July 21, 2010
Mortgage Electronic Registration Services (MERS) is the chink in the armor the big banks did not see. It is the place where all of the players came together to do business. It is the crucible in which the scandal brewed.
Who is MERS?
What do they do?
Why should you care?
Because of MERS, you are spending your mortgage money on …. nothing.
The perception you are laboring under may not be the truth of your reality.
You are not buying your house. You are renting it.
Everyone knows the debt under which we all slave is destroying families and wealth. But here is what you don’t know. There are some fundamentals at play which have significant consequences for all mortgage holders – those who are current, those who are delinquent, those who are in foreclosure; those who have been foreclosed upon. What follows is a very simple explanation of a very complicated situation.
The banks, in their infinite pursuit of fractions of pennies of profit, changed the way they looked at the mortgage market from a large aggregation of individual homes to a cash flow pipeline. When you make this change, you realize you can slice and dice the cash flow pipeline into products and create ready markets for those products.
No one knows who owns a given barrel of oil in a pipeline. The oil companies pay to put their products into the pipeline and their customers pay to pull products out of the pipeline, but while it is in the pipeline, no one owns any single given barrel of oil. It just sort of … is.
The banks pooled groups of mortgages into Structured Investment Vehicles (SIV’s) and cut the cash flow from those mortgages into tranches selling those tranches to qualified investors such as Mutual Funds, Pension Funds, Offshore Banks, Sovereign Wealth Funds and wealthy individuals. Each owned a “piece” of the SIV’s cash flow but not the underlying assets.
In order to facilitate the hoped for rapid changes in ownership, the banks had to streamline (circumvent) the well established registry of court house real property records. To do this, the former C.E.O.’s of Fannie Mae, Freddie Mac, Indy Mac, Countrywide, Stewart Title Insurance and the American Land Title Association created MERSCorp in the mid 1990’s.
MERS is a straw man who stands in place for an unknowable person from an investment trust in the title records at county courthouses all across the country. This closed the loop establishing the pipeline and enabling the ready market in securitized debt obligations. But in the process, by using MERS as a stand in at the courthouse, the banks separated the mortgage from the deed of trust leaving an unenforceable piece of paper and because ownership is obliterated, a very muddied title.
Everything was fine until money from the mortgages stopped flowing. That was when disaster struck. Cash flow in the pipeline diminished because of the high rate of foreclosures and the banks who created this mess started looking for places to hang losses. Eventually, they turned to the taxpayer to unwind these complicated schemes of insurance payments, risk swaps and other forms of gambling with the bank bailouts of 2008 & 2009.
During all of this, a small group of informed homeowners took advantage of the structure of the pipeline to defend foreclosure on a group of houses in Ohio. The homeowners challenged the standing of Deutches Bank to foreclose on anything. They demanded the foreclosing party prove they had perfected interest in the title. Deutches Bank couldn’t, and the foreclosure stopped. This became known as the “Produce the Note” foreclosure defense.
What does this mean to those who are delinquent or are being foreclosed upon by groups including MERS?
It means there is a way to fight back. The only person who can foreclose on a mortgage is the person who holds the mortgage and the deed of trust. Since the mortgage has been separated from the deed of trust and the ownership has been obliterated, who can stand in front of the court and foreclose? The answer, ultimately, is no one and indeed, this strategy is being used all across the country to stop the foreclosure process dead in its track.
What does this mean to those who have been foreclosed upon by groups which includes MERS?
It means they can go back to the courts and demand the foreclosure be rescinded and ownership of the property returned. This will undo and threaten to undo all foreclosure sales that have taken place in the last three years.
What does this mean to those who are current yet have MERS on their mortgage?
Well, if no person owns the underlying mortgage in order to foreclose, is there anyone who can deliver clear title once the mortgage obligation is complete? The answer appears to be …. no, there is not, there is no one which means there are over 60 MM homeowners who are buying into … nothing. They are just paying expensive rent.
Think about that a moment.
No one knows who owns what. The mortgage and the deed are separated. No one is in a position to foreclose. No one is in a position to deliver clear title once the mortgage is paid. As long as everything stays within the system, it can be papered over but it doesn’t change the fact the system is totally messed up. Why do you continue to pay into the system when you know you are buying nothing?
What to do?
This website is dedicated to unraveling this multi trillion dollar fraud. We provide information, links to court cases, and suggestions on ways to proceed to protect yourself from this monster called MERS. We are not attorneys so please do not write to us looking for legal advice. We are an informational resource only.
To follow the ongoing developments of this story, please visit the blog and/or subscribe to the newsletter at http://chinkinthearmor.net/Newsletter___Blog.html
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Important Court CasesAll court cases are important but these are the key ones. The first two are the crux. The rest hang flesh on the bones.
MERS v. Nebraska Dept of Banking and Finance – State Appellate, MERS demands to be recognized as having no actionable interest in title. 2005, Cite as 270 Neb 529
Merscorp, Inc., et al., Respondents, v Edward P. Romaine, & c., et al., Appellants, et al., Defendant the fact that the Mortgage and Deed of Trust are separated is recognized (concurring opinion). While affirming MERS could enter in the records as “nominee”, the court recognized many inherent problems. Rather than resolve them, they sloughed them off to the legislature. 2006
The Boyko Decision -Federal District Judge Christopher Boyko of the Eastern Division of the Northern District of Ohio Federal Court overturns 14 foreclosure actions with a well reasoned opinion outlining the failure of the foreclosing party to prove standing. This decision started the movement of challenging the standing of the foreclosing party. Oct 2007
Landmark National Bank v Kesler – KS State Supreme Court – MERS has no standing to foreclose and is, in fact, a straw man. Oct 2009
MERS, Inc., Appellant v Southwest Homes of Arkansas, Appellee The second State Supreme Court ruling – AR 2009
BAC v US Bank – FL Appellate court upholds the concept of determining the standing of the foreclosing party before allowing summary judgement. All cases in FL must now go through this process. If you want to have fun, read the plaintiff’s brief. 2007
Wells Fargo NAS v Farmer Motion to vacate in Supreme Court, Kings County, NY 2009
In Re: Joshua & Stephanie Mitchell – US Federal Bankruptcy Court, NV 2009
In Re: Wilhelm et al., Case No. 08-20577-TLM (opinion of Hon. Terry L. Myers, Chief U.S. Bankruptcy Judge, July 9, 2009) – Chief US Bankruptcy Judge, ID – MERS, by its construction, separates the Deed from the Mortgage
MERS v Johnston – Vermont Superior Court Decision
Wells Fargo v Jordon – OH Appellate Court
Weingartner et al v Chase Home Finance et al – US District Court (Nev): Two pro se plaintiffs sue for relief re: MERS assignments. Very technical decision but two things are apparent. First, the court has little patience for pro se plaintiffs who throw everything out there wasting the court’s time and second, even though the court threw out most of what the plaintiffs were arguing for, they did side with the plaintiff. Provides a good insight to the court’s reasoning vis a vis MERS assignments.Also makes clear you shouldn’t try this from home. Please seek legal counsel.
Schneider et al v Deutsche Bank et al (FL): Class action suit (the filing) seeking to recover actual and statutory damages for violations of the foreclosure process. Provides an excellent description of the securitization process and the problems with assignments. Any person named as a defendant in a suit by Deutsche Bank should contact the firms involved for inclusion in this suit.
JP Morgan Chase v New Millenial et. al. – FL Appellate which clearly demonstrates the chaos which can ensue when there is a failure to register changes of ownership at the county recorder’s office. Everyone operates in good faith, then out of nowhere, someone shows up waving a piece of paper. The MERS system, while not explicitly named, is clearly the culprit of the chaos. 2009
In Re: Walker, Case No. 10-21656-E-11 – Eastern District of CA Bankruptcy court rules MERS has NO actionable interest in title. “Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.”
There are others, all over the country; at district level, at appellate level, at the Temporary Restraining Order (TRO) stage, at the State Supreme Court stage, in Federal Bankruptcy Court. The issue is so clear one federal suit was brought by the Federal Bankruptcy Trustee. They all speak to the same set of facts. MERS, by its very corporate construction, has no actionable interest in any title either to foreclose, or deliver clear title at sale or pay off.
Read all of these cases and you begin to see clearly how it is MERS can neither foreclose nor deliver clear title. It is MER’s very essence. The very documents which created it precludes it. Furthermore, MERS has argued quite vociferously at the appellate level demanding the right to be recognized as having no actionable interest in mortgage. The courts allowed it, and now we are seeing the results and ramifications thereof.
The dangers of having a parallel set of recordings, one public, one VERY private, should be obvious to all. The possibilities of fraud are rampant. While the concept of modernizing the paper intensive system is perhaps a laudable goal, it is something which must be done with public input, not by corporate decree. A privately held set of recordings gives rise to fraud, abuse and an oligarchical class structure. This is the antithesis of the founding documents of this land.
Fifty Million mortgages at a conservative $150K each. That’s $7.5T. Truth of the matter is, the average mortgage is more likely $250K ea which works out to $12.5T
How do we bail that out?
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