The Death of Mortgage Electronic Registration Systems MERS-UPDATED

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

It is now widely recognized that MERS facilitated fraud by lenders, servicers, foreclosers and securitizers. Even on the most charitable interpretation it is very difficult to believe that MERS was not fraudulent by design. So much of the story has already been told that we do not need to rehash all of it here. Let me first concisely summarize the two main problems, and then move on to the most recent developments that put the final nails in MERS’s coffin. I’ll conclude with my argument that there really was some “not so intelligent” design behind all of this. But it is coming back to bite the hand that feeds it. The big banks will not survive the monster they created.

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

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

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

April Charney’s quote about MERS- “It is like if I say, ‘I am going to marry you,’ and I just never do it, can I then divorce you?” “So, if I say I am going to buy a loan and I never actually do the paper work, can I then foreclose on you?”

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

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

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

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

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

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

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

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

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

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

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

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

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