sure things done in a timely fashion, so that foreclosures would move along in compliance with Fannie’s guidelines,” Jerad explained.  “And we documented what went on with each file so that if the investor came in to audit the files, everything would be accurate in terms of what had transpired and in what time frame.  It was all about being able to show that foreclosures were being processed as efficiently as possible.”

When a homeowner applies for a loan modification, Jerad would receive an email from the modification team telling him to put a file on hold awaiting decision on modification.  This wouldn’t count against his bonus, because Fannie Mae guidelines allow for modifications to be considered, but investors would see what was done as related to the modification, so everything had to be thoroughly documented.

“Seemed like more than 95% of the time, the instruction came back ‘proceed with foreclosure,’ according to Jerad.  “Files would be on hold pending modification, but still accruing fees and interest.  Any time a servicer does anything to a file, they’re charging people for it,” Jerad says.

I was fascinated to learn that investors do actually visit servicers and audit files to make sure things are being handled properly and homes are being foreclosed on efficiently, or modified, should that be in their best interest.  As Jerad explained, “Investors know that Polling & Servicing Agreements (“PSAs”) don’t protect them, they protect servicers, so they want to come in and audit files themselves.”

“Foreclosures are a no lose proposition for a servicer,” Jerad told me during the interview.  “The servicer gets paid more to service a delinquent loan, but they also get to tack on a whole bunch of extra fees and charges.  If the borrower reinstates the loan, which is rare, then the borrower pays those extra fees.  If the borrower loses the house, then the investor pays them.  Either way, the servicer gets their money.”

Jerad went on to say: “Our attitude at CHASE was to process everything as quickly as possible, so we can foreclose and take the house to sale.  That’s how we made our money.”

“Servicers want to show investors that they did their due diligence on a loan modification, but that in the end they just couldn’t find a way to modify.  They’re whole focus is to foreclose, not to modify.  They put the borrower through every hoop and obstacle they can, so that when something fails to get done on time, or whatever, they can deny it and proceed with the foreclosure.  Like, ‘Hey we tried, but the borrower didn’t get this one document in on time.’  That sure is what it seemed like to me, anyway.”

According to Jerad, JPMorgan CHASE in Rancho Bernardo, services foreclosures in all 50 states.  During the 18 months that he worked there, his foreclosure department of 15 people would receive 30-40 borrower files a day just from California, so each person would get two to three foreclosure a day to process just from California alone.  He also said that in Rancho Bernardo, there were no more than 5-7 people in the loan modification department, but in loss mitigation there were 30 people who processed forbearances, short sales, and other alternatives to foreclosure.  The REO department was made up of fewer than five people.

Jerad often took a smoke break with some of the guys handing loan modifications.  “They were always complaining that their supervisors weren’t approving modifications,” Jerad said.  “There was always something else they wanted that prevented the modification from being approved.  They got their bonus based on modifying loans, along with accurate documentation just like us, but it seemed like the supervisors got penalized for modifying loans, because they were all about finding a way to turn them down.”

“There’s no question about it,” Jerad said in closing, “CHASE is in the foreclosure business, not the modification business.”

Yes, you heard it right.  The movement against MERS, short for Mortgage Electronic Registration System, Inc., is picking up steam.   In case after case, MERS is being more and more closely analyzed as to their role, or their “registration” system’s role in the ongoing foreclosure crisis.   MERS related foreclosures may soon grind to a halt.

Sadly this is a harder fight in Texas compared to other states.

Whether you agree with the excellent article below or not, states such as Texas with primarily a NON-JUDICIAL foreclosure process (except cash out refinances and home equity lines of credit), don’t provide homeowners with as many opportunities to defend their home or question the foreclosure process.

What do I mean?  For example, in many states answering a foreclosure lawsuit with a response that MERS doesn’t have the right to foreclosure is straight forward.  But in Texas most foreclosures never go to court.  The mortgage company simply declares you in default and starts a process that can be over within 60 days and your home is gone with NO RIGHT OF REDEMPTION!!

Additionally, the Texas Property PERMITS a “book entry system” to participate in the foreclosure process.     Anyone want to guess the definition of the “book entry system” – “means a national book entry system for registering a beneficial interest in a security instrument that acts as a nominee for the grantee, beneficiary, owner, or holder of the security instrument and its successors and assigns.”   READ = MERS.

If you are facing a foreclosure situation you should seek experienced local assistance ASAP.

- The Bank Slayer

Enjoy the article below…

Ellen Brown
Web of Debt
August 20, 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.

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.

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 “‘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 ‘quiets’ all other claims). Charney says 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 ‘assignment’ which flowed from it;” and that “by engaging in a pattern of racketeering activity, specifically ‘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 ‘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!”

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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 ‘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.

J.P. Morgan Chase along with its attorneys cranked out some bogus docs or so it seems.   These guys will stop at nothing to get their way.  Thanks to 4closurefraud.org for posting this info.

– The Bank Slayer

J.P. Morgan Chase / LPS Produced a Fraudulent Assignment of Mortgage! Memorandum of Law of The United States Trustee in Support of Sanctions Against J.P. Morgan Chase Bank National Association

TO THE HONORABLE ROBERT E. GERBER,
UNITED STATES BANKRUPTCY JUDGE:

Diana G. Adams, the United States Trustee for the Southern District of New York (the “United States Trustee”), respectfully submits this memorandum of law in support of the request of Silvia Nuer (the “Debtor”) for sanctions against J.P. Morgan Chase Bank, National Association (“Chase”) in connection with Chase’s Motion for Relief from Stay (the “Motion For Stay Relief”) as servicer for Deutsche Bank National Trust Company (“Deutsche”), as Trustee for Long Beach Mortgage Trust 2006-2 (“Long Beach Trust”), with respect to a mortgage (the “Mortgage”) as to property located at 1651 Metropolitan Avenue, 7C, Bronx, NY 10462 (the “Property”).

I. SUMMARY OF ARGUMENT

The United States Trustee supports the Debtor’s request for sanctions. Chase has filed documents that appear to be either patently false or misleading in connection with the Motion For Stay Relief. In the Motion For Stay Relief, Chase took the position that it was acting only as the servicer of the Mortgage. Chase at the same time attached documents which supported a different position. Specifically, an assignment showed that Chase held the Mortgage and was assigning that Mortgage to Deutsche. Not only was the assignmentdated post-petition, but it was signed only a few days before Chase filed the Motion For Stay Relief. The assignment was also prepared several yearsafter the last actual assignment of the Mortgage. When afforded opportunities to correct this matter, Chase, through supplemental filings, continued to produce documents that were confusing and contradictory, and presented anaffirmation submitted by a witness who apparently had no direct or personal knowledge of the facts or the chain of ownership of the Mortgage. However, what is clear is that, whether created through inadvertence or a deliberate act, the assignments created by Chase in connection with the Motion For Stay Relief appear to be false or misleading.

This is not the first time that Chase’s conduct with regard to motions for relief from the stay has been questioned in a bankruptcy case. Although Chase has recently taken remedial steps to address concerns expressed by courts in connection with other cases, based on Chase’s past and current conduct, the United States Trustee supports the Debtor’s request for sanctions in order to deter further conduct such as that seen in this case.

Recently we came across a great list of data points on MERS.   Prepare to be overwhelmed with the purposeful confusion MERS aims to achieve.  Articles specifically about MERS can be found here.

MERS Basic Corporate Information

• MERS is incorporated within the State of Delaware.
• MERS was first incorporated in Delaware in 1999.
• The total number of shares of common stock authorized by MERS’ articles of incorporation is 1,000.
• The total number of shares of MERS common stock actually issued is 1,000.
• MERS is a wholly owned subsidiary of MERSCorp, Inc.
• MERS’ principal place of business at 1595 Spring Hill Road, Suite 310, Vienna, Virginia 22182
• MERS’ national data center is located in Plano, Texas.
• MERS’ serves as a “nominee” of mortgages and deeds of trust recorded in all fifty states.
• Over 50 million loans have been registered on the MERS system.
• MERS’ federal tax identification number is “541927784”.

The Nature of MERS’ Business

• MERS does not take applications for, underwrite or negotiate mortgage loans.
• MERS does not make or originate mortgage loans to consumers.
• MERS does not extend any credit to consumers.
• MERS has no role in the origination or original funding of the mortgages or deeds of trust for which it serves as “nominee”.
• MERS does not service mortgage loans.
• MERS does not sell mortgage loans.
• MERS is not an investor who acquires mortgage loans on the secondary market.
• MERS does not ever receive or process mortgage applications.
• MERS simply holds mortgage liens in a nominee capacity and through its electronic registry, tracks changes in the ownership of mortgage loans and servicing rights related thereto.
• MERS© System is not a vehicle for creating or transferring beneficial interests in mortgage loans.
• MERS is not named as a beneficiary of the alleged promissory note.

Ownership of Promissory Notes or Mortgage Indebtedness

• MERS is never the owner of the promissory note for which it seeks foreclosure.
• MERS has no legal or beneficial interest in the promissory note underlying the security instrument for which it serves as “nominee”.
• MERS has no legal or beneficial interest in the loan instrument underlying the security instrument for which it serves as “nominee”
• MERS has no legal or beneficial interest in the mortgage indebtedness underlying the security instrument for which it serves as “nominee”.
• MERS has no interest at all in the promissory note evidencing the mortgage indebtedness.
• MERS is not a party to the alleged mortgage indebtedness underlying the security instrument for which it serves as “nominee”.
• MERS has no financial or other interest in whether or not a mortgage loan is repaid.
• MERS is not the owner of the promissory note secured by the mortgage and has no rights to the payments made by the debtor on such promissory note.
• MERS does not make or acquire promissory notes or debt instruments of any nature and therefore cannot be said to be acquiring mortgage loans.
• MERS has no interest in the notes secured by mortgages or the mortgage servicing rights related thereto.
• MERS does not acquire any interest (legal or beneficial) in the loan instrument (i.e., the promissory note or other debt instrument).
• MERS has no rights whatsoever to any payments made on account of such mortgage loans, to any servicing rights related to such mortgage loans, or to any mortgaged properties securing such mortgage loans.
• The note owner appoints MERS to be its agent to only hold the mortgage lien interest, not to hold any interest in the note.
• MERS does not hold any interest (legal or beneficial) in the promissory notes that are secured by such mortgages or in any servicing rights associated with the mortgage loan.
• The debtor on the note owes no obligation to MERS and does not pay MERS on the note.

MERS’ Accounting of Mortgage Indebtedness / MERS Not At Risk

• MERS is not entitled to receive any of the payments associated with the alleged mortgage indebtedness.
• MERS is not entitled to receive any of the interest revenue associated with mortgage indebtedness for which it serves as “nominee”.
• Interest revenue related to the mortgage indebtedness for which MERS serves as “nominee” is never reflected within MERS’ bookkeeping or accounting records nor does such interest influence MERS’ earnings.
• Mortgage indebtedness for which MERS serves as the serves as “nominee” is not reflected as an asset on MERS’ financial statements.
• Failure to collect the outstanding balance of a mortgage loan will not result in an accounting loss by MERS.
• When a foreclosure is completed, MERS never actually retains or enjoys the use of any of the proceeds from a sale of the foreclosed property, but rather would remit such proceeds to the true party at interest.
• MERS is not actually at risk as to the payment or nonpayment of the mortgages or deeds of trust for which it serves as “nominee”.
• MERS has no pecuniary interest in the promissory notes or the mortgage indebtedness for which it serves as “nominee”.
• MERS is not personally aggrieved by any alleged default of a promissory note for which it serves as “nominee”.
• There exists no real controversy between MERS and any mortgagor alleged to be in default.
• MERS has never suffered any injury by arising out of any alleged default of a promissory note for which it serves as “nominee”.

MERS’ Interest in the Mortgage Security Instrument

• MERS holds the mortgage lien as nominee for the owner of the promissory note.
• MERS, in a nominee capacity for lenders, merely acquires legal title to the security instrument (i.e., the deed of trust or mortgage that secures the loan).
• MERS simply holds legal title to mortgages and deeds of trust as a nominee for the owner of the promissory note.
• MERS immobilizes the mortgage lien while transfers of the promissory notes and servicing rights continue to occur.
• The investor continues to own and hold the promissory note, but under the MERS® System, the servicing entity only holds contractual servicing rights and MERS holds legal title to the mortgage as nominee for the benefit of the investor (or owner and holder of the note) and not for itself.
• In effect, the mortgage lien becomes immobilized by MERS continuing to hold the mortgage lien when the note is sold from one investor to another via an endorsement and delivery of the note or the transfer of servicing rights from one MERS member to another MERS member via a purchase and sale agreement which is a non-recordable contract right.
• Legal title to the mortgage or deed of trust remains in MERS after such transfers and is tracked by MERS in its electronic registry.

Beneficial Interest in the Mortgage Indebtedness

• MERS holds legal title to the mortgage for the benefit of the owner of the note.
• The beneficial interest in the mortgage (or person or entity whose interest is secured by the mortgage) runs to the owner and holder of the promissory note and/or servicing rights thereunder.
• MERS has no interest at all in the promissory note evidencing the mortgage loan.
• MERS does not acquire an interest in promissory notes or debt instruments of any nature.
• The beneficial interest in the mortgage (or the person or entity whose interest is secured by the mortgage) runs to the owner and holder of the promissory note (NOT MERS).

MERS As Holder

• MERS is never the holder of a promissory note in the ordinary course of business.
• MERS is not a custodian of promissory notes underlying the security instrument for which it serves as “nominee”.
• MERS does not even maintain copies of promissory notes underlying the security instrument for which it serves as “nominee”.
• Sometimes when an investor or servicer desires to foreclose, the servicer obtains the promissory note from the custodian holding the note on behalf of the mortgage investor and places that note in the hands of a servicer employee who has been appointed as an officer (vice president and assistant secretary) of MERS by corporate resolution.
• When a promissory note is placed in the hands of a servicer employee who is also an MERS officer, MERS asserts that this transfer of custody into the hands of this nominal officer (without any transfer of ownership or beneficial interest) renders MERS the holder.
• No consideration or compensation is exchanged between the owner of the promissory note and MERS in consideration of this transfer in custody.
• Even when the promissory note is physically placed in the hands of the servicer’s employee who is a nominal MERS officer, MERS has no actual authority to control the foreclosure or the legal actions undertaken in its name.
• MERS will never willingly reveal the identity of the owner of the promissory note unless ordered to do so by the court.
• MERS will never willingly reveal the identity of the prior holders of the promissory note unless ordered to do so by the court.
• Since the transfer in custody of the promissory note is not for consideration, this transfer of custody is not reflected in any contemporaneous accounting records.
• MERS is never a holder in due course when the transfer of custody occurs after default.
• MERS is never the holder when the promissory note is shown to be lost or stolen.

MERS’ Role in Mortgage Servicing

• MERS does not service mortgage loans.
• MERS is not the owner of the servicing rights relating to the mortgage loan and MERS does not service loans.
• MERS does not collect mortgage payments.
• MERS does not hold escrows for taxes and insurance.
• MERS does not provide any servicing functions on mortgage loans, whatsoever.
• Those rights are typically held by the servicer of the loan, who may or may not also be the holder of the note.

MERS’ Rights To Control the Foreclosure

• MERS must all times comply with the instructions of the holder of the mortgage loan promissory notes.
• MERS only acts when directed to by its members and for the sole benefit of the owners and holders of the promissory notes secured by the mortgage instruments naming MERS as nominee owner.
• MERS’ members employ and pay the attorneys bringing foreclosure actions in MERS’ name.

MERS’ Access To or Control Over Records or Documents

• MERS has never maintained archival copies of any mortgage application for which it serves as “nominee”.
• In its regular course of business, MERS as a corporation does not maintain physical possession or custody of promissory notes, deeds of trust or other mortgage security instruments on behalf of its principals.
• MERS as a corporation has no archive or repository of the promissory notes secured by deeds of trust or other mortgage security instruments for which it serves as nominee.
• MERS as a corporation is not a custodian of the promissory notes secured by deeds of trust or other mortgage security instruments for which it serves as nominee.
• MERS as a corporation has no archive or repository of the deeds of trust or other mortgage security instruments for which it serves as nominee.
• In its regular course of business, MERS as a corporation does not routinely receive or archive copies of the promissory notes secured by the mortgage security instruments for which it serves as nominee.
• In its regular course of business, MERS as a corporation does not routinely receive or archive copies of the mortgage security instruments for which it serves as nominee.
• Copies of the instruments attached to MERS’ petitions or complaints do not come from MERS’ corporate files or archives.
• In its regular course of business, MERS as a corporation does not input the promissory note or mortgage security instrument ownership registration data for new mortgages for which it serves as nominee, but rather the registration information for such mortgages are entered by the “member” mortgage lenders, investors and/or servicers originating, purchasing, and/or selling such mortgages or mortgage servicing rights.
• MERS does not maintain a central corporate archive of demands, notices, claims, appointments, releases, assignments, or other files, documents and/or communications relating to collections efforts undertaken by MERS officers appointed by corporate resolution and acting under its authority.

Management and Supervision

• In preparing affidavits and certifications, officers of MERS, including Vice Presidents and Assistant Secretaries, making representations under MERS’ authority and on MERS’ behalf, are not primarily relying upon books of account, documents, records or files within MERS’ corporate supervision, custody or control.
• Officers of MERS preparing affidavits and certifications, including Vice Presidents and Assistant Secretaries, and otherwise making representations under MERS’ authority and on MERS’ behalf, do not routinely furnish copies of these affidavits or certifications to MERS for corporate retention or archival.
• Officers of MERS preparing affidavits and certifications, including Vice Presidents and Assistant Secretaries, and otherwise making representations under MERS’ authority and on MERS’ behalf are not working under the supervision or direction of senior MERS officers or employees, but rather are supervised by personnel employed by mortgage investors or mortgage servicers.

MERS.  You might have heard the word but what does it have to do with your mortgage?   Look on your Deed of Trust or Note and see if it has a MERS # in the top right hand corner or if it mentions Mortgage Electronic Registration System (“MERS”).    If so welcome to the club.

Below you’ll find a short summery of how MERS is involved but bottom line is this…If MERS is on your loan docs you can be virtually assured it has been sliced/diced/pureed and the actual owner or holder of your original Promissory Note is out of the picture.  Meaning what?  You should strongly consider challenging you current mortgage servicer to cut you a better deal then you have now.  How about 2% interest rate?  Sound like a fairy tale?  It’s reality in our office.

-          The Bank Slayer

MERS Summary

During the securitization process, a mortgage is initiated – and then immediately sold to a 3rd-party.  Once holding this mortgage, bankers slice-and-dice them until they can package and sell them in neat little bundles until no one can tell who holds clear, legal title to these mortgages.   So how can any investor of a mortgage-backed security know that it really has some collateral (mortgage)?

This is why the banks created MERS.   As Pam Martens, whom has worked on Wall Street for 21 years writes, “MERS is nothing more than a confidential electronic registry which exists only to ―track mortgages and the changes of servicing rights and mortgage ownership”. In other words, it has no proprietary interest in these mortgages. The reason why that last fact is so important is because of the fact that Wall Street had created such convoluted chains of ―ownership that even in court proceedings the banksters are unable to show any party in these chains of transactions as having clear title to the mortgage. Wall Street’s plan was to send MERS (nothing but a glorified, electronic clerk) to all these foreclosure proceedings and allow MERS to act as if it was the mortgage-holder in these proceedings.”

However, it is one of the oldest principals of our Western legal system that in civil proceedings any party wanting to bring an action before the court has to have ―standing.  Typically, this is defined as a direct, proprietary interest in the subject of the trial. Clearly, MERS has no proprietary interest – and thus in several legal decisions it has been found to have no right to initiate foreclosure proceedings.

Here are some interesting data points we’ve uncovered from various sources…

• MERS is never the owner of the promissory note for which it seeks foreclosure.
• MERS has no legal or beneficial interest in the promissory note underlying the security instrument for which it serves as “nominee”.
• MERS has no legal or beneficial interest in the loan instrument underlying the security instrument for which it serves as “nominee”
• MERS has no legal or beneficial interest in the mortgage indebtedness underlying the security instrument for which it serves as “nominee”.
• MERS has no interest at all in the promissory note evidencing the mortgage indebtedness.
• MERS is not a party to the alleged mortgage indebtedness underlying the security instrument for which it serves as “nominee”.
• MERS has no financial or other interest in whether or not a mortgage loan is repaid.
• MERS is not the owner of the promissory note secured by the mortgage and has no rights to the payments made by the debtor on such promissory note.
• MERS does not make or acquire promissory notes or debt instruments of any nature and therefore cannot be said to be acquiring mortgage loans.
• MERS has no interest in the notes secured by mortgages or the mortgage servicing rights related thereto.
• MERS does not acquire any interest (legal or beneficial) in the loan instrument (i.e., the promissory note or other debt instrument).
• MERS has no rights whatsoever to any payments made on account of such mortgage loans, to any servicing rights related to such mortgage loans, or to any mortgaged properties securing such mortgage loans.
• The note owner appoints MERS to be its agent to only hold the mortgage lien interest, not to hold any interest in the note.
• MERS does not hold any interest (legal or beneficial) in the promissory notes that are secured by such mortgages or in any servicing rights associated with the mortgage loan.
• The debtor on the note owes no obligation to MERS and does not pay MERS on the note.