john gault's Blog

9th Circuit Reverses; Suit Goes Forward re: Mtg Loan Debt Collectors

john gault — Mon, 20 Jul 2015 16:29:41 EST

The 9th Circuit Court of Appeals recently reversed and remanded a long-fought battle over licensing for those who are deemed to have been acting as debt collectors when performing activities related to non-judicial foreclosure.

The Deed of Trust Act, enacted at the lobbying efforts of lenders seeking to avoid the time and expense of judicial foreclosure, introduced and provided for non-judicial foreclosure by the introduction of a third party, the trustee, into the collateral instruments for mortgage loans (this is an old act; I wonder now if homeowners were given an opp to weigh in on the proposed legislation. Many homeowners know what we'd have said had we known of its future abuses, just like with a "MERS" beneficiary or a "mers" mortgage") That party, the dot trustee, was vested with the powers to do certain things and those rights are triggered by the default in payment on the note the dot secures. Trustees were generally title companies. Title companies, as many readers here at sourceoftitle would know, retain copies of the documents used when loans are closed. They must keep them for a prescribed amt of years. This includes copies of the notes and dots. Copies of the notes and deeds of trust are also included in the loan file sent to the servicers, so at least these copies are available to send to the trustees when foreclosure is sought,along with other documentation supporting the default.

By and large, the law holds that a title company, acting in its capacity as title insurer, is not the agent of the lender (nor of the borrower). I don't know, unfortunately, how the original act described the party who could be the dot trustee. I only know they are initially the title company closing the loan. All title companies, to my knowledge, have attorneys on staff well-versed in the laws relevant to these loans and the transfers of these loans from a seller to a buyer.

As non-agents for either party to the agreement, the trustee is to serve as a non-judicial (no black robe needed), impartial third party in determining if non-judicial foreclosure may be instituted. The attorneys on staff (distinction re: other attorneys) should be, and likely were, people qualified to make such a determination.
Today, some states mandate that certain parties be licensed as debt collectors. I've never thought such a requirement for add'l licensing as a trustee was needed for title companies who have on-staff well-versed attorneys, but, BIG but, that was based on the former qualification of parties serving in that capacity (with these well-versed staff attorneys). Now it's just about anyone and some of those "just about anyone's" appear to be calling themselves "escrow" companies to avoid the licensing requirements prescribed by some states, here noteworthy, Nevada. Further, the "escrow company" and also companies acting as dot trustees - or agents - are affiliated with the party claiming to be the successors in interest to the loans. Well, actually, there isn't a claim per se of being the successor in interest. What there generally is is a claim of being in possession of the note, as if those two descriptions are synonymous. They are often owned by law firms representing the lender (or ARE the law firm) or owned by the lender itself. This is hardly consistant with the objectivity and neutrality contemplated by the Act in allowing non-judicial foreclosure.

Some states, like Nevada, have massacred the Act in my opinion by changes to state law, in particular by allowing agents of the lender to perform duties related to non-judicial foreclose. Any originally legislated neutrality and objectivity appears to wrongfully be a thing of the past.. As I've opined before, if one is an agent of one party to an agreement, one is not a "trustee" as contemplated if not mandated by the Deed of Trust Act - and agents are being allowed to execute and record Notices of Default and further, to not recite critical information in those notices of default. (In one noteworthy case wherein a party alleged to be the beneficiary's agent and not the duly appointed substitute trustee, the NV SC found it unnecessary to recite the default figures, including the number $$ to cure, in a notice of default (in fairness to the court, the court said it didn't matter as long as the homeowner gets the info). This, imo, overlooks the fact that these numbers $$ aren't provided in the NOD for the exclusive benefit of the borrower. They're an integral part of the recorded Notice of Default to give Notice to the public and also to any junior lienholders who may want to cure to protect their interests: in my view, any recorded Notice of Default which doesn't include these figures is no Notice of Default.

Debt collectors should be licensed as such and stay in their own corners. No one should be performing ANY duties relevant to the deed of trust and no one acting as the purported lender's agent should be in the act at all. Lenders argue they and their trustees and or agents are not subject to licensing laws and don't violate the FDCPA by their practices because they aren't subject to the FDCPA. Yet many letters sent to homeowners around the time of the Notice of Default are sent by (sometimes the same) parties identifying themselves as debt collectors and specifically reference the FDCPA.

Acting as the agent of the lender in seeking enforcement under a deed of trust is just plain wrong in my view if one is also purporting to be the trustee in a deed of trust; in fact, it's an outrage. No one except a bona fide, qualified deed of trustee should be doing anything in regard to the deed of trust - or the amounts due under that deed of trust. Trustees shouldn't be abdicating their own duties. It's my lay person understanding that if those appointed as substitute trustees for deeds of trust claim agent status with the lender, they're actually prohibited as a matter of law (if not contract) from appointing sub-agents for anything but the most menial of tasks. And yet we have not at all diminutive documents and letters sent to homeowners often signed by so and so as the agent of another party itself claiming agency status with the deed of trust beneficiary.

Debt collectors work exclusively for the party engaging and paying them, which is hardly consistant with the neutrality this job, at least when legislated initially, demanded.

So it's with that background, including "they wanted it, they got it" as to the abominable changes in the law (allowing agents for one party to the deed of trust to perform duties relevant to the deed of trust), that I was pretty happy to see a recent decision in the 9th, reversing and allowing (after a 4 year battle) a suit to go forward regarding the non-licensed status of five companies who were apparently acting as trustees and or debt collectors for any number of entities.

BENKO , 1315185 (9th Cir. 61 8 2015)
v

1) QUALITY LOAN SERVICE(s) CORPORATION, a California corporation

2) MTC FINANCIAL,INC., DBA Trustee Corps.

3) MERIDIAN FORECLOSURE SERVICE, DBA Meridian Trust
Deed Service, DBA MTDS, Inc.

4) NATIONAL DEFAULT SERVICING CORPORATION;
CALIFORNIA RECONVEYANCE COMPANY, Defendants Appellees

5) CALIFORNIA RECONVEYANCE COMPANY, DefendantsAppellees

(my nos. above)

Nicholas A. Boylan (argued), Law Office of Nicholas A. Boylan, San Diego, California, for Plaintiffs-Appellants. Las Vegas attorney Shawn Christopher was or is also involved for
the plaintiff-homeowners.

As an advocate for home-ownership and the law, and witness to what can only be descried as unprecedented predatory lending, I can't help hoping some measure of justice prevails for homeowners, for as I said, they wanted it, they got it. We can't be sorry they can't have it both ways: if one is going to act as a debt-collecting agent of one party, he should be appropriately licensed.

On information and belief, while QLS was originally the recipient in 2010 of a cease and desist order, that order has since been vacated. Also on information and belief, the Order was not stayed during the pendancy of the appeal, potentially impacting hundreds if not thousands of foreclosures.

According to the 9th Circuit

" In their SAC, the Plaintiffs alleged that, by virtue of foreclosing on Nevada real property utilizing a private sale, the Defendants engaged in "claim collection" under Nevada Revised Statutes (NRS) Section 649. The Plaintiffs argue that, since Nevada law requires that trustees be licensed, the Defendants' failure to register as "collection agencies," as defined in
NRS Section 649.020, constituted a deceptive trade practice."

This could end up being very interesting for homeowners or it could be the 9th has merely determined the district court was the improper venue for this case, with the proper venue ruling much the same as the district court. Say tuned!

These are my own (lay) opinions. I have no affiliation with anyone related to this case.

The Deed of Trust Trustee, Laws, and the Constitution

john gault — Sun, 08 Feb 2015 17:52:57 EST

Are the current actions by those named as substitute trustees or acting as agents for the

beneficiary in our deeds of trust unconstitutional?

My support of an answer in the affirmative.

"The general misconception is that any statute passed by legislators bearing the appearance of law constitutes the law of the land. The U.S. Constitution is the supreme law of the land, and any statute, to be valid, must be in agreement. It is impossible for both the Constitution and a law violating it to be valid; one must prevail. This is succinctly stated as follows:

The general rule is that an unconstitutional statute, though having the form and name of law, is in reality no law, but is wholly void, and ineffective for any purpose; since unconstitutionality dates from the time of its enactment, and not merely from the date of the decision so branding it. An unconstitutional law, in legal contemplation, is as inoperative as if it had never been passed. Such a statute leaves the question that it purports to settle just as it would be had the statute not been enacted.

Since an unconstitutional law is void, the general principles follow that it imposes no duties, confers no rights, creates no office, bestows no power or authority on anyone, affords no protection, and justifies no acts performed under it. . .

A void act cannot be legally consistent with a valid one. An unconstitutional law cannot operate to supersede any existing valid law. Indeed, insofar as a statute runs counter to the fundamental law of the land, it is superseded thereby.

No one is bound to obey an unconstitutional law and no courts are bound to enforce it."

Sixteenth American Jurisprudence
Second Edition, 1998 version, Section 203 (formerly Section 256)

jg: If any state law denies one party the benefit of due process before being relieved of his property, a right guaranteed by our constitution, then that law, according to this tenet, is to be given no consideration. I think it's been argued that the constitution literally speaks to only separation from one's property BY THE GOV'T, but I don't believe (but can't 'prove') that they meant to limit the application of due process to attempts by only the government to take our property.

There's no due process when on the word of one of the parties' representative, without consideration of the rights and arguments of the other party to the agreement, the latter may be separated from his property. These particular trustees, those in our deeds of trust, owe their fiduciary to both parties, not just one, just as courts owe their objectivity to both parties before them. The evidentiary standard may be less for dot trustees than one for courts, but it still has to be met, and that includes ascertaining that an alleged assignee had something to assign. Significantly, the person making the determination that the evidentiary standard is met must be qualified to know if it is or isn't, and that itself is woefully missing in today's activities.

If states adopt laws which allow for the creation of a trust into which
a homeowner sends his land title as security for a loan (which adoption was done years ago by many states to 86 lender' problems with mortgages, briefly) and yet subsequently enact other laws which allow for the separation of the landowner from his estate, by way of that trust created, with reference only to the interests of one party to the trust, one of those laws is unconstitutional. When a dot trustee, or someone designated an "agent" for the beneficiary or otherwise acting for the beneficiary only, may take the thing put in trust by the other party for the party for whom he acts exclusively, there is either no deed of trust - or - a law which says an entirely unilateral act, that is, one without due process, separating one from his property is at odds with the earlier law providing for deeds of trust as security instruments. I dare say any such contravening state law is void.

Expressed Agreements v the Uniform Commercial Code

john gault — Fri, 18 Apr 2014 03:43:02 EST

This material looks at the UCC as the default law which it is when construing

enforcement of promissory notes utilized in home loans.

I often mention that the UCC is default law, a last resort to resolve a conflict
when the resolution of the issue isn’t readily available from / in the contract.
Well, the issue of whom may enforce our notes is in fact defined, enunciated in
the note itself. As to whom may enforce our promissory notes, another reader of
a popular defense blog did a pretty good job a couple years ago: "Patrick" said:

“.. The terms of the promissory note contract requires a two part test to

determine if an entity is the note holder entitled to enforce the instrument.

1) The note must be acquired via transfer and 2) the entity must be entitled to

receive payments made under the note. This requires the plaintiff, or anybody

alleging possession of the genuine note, to recognize the debt transfer by

reporting the instrument as a financial asset ....on its balance sheet."

The NOTE say who may enforce – not the UCC. If there were an ambiguity, the UCC
could be invoked, but there ISN’T. From the note:

   ” I understand that the LENDER may transfer this note. The Lender
   or anyone who takes this note by transfer and who is entitled to
     receive payment under this note is called the “note holder”.

This language does a few things, and imo, this language is wholly dispositive
of whom may enforce the note:

1) the note defines the person (entity) who may transfer the note (and it isn’t
   “MERS”.)

2) It limits the enforcement of a note to someone who has taken the
note by ‘transfer’. That does NOT describe a person in mere possession or a
thief. A thief certainly doesn’t qualify, and one in possession of a note
must demonstrate it has the note as a result of transfer and that he is
entitled to payments. Imo, the current claimants' reliance on the default-law
UCC Article III is misplaced and positively errant, because OUR note defines
the party who may enforce.

3) It says that the ‘note holder’ will be someone who has taken the
note by TRANSFER and is entitled to payments under the note.

So why is anyone looking at the default-law UCC for who may enforce? There’s
no need to because THESE notes clearly define who is entitled to enforce and
is the "note holder".

The ONLY thing necessary, if anything, is a look at the UCC for its definition of ‘transfer’.This is found in Article III (applicable as long as article III is itself applicableto these notes). It may be found in other articles of the UCC - I don't know - , but this is the first one I landed on, and since current claimant do in fact rely on Article III, I thought it fit for reference:

“UCC § 3-203. TRANSFER OF INSTRUMENT; RIGHTS ACQUIRED BY TRANSFER.

(a) An instrument is transferred when it is **delivered** by a person other
than its issuer for the **purpose** of giving to the person **receiving delivery**
the right to enforce the instrument.

(b) Transfer of an instrument, whether or not the transfer is a negotiation,
vests in the transferee any right of the transferor* to enforce the instrument,
including any right as a holder in due course, but the transferee cannot
acquire rights of a holder in due course by a transfer, directly or indirectly,
from a holder in due course if the transferee engaged in fraud or illegality
affecting the instrument.

jg: “any right of the transferor” = one must HAVE a right to transfer a right.

(c) Unless otherwise agreed, if an instrument is transferred for VALUE and the
transferee does not become a holder because of lack of indorsement by the
transferor, the transferee has a specifically enforceable right to the
unqualified indorsement of the transferor, but negotiation of the instrument
does NOT occur until the indorsement is made.

jg: transfer includes delivery, as seen in (a).

(d) If a transferor purports to transfer less than the entire instrument,
negotiation of the instrument does not occur. The transferee obtains no rights
under this Article and has only the rights of a partial assignee.”

Imo, the language in the note puts a restriction on the class of people who may
enforce the note. IF the note were otherwise a negotiable instrument, this
condition expressed in the note (above) may well preclude the note from being a
negotiable instrument; if the person in possession of a note doesn’t meet those
conditions, he has no claim against the borrower, imo. The note not only says
it may not and won’t be enforced by a thief, but it does in fact make
assurances by putting restrictions on who may enforce, who is the “note
holder”: one who has taken by transfer and is entitled to receive payment under
the note.

Since I'm big on injury as a jurisdictional threshold, I note the UCC has its
own defnition of 'aggrieved party':

“§ 1-201. General Definitions (subject to definitions contained in other
articles of the Uniform Commercial Code that apply to particular articles
or parts thereof:

2) “Aggrieved party” means a party entitled to pursue a remedy.”

According to the online legal dictionary, the definition of “remedy” is:

“The manner in which a right is enforced OR satisfied by a court when some
HARM or INJURY, recognized by society as a wrongful act, is inflicted upon
an individual. The law of remedies is concerned with the character and extent
of relief to which an individual who has brought a legal action is entitled
once the appropriate court procedure has been followed, and the individual
has established that he or she has a substantive right that has been
infringed by the defendant.”

And while we're on the subject of remedies, an injured party is entitled to only one remedy. He doesn’t get five, or even two. Imo, that means he gets a tax-easing write-off or he gets a foreclosure, but he doesn't get both of equal amounts from the same agreement. I don't believe a loan which has been written-off may yet be sold for collection. As far as I, a lay person and not an accountant, knows, one may not indefinitely hold a soured asset, such as a non-performing mortgage loan, on his books. He may move it to charge-off status and then to written off status and derognize the asset.

That’s my lay person take on the home loan promissory note v the provisions of the default law UCC. . If there are arguments, I’d like to hear them (really!)

Today the Fed Announced It Will Trim Its Bond Buying

john gault — Wed, 18 Dec 2013 19:11:37 EST

aka The Long Lasting Impact of Failure to Prosecute

When some of us formed our ideas that government should butt out of business
enterprises, I doubt we had any idea how heinously unregulated or unwatched business
could and would act. The fact that many loans were made with inflated appraisals
and overstated income and the even more infamous no income no asset loans ("ninja"
loans), says some business is simply not capable of self-governance,
especially when rating agencies are in cahoots with that business. The fall-out of
bad acts unchecked can be and has been too severe. In fact, it can cripple a
country and even a globe and undermine pacts which took years and years to
implement.
That gang has had five years to get their acts together. Five years of being propped
up. The government's continued effort to prop them up and skew, change, and ignore the
rule of law is an affront to everyone not a part of the misdeeds, which is the
majority of this country's citizens. Underlying the failure to prosecute and
return to regulation is an oppressive threat / insinuation that this country will
lose its coveted world dominance, formerly known as leadership, most widely touted,
at least in some circles, as the bankers having our gov't in their pocket. I don't
believe what we've got to gain by ignoring bad acts holds a candle next to what we've
got to lose: who we are. It's a historical fact that immorality (never minding illegality) has led to the downfall of many empires. We need to say "This is Not Okay in the USA": bad actors, each and every one, need to be prosecuted and the ill-gotten gains returned to their rightful owners.Our government, I hasten to remind, may and does generally make off with ill-gotten goodies, like from drug, laundering, or other RICO enterprises.

Many young people who will be the leaders of tomorrow don't understand what's been done here, because for them, there's always another tomorrow, a new horizon, and a new mountain. They haven't lost their homes of 20 years nor their retirement accounts earned over 30 to 40 years, nor the businesses they sacrificed greatly to create. They haven't felt the real bite of these illegal and immoral behaviors.

They don't know what was done here and will likely mistakenly see the "Great Recession" as just a series of unavoidable calamities, something as mistaken as night from day.

The government has been buying bonds, so-called toxic assets, at top speed,
apparently by printing money to do so. I have no economics degree, but even I can
see that dilution of a currency's value is a bad idea, and that's been demonstrated
so far by at least other countries' decisions to engage in international commerce
without reference to the almighty dollar. Perhaps that was to be expected and accepted
as a matter of the course taken, a rather steep economic ramification. But can there
be any doubt that "toxic assets" shouldn't exist or that they exist because those
charged with seeing they didn't exist abandoned their duties to the people, to
their offices?
TARP and whatever else alleged total economic collapse prevention measures happened.
Maybe it really is impossible to change certain courses. Or maybe it's that it's just
too unsure a proposition to take on repatriotization of the trillions lost. But we are
still left to lose our homes, our most precious assets, to the very parties who created
the toxic assets, starting with engaging in illegal predatory lending, who benefit from
the bond-buying and other alleged anit-economic collapse measures, such as TARP. In creating the toxic assets, as well as in the efforts to take our homes, many laws have been broken and
continue to be broken.
The Consent Orders are a slap in the face to every law-abiding citizen, which means
most of us. Executing a "robo-signed" instrument and then recording it is 1) wrong and 2) its continued existence in public record constitutes a continuing crime, one for which restitution and abatement are not found in the form of a monetary fine. Reform or the retraction of the fraudulent instruments is called for. I cannot even imagine why MERS hasn't been prosecuted for the robo-signing done in its name since it's black letter law that corporations are liable for the acts of their "officers".

The rule and application of law and legislation about these issues can't be left
to a generation which can't fully understand the devastating ramifications of "free
enterprise" gone amuck. This generation, this government, needs to handle this,
starting with the prosecution of those who have it coming. I'm of a mind if some
people were worth their salt, worth the salaries and perks they enjoy, this could
be done without total chaos. We need to collectively demand action, including
legitimate prosecution and oversight. In ten years when much of this has blown
over and or been swept under the rug, and the bodies, including ours, have been buried,
will the next generation know better than to enter into a 3 month teaser rate
loan with an inflated appraisal to boot? Will the future pension managers be any more
sophisticated about where they put hard-working Americans' funds? NOT without
prosecutions of today's criminals as part of our lessons. All that will have been
accomplished without prosecution, in addition to the unlawful taking of another's property, is the creation of a road map, a how-to-get-rich-quick manual on illegal and immoral short-cuts to wealth.

GNMA's Mandate to MBS Issuers to Repurchase and Holder v Holder in Due Course

john gault — Fri, 18 Oct 2013 20:01:29 EST

Are the actions of third parties manipulating homeowners' rights to affirmative defenses? Issuers are contractually obligated to purchase loans in order to modify or foreclose.

The function of GNMA is to guarantee / insure FHA and VA loans for the
benefit of the lender. With the advent of securitization, it appears GNMA
has made a new contract with the issuers of mortgage backed securities
which impacts the insurance / guarantee, and the duties of the issuer. In short,
the issuer is to make and keep the investors whole.
The issuers may then benefit from GNMA's guarantee or insurance.

From GNMA:

"In the Ginnie Mae program, Issuers are financially responsible for their
securities, even if the underlying mortgage collateral becomes delinquent."

jg: The issuer of securities accepts liability ("financially responsible") for payment
to the investors on the securities it issued. Accordingly, among other things, the
securities issuer has contractually agreed to be primarily liable to the securities
holders by this third party agreement - at least if anyone is to see the benefit of
GNMA's insurance.

"While the GSEs are responsible for the financial losses related to the loans
in their investment portfolios and MBS, the Ginnie Mae Issuer must make
principal and interest pass-through payments to investors for delinquent loans,
as well as provide the funds to re-purchase loans to foreclose on a home or
modify a loan."

jg: The issuer must 1) continue payments to the investors on the securities and
2) repurchase the loan to a) foreclose or b) modify. This says to me that
trusts should never be the foreclosing party on FHA or VA loans, not if the
contract between the issuer and GNMA is being honored, as it must be for anyone
to realize the benefit of GNMA's coverage.

"Ginnie Mae Issuers are responsible for any unreimbursed costs associated with
either violating insurers' servicing guidelines or for inadequate insurance
coverage. This requirement provides a strong incentive for private institutions
to make better quality mortgage loans."

jg: It's not exactly clear what GNMA won't cover, though something which may be
reasonably inferred is a loan which was not underwritten to FHA or VA guidelilnes.*

"It is important to note that Ginnie Mae does not have a financial obligation
to MBS investors unless the Issuer becomes insolvent."

jg: Why is that, pray tell? GNMA has historically made its guarantee available to the
owners of the loans. A copy of certain documents from the loan file along with the funds
for the insurance are sent to FHA or VA, which then issues a mortgage insurance
certificate (FHA) or one of guarantee (VA) to the lender, its successors, or assigns. If
not for the contract between the issuers and GNMA, the guarantee or insurance would
directly benefit the current lender (he who has paid for and received a properly
negotiated note and assignment of the collateral instrument). But now GNMA's guarantee
only goes directly to that lender if the securities issuer becomes insolvent. How is it
that GNMA was able to inject a contract which moved its decades-long guarantee from loan
owners to a third party, and just as importantly, why do this? There may be a simple
logistics explanation or it may be that GNMA tried to remove itself from the "who owns
this loan" issue by paying the issuer only after the issuer's "repurchase".

At any rate, the insurance is now paid to the issuer, whom to get the benefit of that
Insurance must repurchase the loan to modify or foreclose and THEN GNMA's insurance or
guarantee will kick in TO THE ISSUER. But to get the benefit of GNMA's guarantee, the
third party has agreed to a number of things, including to forego holder in due course
status. It's likely this isn't popular, but this doesn't change the fact the issuer has
agreed to it.
However, it appears that without repurchasing as is contractually required, the issuer
(or someone) instead uses the (alleged) credit bid of a trust to garner the collateral by
showing the trust as the foreclosing party. Whether or not the issuer then passes the
gnma guarantee / insurance monies to the investors is unknown, at least to most of us.
The investors were to have been made whole by the issuer's payments and ultimate
repurchase before then and aren't being. If they were, the trust wouldn't be the named
party trying to foreclose, no longer having any skin in the game. Could party A
repurchase a loan from party B and then assign its credit bid to party B? Maybe so, just
not these particular parties, most particularly if party B is a passive REMIC regulated
by NY trust law. Nor would a wrongfully induced illusion that a claimant is a holder in
due course be anything but illegitimate.
If issuers are not honoring their contractual obligation with GNMA by not repurchasing
the defaulted loans, are the investors ultimately benefitting from this m.o.? Are they
receiving the benefit of the GSE guarantee / insurance? It's hard to say, but if the
plethora of investor suits against the other players is any indication, it doesn't appear
so.
If the issuer avoids the repurchase obligation, the issuer is managing to avoid the fact
that if he repurchased because of a default, which is the only known reason an issuer
is obligated to repurchase, he never obtains holder in due course status (having taken
the note with notice of its dishonor). Instead, as it is, the borrower is intended to
find himself up against an alleged holder in due course (a trust) and is without the
benefit of affirmative defenses available against a holder who is not a holder in due
course.
But, because "MERS" (read servicer-employee), without known exception, only executes an
assignment after a default in payment by the note maker, it's fair and reasonable to
presume that any loan which is the subject of a "MERS" assignment is 1) in default and
therefore 2) that the new owner of the note, the trust, is not a holder in due course,
either.
Even if argument is made that the assignment of the collateral instrument had been assigned with no recordation, there's no mistaking the new assignment of the note to the trust (either
in keeping belatedly with an existing contractual agreement and or pursuant to an Article
of the UCC other than Article III). In my opinion, and most highly relevant to this whole
mess, is that such an assignment is itself prima facie evidence the loan was not
transferred to the trust in the first place.

In one foreclosure case where a claimant was squarely confronted about "MERS" authority
to assign the note, PHH v Anderson, PHH agreed that MERS had no authority to assign the
note, but averred the assignment of the note in that instrument was merely "superfluous".
I'd have to disagree. The recordation of an instrument carries an obligation to contain
only facts and an instrument is recorded, significantly, to provide notice of, and
reliance on, those facts. If the assignment of the note is "superflous", meaning it's not
what it says and is not to be relied on, it shouldn't be contained in a recorded
instrument. It seems the party who has executed such an assignment wants it both ways: it
wants to make a record for its own purposes "over there", and yet that same party says
it's not to be factually relied on by the one party it affects most: the homeowner.

But importantly, why would a trust, or anyone (clearly the issuer doesn't want to),accept a transfer of a loan in default, even if it weren't subject to strict compliance with cut-off dates imposed by trust law - "Here - take this turkey!" ??? And an issuer would be 'rather reluctant' to pay a trust for a loan which it knows can't be transferred to a trust post cut-off date, which may help explain why issuers aren't complying with their agreements with GNMA.

The impact on an intervening agreement or any agreement among others which impacts a note maker, such as that of GNMA with the Issuers, is an important issue, one about which I hope scholarly minds are or will soon be devoting some energy.

Homeowners haven't by and large made an issue of holder v hidc, but in my opinion,
when they get around to it, they'll find there is no holder in due course on these
notes. The issuer by contractual agreement has abandoned that potential status
and the trust, when and if lawfully accepting a tardy assignment of a loan now in default, cannot claim the status. As to the validity of a late assignment to a trust and the note maker's challenge to such a late assignment, those issues are being litigated in the hotly contested Glaski v Bank of America et al.
*It's my understanding that GNMA will only respond to claims made by GNMA approved
servicers. FHA has been known to tell an unapproved servicer, who should
be making the claim on these particular loans for, if anyone, the issuer who should have
repurchased the loans, to go home, essentially, for lack of that approval. When loans
are removed from a pool for any reason, the servicing may be moved to a "default
servicer", and apparently some of these default servicers are not GNMA approved.

For a look at FNMA's guarantee, see my blog of 03/26/11 here at SourceofTitle.

Who May Assign a Deed of Trust, even if MERS has Authority?

john gault — Sat, 15 Jun 2013 00:00:01 EST

This material touches on numerous topics, including agency, but its primary goal is

to identify the party who may assign a deed of trust, either himself or who may empower

another, including MERS, to do so. I also discuss my belief that a deed of trust does not

"follow a note", why not, and why a court may not find an 'equitable' assignment.

Does supplying, but not signing, the deed of trust meet the expession of authority

demanded by the statute of frauds?

1) Is the authority to assign deeds of trust granted? (I say "not so fast!")

What impact does the fact that the lender doesn't sign the deed of trust have on the

authority? The borrower may agree in the document, but the borrower is not the one

whose express authorization is required. The borrower may not convey any rights of

the true beneficiary to MERS or anyone else.

As a nominee or agent, IF the answer to No. 1 above is yes, MERS may have certain

authority, that is IF

2) the choice of the word nominee over agent in the document means that as a

nominee, a third party, here MERS, could appropriately be authorized to act as an

agent by language in the deed of trust which conflicts with the "Nominee" designation.

Any document which is patently open to interpretation imo suffered from poor drafting.

Or did it?

The fact that the word "agent" was not chosen is imo no slight matter. A nominal party is generally one with limited, if any, authority - a person meant to stand in for another, devoid of any rights. It appears to me that MERS avoided the word agency for the liability which comes with it and for other reasons related to its ostensible appointment of MERS members as officers of MERS.

3) Who may authorize the assignment of the dot? The note transferor? The note

transferee?

The answer to that question depends on whether or not a deed of trust "follows

a note". If it does, it's possible the current note owner could command an assignment

of the collateral instrument. If not, the answer is the last transferor / owner of the Note. The

UCC does not regulate real property collateral instruments. Even if it did, it's by far the only law bearing on real property collateral instruments. They are regulated, in part,

by the Statute of Frauds, which calls for a writing in order to convey an interest in real

property. A deed of trust is an interest in real property: the deed of trust does not,

cannot, "follow" a note. A RIGHT to an assignment of the collateral instrument may very well

follow the note, but not the instrument nor its interest. Many claimants today want to rely on a very old case, Carpenter v Longan, for the proposition that a mortgage (a two party instrument) follows a note. The Carpenter court did not address the statute of frauds when making its decision.

Significantly, there is no jurisdiction for a court to find an 'equitable' assignment of the deed of trust in a contest between the guy who wants an assignment and the borrower. In the absence of the guy who may owe someone an assignment, the court has no jurisdiction to entertain the issue. That guy's rights may not be adjudicated in his absence; he must be a party to the action. The only appropriate forum for a contest regarding an assignment is one between the guy who wants the assignment and the guy he claims owes him one, and even then imo, the court is limited to ordering a written assignment.

By all accounts, it's an employee of the servicer (law firm for servicer or trust?) for the trust

who is executing the assignment as a MERS' "officer". The servicer, if he represents anyone,

represents the alleged current note holder, the guy for whom he's servicing, and here, the

guy who wants an assignment. Being a servicer does not make one the party with the right

to command an assignment of interest, even for the party for whom he services. Importantly,

a servicer does not represent the last owner of the note, the guy who sold the note to the

trust or other current owner. As such, "MERS" isn't authorized to execute an assignment at the behest of the servicer for the current note owner, nor may MERS do so at the direct urging of the current note owner. Further, if a note is in the possession of one who is not its owner, there should be no assignment to that person - another story for another day.

Any authorization to assign the deed of trust must come from the last note owner, who is the only party with authority himself to execute an assignment of the collateral instrument to the party to whom it transferred the note. Because a current note holder who does not himself have an assignment may not himself execute an assignment of the collateral instrument , he cannot authorize another to do so, agent or otherwise.

The assignments which have taken place historically, and to date as far as I know, are done

by an "officer" of MERS as nominee for the "original lender, its successors and or assigns"

There is never any e v i d e n c e that MERS has any relationship with any note owners subsequent

to the original lender named in the instruments, nor the terms and extent of that relationship.

There is never any evidence that MERS is the nominee or agent or has any relationship whatsoever

with either the "middle-men" or the last note owner.

But let's say for the moment there is such evidence of MERS' status with the last note owner,

the guy who may tell MERS to execute an assignment to the current note owner,

distinguishable from the party in possession. In order for a nominee or agent to convey its

principal's interest, the nominal or agency status must 1) exist and 2) be identified. There

must be notice of the nominal or agency relationship, whatever is being relied on. Even were there such evidence, an agent does not convey interest in its own right, as is the current posture of assignments. An agent conveys its principal's interest by just that - agency. Every assignment must be executed by "MERS", or whomever, as agent for an identified party. There is no good reason to recite what is currently written therein.

Imo, the first paragraph should read, essentially, "ABC Lender assigns this deed of trust to XYZ Lender etc."

Any document or instrument executed by one party for another, particularly when it comes to real property, must say so. The appropriate language for the execution is like this:

ABC Lender

_____________________________

by MERS (or anyone), its authorized agent

If I leave town and give you my Power of Attorney to sign closing papers for the sale of my home, including the deed, you wouldn't sign your own name, would you? No, you'd sign like this:

John Gault, Grantor

_________________________________

by James Jabberwocky, his attorney in fact (or "under a limited power of attorney", say)

Significantly, you would identify the party for whom you are signing. If not, the deed would convey nothing.

Imo, the current language in the assignment is no more than posturing, a red herring, one meant to distract from f a c t s.

It's a reference to and in support of the "successors and or assigns" in the deed of trust, as if

that makes everything kosher and vitiates what is necessary for one to act for another, not only

as to evidence of authority, but in the very execution of that authority.

As to the "successors and or assigns" recited in the deed of trust in regard to MERS' nominal

status, that language alone simply fails to support a relationship with any successors or assigns

of the lender, if for no other reason than the borrower alone signs the deed of trust, and just

as he may not bestow the original beneficiary's rights on anyone, he surely may not bind

subsequent parties. Subsequent parties could be bound by other agreements; the players

remain free to assert such agreements between MERS and anyone who has had an interest in the

deed of trust from its inception. Absent demonstration of all required agreements

as to MERS' status as nominee or other with subsequent interested parties, courts shouldn't be

finding any. These relationships are certainly not a fact in evidence.

Let's say MERS is the agent of the original lender empowered to execute assignments, not merely abandon its nominal status. Let's even say MERS is the agent for the last note owner and it's time to execute an assignment.

Since MERS has no employees (it may now), who is going to execute the assignment? Well, the last (not current) note owner certainly could, assuming he were appropriately assigned the deed of trust himself. But he doesn't want to, so let's say he has an appropriate agreement with MERS, one which passes muster including with the statute of frauds. In that agreement, the last note owner authorizes MERS to execute an assignment on his behalf to the current note owner.

Because MERS has no employees, and for other reasons unknown, MERS allegedly "officer-izes

employees of servicer-members (and by some accounts, employees of non-members) to

execute these assignments on MERS' behalf.

No. 4) Is this legitimate a) at all and b) is it legitimate if the member-employee to execute the

assignment in MERS' name is an employee of the servicer for the current note holder, i.e.,

the servicer's boss or principal, who is the transferEE? I've already weighed in in previous

blogs on my impression of an alleged agent making its principal ITS agent (officer?)

(tweaked, very tweaked), so just now I'll concentrate on the person executing the assignment

having a relationship with the transferEE.

I call this a patent conflict of interest: MERS, or anyone, should not be authorizing a person

connected with, or the agent of, the assignment transferEE to make the assignment in MERS'

name. Not only should this not be allowed, it should be prohibited. If anyone (and again

my impressions of this m.o. are well-known to long-time readers), MERS should only allow

assignments in its name to be done by a person properly associated with the transferOR or at any rate, certainly not someone affiliated with the transferEE. And even then, MERS relationship with the transferor must be identified and the assignment executed accordingly, above.

This is all the more true because in reality, it's likely the transferEE who is pulling the strings.

As I've said before, we all understand that obligations have to be taken seriously. But that is a two- way street. These are as always lay opinions.

Kentucky County Recorders File Suit Against MERS, Shareholders - Is Money Due?

john gault — Thu, 31 Jan 2013 22:20:01 EST

Kentucky county recorders have followed the actions of other states' county recorders and filed suit against MERS and others, including shareholders, for failing to pay statutorily mandated recording fees. The Kentucky case makes at least one salient point not made in other such actions: the defendents have availed themselves of the benefit of recordation, while at the same time avoiding the required fees for assignments. According to the suit, "They have taken advantage of the protections afforded by Kentucky's laws by recording mortgages while at the same time, they have failed to comply with Kentucky law requiring accurate information in mortgage instruments, the recording of assignments for the same mortgages, and the payment of required recording fees for the statutorily required recording of mortgage assignments." The suit also maintains that the members' general averments that MERS is anyone's agent is merely a claim (not a fact in evidence by reason of real property agency laws - sic).

So are the fees owed or not?
The collateral instrument, which one must acknowledge is signed by only the homeowner, states
that MERS is the beneficiary as nominee of the lender.
All right - let's say, then, that MERS is a nominal beneficiary. A nominal beneficiary is one
which, long and short, has no economic interest in the matter. Or say MERS IS an agent.
Doesn't matter here. In order for the loans to have been transferred to the trusts, there has
to be a writing somewhere which identifies the loans, because they surely are not transferred
by osmosis. Let's say that writing is the PSA - or any writing which meets the UCC Article 9
provisions for transfer -such as a Sale and Assignment Agreement - and it identifies the loans
with sufficient particularity to pass muster.
There could also be endorsements on the notes, which were called for by the PSA's, right?
There could also have been assignments of the collateral instruments, which were called for
by the PSA's, right? But we now know there were no individual assignments actually done for
the reliance on MERS as mutual nominal beneficiary. Some suspect, with good reason, such as
the mountain of lost note affidavits initially submitted by claimants, that not only were the
notes not timely endorsed and delivered to the trusts or their custodians, but also suspect
the endorsements and deliveries in the chain were also not done with rushed reliance on the
entries in the MERS' database, somewhat akin to a post-it note about what to handle when
there's time.

As to transfers to the trusts and perhaps others along the way, even if MERS remains the
nominal beneficiary, if the loans were factually transferred to the trusts by bulk Purchase
and Assignment Agreements pursuant to Article 9, the loans were transferred and the only
things missing are 1) Notice, 2) recordation of the assigning Agreements, and 3) fees due to county recorders. If the transfers took place by Article 9 S & A Agreements, which is suggested in
material published by those involved, the S & A Agreements could have been recorded to
provide Notice and the fees owing could have been paid. But that didn't happen.

It appears under the UCC that any failure to sell and assign by way of a Sale and Assignment Agreement as well as to deliver the notes, fully endorsed, to one who has paid for the sale and assignment, results in mere security interests to the party who has paid, makes the seller an obligor on the notes to that party, leaving the matter of that party's right to enforce the notes subject to the provisions of the UCC regarding security interests and more specifically, subject to the provisions of the UCC for enforcement of security interests in notes secured by real property. As to the trusts, even this must assume the earlier transfers on the way to securitization were effected and didn't themselves create only security interests.

There are two choices here: 1) the loans were factually transferred in oneor more bulk Sale and Assignment Agreements pursuant to Article 9 even though for lack of individual assignments, if not Article 3 endorsements, they didn't meet the provisions of

the psa's or 2) in the absence of a qualifying Sale and Assignment Agreement, the loans, for
lack of endorsement, assignment, and delivery, resulted only in security interests to the
trusts. If one takes No. 1 as a fact, then regardless of MERS maintaining its nominal status
in public record (disregarding the salient question of MERS' nominal status for non-member
investors), the transfer fees are due to the county recorders for every interest identified
in those bulk transfers (as well as the transfers prior to any to the trusts) since MERS'
nominal status, or even agency, didn't serve to undermine the transfers. In which case, all
those fees are owing and overdue.
The only way this could not be true is if MERS as beneficiary meant MERS had and retained
the economic interest of a true beneficiary, which would stand in stark contrast to MERS'
sworn testimony, most notably in MERS v Nebraska Dept of Banking and Finance, and calls into
question MERS' need to be appropriately licensed in each state. And of course, if MERS were
the true beneficiary, i.e., the party with the economic interest and not merely a nominee or
agent, the question of intended bifurcation and its ramifications necessarily arises.

If No. 2 is factual, that for lack of endorsement and written assignments, only security
interests were established for the trusts, it's possible no fees are due to the county
recorders since no sales and assignments actually occurred. But No. 2 is a concession MERS
and its members would hardly want to make; that is, that no sales actually transpired, that
what optimally occurred was the creation of security interests to the trusts and all the
ensuing entanglements. Since every MERS' assignment of the collateral instrument also contains a recitation of transfer of the note, one reasonably wonders if this document isn't to serve as a a belated Article 9 transfer of the note itself, although if MERS has any authority regarding the note, it hasn't come to light. Further telling, perhaps, is the fact that an assignment of the collateral instrument wouldn't actually require any consideration - it's the transfer of the note which must be supported by consideration - yet consideration is expressed in every MERS' assignment. The fact that the assignment is actually executed by an employee of the assignee as a MERS' officer further complicates the matter and possibly if not likely presents a conflict of interest as well as a legal snafu.
Unless MERS and its members want to stare down the creation of mere security interests to
the trusts, they might want to pony up and pay the County Recorders for those multiple
transfers. Of course, since there were no assignments of the collateral instruments done
because of reliance on MERS, if there were also no Article 9 bulk sales and assignments
at all, includng along the way to the trusts, that's another story.

The Kentucky County Recorders' Amended Complaint alleging fraud, conspiracy, and unjust enrichment may be found here:

http://www.scribd.com/doc/124006148/Kentucky-Recorders-v-MERS-et-al-Amended-Complaint

The OCC Abandons the "Independent Foreclosure Review"

john gault — Tue, 08 Jan 2013 20:02:58 EST

The Office of the Comptroller of the Currency has announced it's ending the Independent Foreclosure Review, apparently on the basis it's inconclusive. The OCC left the review in the hands of the banks: how was this "independent"? It wasn't , and as such, I hope it wasn't the polity which had to pay for this show-boat exercise in futility.

The Office of the Controller of the Currency has apparently decided to abandon the 'Independent Foreclosure Review". Well, now there's a mislead if ever there were one. Given that it was the banks themselves

which controlled and directed the review, there was nothing independent about it. The OCC has apparently taken the position that at $250.00 an hour for review, it's a colossal waste of money. Under the circumstances, the fox guarding the henhouse, who could disagree? I don't know where they got that 250 figure. An acquaintance of mine does a portion of the audits for a large company and is paid 40.00 per file. She works from her home and no overhead is required by the company for her efforts. I suppose some attorneys may be involved at the "250 level", though I've yet to meet an attorney who could identify predatory lending if it bit him.

Today at Forbes, writer Daniel Fisher, commenting on the OCC's decision to end the review, says:

"This so-called “predatory lending” doesn’t make any economic sense, unless you’re willing to buy the theory that the fees flowing from an ultimately unprofitable loan were enough to induce bankers to destroy

their own institutions in search of a year-end bonus."

"Destroy their own institutions"? This assumes they knew their acts would destroy their institutions, which lo and behold, it hasn't. No, we the people got to pick up the tab, something more likely foreseeable to the

bad actors under the too big to fail blanket. Even if the actors could have foreseen the result of their acts on their own institutions, that's what they did: they plowed right ahead, like a runaway train, stopped by neither the dictates of conscience nor business acumen when in fact making predatory loans and attempting to pawn the inevitable losses on another group.

It's certainly what FNMA did (notwithstanding FNMA's default-guarantee to the investors). The executives who got those production bonuses did in fact abandon their fiduciaries to FNMA for those fat bonuses. They willfully turned blind eyes to the garbage that was coming in. I remember hearing it for the first time in 2008 - I just about fell off my chair, I did. I was literally horrified, and enraged may I add, at such dereliction and greed in what has become the course d'jour these days. A sad saga indeed.

FNMA and FHLMC were formed to provide funds for home loans. Someone, and I can see how this idea (shared risk, more or less) was formulated since even I once thought of it in the 80's. Someone(s) decided there should be a way to further spread the risk of defaults on these home loans and

maybe that would have in fact created a viable investment opportunity for pension funds, etc.

But it's undeniable that the plan hasn't worked and it's also undeniable that both corporate and individual (mucks' bonuses do in fact come to mind) greed was at the heart of the failure. The bankruptcy remoteness for one thing, ultimately for the benefit of the securitization trusts, complicated the matter by requiring multiple transfers before the loans were to find their resting places in the trusts.

The multiple transfers on such volume, volume fueled by reduced underwriting standards ,inflated appraisals, and in some cases plain abandonment of those standards, proved to be too much of a challenge.

That's on a good day. Now throw in the greed Mr. Fisher appears to want to deny: the parties involved cut corners and did not create the appropriate paper trail, here short for transfer and delivery, which would legitimately establish entitlement to enforce the contracts.

These aren't just any contracts - they'are contracts involving provisions of the UCC and the Statute of Frauds / real property laws. Enter MERS, whose attempt to save some time on recordations of assignments of collateral instruments nonetheless - at best - left the UCC requirements for transfers of notes

solidly in place.

Some people believe the participants said "hey, we'll just fund the loans with the Pensioners' money". I can't speak to that, although it has a certain ring of truth, but one way or another, forensic accounting is called for here to determine parties' rights. I would venture the next few years will find an onslaught of overdue e-discovery in that regard.

These loans are contracts and subject to all available defenses, just like any others. To say a party showing up with no interest for its own failure to either follow the rules or take action to protect its own interest but

demanding recourse as if it did because we owe SOMEone is not fraud is absurd and a great insult to all Americans and the law. The party who messed up whether by design or negligence is the one who is legally required to bear any loss. That's a fact and it's one the judiciary routinely overlooks when coming from "you're not getting a free house". And as I've asked before, would it be so bad, especially given the state of our economy, if the party to benefit from another's malfeasance and misfeasance were the

homeowner?

In his article, Mr. Fisher asks, "Has there been a single case in the past five years of a homeowner who was current on his mortgage being foreclosed through fraud?" First of all, yes there has. But more importantly, what's default got to do with anything? Nothing. Default doesn't determine the rights of parties.If it did, you or I could start a used car business with all the cars with payments in default we could get our hands on. Equity, even if it could stand in place of the UCC and land laws, is a consideration to be extended to those with clean hands and only those with clean hands.

It appears at least Mr. Fisher is espousing a view that it's a victimless crime when one with a bigger stick may deprive another of his home on some theory that the homeowner has it coming.

What's going on is far from victimless. What's at stake is who we are.

MERS and the Doctrine of Merger

john gault — Thu, 06 Sep 2012 18:15:31 EST

This material looks at the doctrine of merger including the ramifications of credit bids in foreclosures and deed of trust trustees selling liens. It also touches on WA SC's recent decision on MERS as beneficiary in Washington state deeds of trust.

It may be that none of us, and that would include the author, have been paying proper attention to what a foreclosure actually is / means. A foreclosure of a deed of trust is, by design, a quiet title action, with the defaulting borrower being the loser. The borrower is stripped of all title, both equitable and legal. The interest held by the deed of trust trustee for the benefit of the deed of trust beneficiary as well as the borrower's interest, now lost, are united in the successful bidder: everyone else's interests are extinguished in favor of the successful bidder. The title is now quieted in fee simple absolute in the successful bidder by way of the trustee's deed.

There have been rumblings lately of deed of trust trustee's attempting to sell the lien created in the deed of trust in lieu of foreclosure. Some believe this is an effort to dodge the responsibility taken on as a matter of course and law by substitute trustees, including the duty to foreclose for the proper party. Selling a lien is not only unauthorized and contrary to its duties, it does not fulfill a trustee's actual duty. Such an act attempts to put that duty on another party. The deed of trust empowers, authorizes, the trustee to perform an act which quiets title, because that's what foreclosure is and does. A trustee selling the lien is not only not contemplated or authorized in a deed of trust; the deed of trust trustee is not authorized to convey a less than fee absolute interest. Selling a lien will not convey fee absolute and will not quiet title.

Historically, before the advent of MERS, the successful bidders at foreclosure sales were by and large arm's length third parties. While credit bidding has always been available to the legitimate lender, its use did not become rampant until recently. The credit bid is no slight matter.

Under the doctrine of merger, certain significant things happen with foreclosure. A full credit bid extinguishes the collateral instrument as a matter of law. The lesser interest, that created in the deed of trust for the beneficiary, merges with the greater interest, the fee, when the lender / beneficiary is the successful bidder at sale. This means the successful bidder is the recipient, grantee, of the trustee's deed, is now the holder of fee simple absolute to the real property. It is only the beneficiary who has a right to make a credit bid, and this right flows from the beneficiary's rights in the note which the deed of trust secures.

MERS has been most insistant that it is the beneficiary. For years, prior to its Consent Order, foreclosures were done by or in the name of MERS as beneficiary using credit bids. Under the doctrine of merger, the beneficiary foreclosing with a credit bid (or cash) becomes the fee owner of the real property; in other words, by operation of law, MERS, the beneficiary, held title to every property foreclosed in its name when a credit bid was used. If that's not problematic enough, it means the deed to every resale of a foreclosed property had to come from MERS or there may be a fatal break in the chain of title, if there weren't already.

As a side note, in a recent landmark case, the Washington State Supreme Court recently disagreed with MERS' claim of being the beneficiary, finding in the "Bain"case that MERS does not meet Washington's statutory definition of a beneficary, apparently leaving the deed of trust with no beneficiary. It's too early to pontificate too much on what will happen with foreclosed properties foreclosed by "MERS" in WA state, other than to note the obvious, which is that only a beneficiary may command foreclosure or for that matter, make a credit bid.

Perhaps the lenders will argue that even if MERS were not the beneficiary, MERS remained its agent, an allegation which does not survive the statute of frauds. As to future events, the lenders will likely argue that if that's the case, i.e., MERS is not the beneficiary, the lender named in the deed of trust is the "default" beneficiary and only its nominee or agent (pick one) is missing. But, even if courts were to sustain such an averment, procuring the missing if not unexecuted assignments is going to present some very real problems for current claimants. It doesn't seem likely that under Washington statutes they'll get far in averring the deeds of trust follow the notes.
A legitimate owner of a note secured by a deed of trust has a right to an assignment of its collateral instrument, but pursuant to the statute of frauds, imo, that owner does not have an assignment until he has an assignment, even if he has to sue to get it. And one cannot legitimately ignore the strict compliance required by trust law, which strict compliance does not recognize equitable anything, including that which is relevant to cut-off dates.

All or many of these issues might have been avoided if the lender had first appropriately been named the beneficiary in the deed of trust and if MERS had then legitimately been appointed its agent by written expressed agreements which met the provisions of the statute of frauds. MERS, however, vigorously sought to avoid that relationship, although this non-existant relationship became the 'go-to' relationship when claimants found it beneficial.

A Look at Foreclosure Post-MERS' Consent Order

john gault — Sat, 05 May 2012 20:23:21 EST

Since MERS entered the Consent Order with the U.S. Dept of the Treasury in April of 2011, its members may no longer foreclose in MERS' name. This material looks at how the members are dealing with this situation.

"Let's start at the very beginning. A very good place to start."

"The language in the dot appears to grant MERS the right to foreclose; Millions
of foreclosures were done up until mid 2011 in MERS' name. In April
of 2011, MERS entered into a Consent Order with the Dept of the Treasury.
Thereafter, MERS issued a mandate to its members for no more foreclosures in
its name.
MERS is named the beneficiary as nominee of the lender in the deed of trust.
What is not seen in that document, but is controlling nonetheless, is other
language in another document: the MERS' membership agreement. In that
agreement, MERS and the member agree that a member may foreclose on the
deed of trust in MERS' name if the member has possession of the note.
Note that's two things, not one. In all the foreclosures done in MERS'
name pre-MERS' Consent Order, the member tacitly implied to MERS that
it had possession of the note. That's it.
End of the story as to written documentation concerning MERS which defines
foreclosure rights.

So what's wrong with this picture?

1) The member had agreed in the membership agreement
that it would only foreclose in MERS' name if the member is in possession
of the note. The right to enforce the note is the most dispositive issue
in a foreclosure action. How does / did MERS know a member had a note?
How did MERS know to whom it was payable? Based on my understanding of
their operation, MERS didn't. Apparently it was an 'honor system', just
as entries by members of sales of notes into MERS' database is an honor
system.

2) MERS is named the nominal beneficiary in the dot. MERS' members
have (post-Consent Order) alleged that that status is a de facto agency.
It's my understanding there is no such thing as a de facto agency when it
comes to real property. The expression and intent of real property agency
may not be implied; it must be clearly articulated. But even so, if MERS
is an agent, than the member is the principal. The plan was to allow
the principal / member to act in the name of the agent / MERS, rather
like, well, a club. Principals don't act in the name of the agent
(agents act in the name of the principal). I am at a loss to see how
this relationship can be legally justified and I'm also at a loss to
understand why it has stood for so long.

This is (one of) the largest flaws imo of the MERS model: the
principal is acting in the name of its alleged agent. Agents act
in the name of the principal and not the other way around. This legal
tenet is not peculiar to MERS - it's Agency 101. A duly appointed agent
may bind its principal; principals do not bind agents. If the true
beneficiary were first named as such in the deed of trust, with MERS
then being appointed the agent of the beneficiary, and if MERS actually
had employees to execute documents (which would remove the straw man
issue raised below), the relationship between MERS and its members
wouldn't strike such a dissonant chord.

3) Did the members have possession of the notes? Who's to say? The
problem with that question is its answer, which is that no one would
know. MERS had no way to assure compliance. Based on the rash of
'missing note' affidavits filed in subsequent litigation when possession
was actually challenged, it isn't unreasonable to question whether or
not those foreclosing parties actually had possession of the notes in
prior actions.

In 2011, MERS entered the Consent Order and thereafter issued its
mandate to its members: no more foreclosures in
its name. Problem is, in addition to providing relief from the time
and expense of recording assignments in county land records, the MERS'
operation was structured around foreclosing in MERS' name. In my
opinion, it's really necessary to understand this, the basic,
original m.o., that is, the MERS' foreclosure function and what
unforeseen changes the Consent Order has has occassioned.

"NOW WHAT TO DO?" If the paperwork weren't done, including
the assignments of the deeds of trust and the endorsements on the
notes on their way to securitization, who is going to foreclose now
that foreclosures may not be done in MERS' name?
Further complicating the matter is the fact that many of the entities
whose assignments and endorsements were neglected are out of business.

The "what to do" answer has been to have the members assign the dots
in MERS' name by way of the members' or even non-member MERS' officers. Some of the
members have argued that the dot follows the note, for which they assert possession, and maintain that the assignment of the deed of trust is superfluous. A deed of trust, however, unlike a note which is generally regulated by the UCC, is regulated by the statute of frauds which requires real property interests to be in writing.
A note without a proper assignment of its collateral deed of trust is an unsecured one. Unfortunately some investors who thought they were purchasing mortgage-backed securities find themselves with no collateral, and this unfortunate fact can only
be the result of other parties' complacency and dereliction. The
homeowner, likewise, had nothing to do with this business plan.

Which brings me to legitimate question 1, one which begs an answer,
and which answer is long overdue. Is a member' employee a
MERS' officer? MERS has appointed over 20,000 of these officers at
its members and elsewhere. These appointees execute the assignments of the deeds of
trust from MERS to members, generally to the appointee's actual employer or to the party who has hired them in the case of a law firm employee-appointment.

Many of those active in foreclosure defense refer to these appointees by
the common parlance "straw officers". A straw man is generally defined
as "a front for somebody, someone who acts for another for the other's
questionable and even illegal activities". Is this an unfair
description of the 20,000+ officers appointed by MERS at its
members? In this particular instance, it's difficult to separate the
appointment from the reason for and the gravity of the appointment.
MERS has no employees to execute the millions of documents executed
in its name. Are member' employees the proper people to do so? Are
they MERS' Officers?
They don't work for MERS, they're not paid by MERS, they don't show
up at MERS' offices to report for work or attend meetings. Their
sole "MERS" function is to execute assignments and other documents
in MERS' name at the behest of their true employers. Does this arrangment
actually comport with the law? Whether or not it should be influential,
it can't be forgotten that we are talking about the largest and most
significant asset most of us will ever have - our homes.

Is an assignment of a deed of trust to one's employer in the name of
MERS a legitimate assignment? Most courts are not apprised that these
assignments are self-instigated and self-executed assignments.

Since "MERS" foreclosure mandate, apparently the members have decided
it's the only thing they can do to try to establish rights under the
deeds of trust: the assignments are going right from the alleged nominal
beneficiary to the trust or loan servicer by way of servicer-employee
or law firm executions. I don't believe these assignments are legitimate. Even if
the assignments were actually, literally, executed by MERS, there's
still plenty of room for doubt that anything would be conveyed.
First of all, MERS has no authority to execute an assignment. Secondly,
MERS is at best a nominal beneficiary for public record and nominal
anythings have nothing to assign, having no real interest. MERS
itself has made it perfectly clear it has no real interest; MERS says
it merely holds legal title to the interest of another.
MERS might appropriately relinquish its nominee status by quit claim,
but the true beneficiary is the only one who may assign its interest.
That it isn't done strikes me as fatal to the enforcement of these
collateral instruments, a fact courts of equity grapple with daily.
However, the bottom line is that the mandates of the statute of frauds,
which regulate interests in real property, are not open to equitable
considerations, which is generally implemented only in the absence of
existing, controlling law.
MERS' nominal status in public record didn't change the need for
assignments by the true, not nominal, beneficiary, even if
the assignments were to remain unrecorded pending the need for
enforcement or the time to get them recorded.

But, since foreclosures may not be done in MERS' name any longer,
which schematic was at the very heart of the MERS' m.o.,
and that which had to be done appears to not have been done, what
else are the members to do?

The original plan was to enforce the deed of trust by MERS' members
in its name. Now that that is no longer available, another schematic
has taken its place: the self-assignment of the collateral instrument,
the deed of trust, by members in MERS' name.

MERS' members now wish to rely on the very same legal tenets, those
found in the UCC, which they eschewed for one reason or another in their
rush to the big bucks. The provisions of the UCC, not to mention
Trust Law, which would define the real owners of these notes appear to
have been of no moment to them when dealing with loans on the way to
securitization. Was this as rampant as now reported? Hard to say, but
many, many instances of noncompliance have certainly come to light and are the topic of many lawsuits. .
These actors nonetheless rely on the UCC now, specifically
possession of bearer notes, when it allows them to take collateral.
Even if the law provides for enforcement by one in possession of a
bearer note, that possessor, in the absence of (all the) legitimate
assignments of the dot, has no more than an unsecured note. No where
in the history of this country has one party's right to affirmative
defenses been so negated and sadly, for many homeowners, overlooked.

The real facts surrounding this securitization scheme, and I believe
that's an appropriate description, has lead to an unprecedented
economic and moral morass in our country's history. If my assessment
of this situation is accurate, the good men and women of our judiciary
have a lot of work to do. They appear to be the last bastion, charged
with the task of sorting out and dealing with this horrendous maelstrom,
a task none of us can envy.

I don't believe the assignments currently being executed in MERS'
name are legitimate, and certainly not when they purport to assign the
promissory note, as well. Is there another way? I don't know.
Maybe there is. Financial obligations have to be taken seriously.
No one would argue otherwise, but it's very difficult to have sympathy
for an industry which willfully operated with its eyes wide-shut
and which continues to spurn the implementation of the billions of
HAMP and other program dollars intended to help Americans retain
their homes after getting its own trillion dollar bail-out.

Rockwell P. Ludden has written a more lengthy and detailed missive
regarding MERS, and while I don't agree with everything he opines, I
think it's worth a read. It can be found here:

http://www.scribd.com/doc/92536900/Mers-Shell-Game-1-by-R-P-Ludden

The Foreclosure Dilema: Decisions at the Expense of One Class

john gault — Wed, 11 Jan 2012 02:23:35 EST

This material looks at favoritism to one class of citizens at the expense of another in

enforcement of Law in regard to foreclosures.

A deed from Adam to Martha is effective upon its delivery to Martha, and not until then. That's a fact. The only thing at all arguable is does this delivery mandate apply to a deed of trust, which is a transfer of an interest in real property. - the DEED in deed of trust.

MERS claimed to be the beneficiary in the deeds of trust, (where it is not claiming agency in lieu of beneficiary) but MERS never took delivery of one single deed of trust. I don't know why the law of delivery wouldn't apply. "MERS" doesn't take delivery of anything, or even do anything except provide a database, collect fees, and appoint anyone it feels like for a fee as an alleged officer to do things they couldn't otherwise and in reality do. It is a shell entity with no employees. It is a computer system used by its members for a fee. The members either with intent or as a result attempt to and are able to avoid any number of legal requirements. Any time a member relies on anything at all as to Mers, it is as to the claimant's employee's alleged status as an officer of MERS by the appt from William Hultman (all 25, 000 of them).
The lack of delivery and possession may undermine a lot of what is passing as "fact" by foreclosing parties.
MERS has no interest in notes and no one should be made at this date to argue this point. It isn't news. MERS itself has made this very clear in MERS v. Nebraska Department of Banking and Finance, A-04-000786, Appellant Brief filed October 14, 2004:

“MERS does NOT acquire loans….”
“There is no rational basis for determining that MERS acquires loans.” P. 9

“MERS has no interest at all in the promissory note…” P. 11

"Mers is not the owner of the promissory note secured by the mortgage." P. 11

Full text of the brief is available here:

http://www.scribd.com/doc/52903486/MERS-Disavows-Interest-in-Loans-and-Notes

Every self-assignment done by a MERS' member which purports to assign the note is imo a false instrument. Such an assignment is contractually and legally impossible. You just can't 'assign' an interest you don't have and to pretend to do so to the (significant) detriment of another crosses the line and becomes criminal according to all states' law.
By all appearances, none of the intermediaries on the note ever took possession of the note on its alleged way to securitization. They didn't have time, they just didn't, for any of those "formalities" otherwise known as law. Did any money actually change hands? I doubt it. That takes time, also.
Someone funded the loan, whether it were the party named on the note or someone else. The next time (or first, depending on your view of this funding issue) the note ever saw any money change hands after its origination was likely from the derivative investors, with no payment by anyone along the road, in stark contrast to the provisions of the UCC. No money = no interest. No possession = no interest.
If Dee 'bought ' a note from joann, but Dee never gave Joann any money nor took possession but then sold the note she hadn't paid for or possessed to Richard, I think under the UCC, there has been no transfer between Dee and Joann, so no transfer from Joann to Richard.
There just wasn't time between origination and securitization for those people to have done what had to be done: pay for-take possession-endorse-deliver, pay for-take-possession-endorse-deliver- and so on. (And none of this considers the constant flux of money, any promised yields in light of that constant flux, and their self-created urgency to get that part - the promised yield - "nailed down", and that may well be at the heart of why laws weren't followed). I, for instance, once lost around 150k for the flux of that money, and I was just a minute fry, a mere speck on 'the freckle of life's complexion'. Any business plan to get loans securitized in a NY minute (pun intended) had to consider that fluctuation and meeting deadlines on commitments. These loans were moved around in huge blocks. Multimillion dollar blocks. Missing any commitment dates would be a very big deal. So did they just record alleged "transfers" of notes in MERS' database and call it a done deal? Sure looks like it.

All these notes had to be paid for and physically transferred and possessed by everyone in the chain, at least that's my understanding of the UCC.
We think of MERS merely as a computer database, a private registry for deeds of trust. I think it's worse than that. I think they skipped all the laws, including the UCC, by only (allegedly)
registering these alleged transfers of notes in MERS' database, which could appropriately be called a private set of books, but significantly, one which has no basis in fact or law and certainly one with no governance. What I'm suggesting is there was no endorsement of the note along the way by design. I'm opining it was not an accident - the 'shortcuts' were part of the plan, their reliance being the blank endorsement, but I think that plan fails for lack of possession and payment. We know there was no assignment of the deed of trust and most likely no possession, either, of deeds of trusts or their assignments. We've all done some reckless things when we're in a hurry. But most of us confine these things to that which we know can be remedied and slap it on tomorrow's calendar. Failure to follow the UCC as applicable as well as other contractual and statutory provisions, however, is fatal.
A million to one there was no (required) delivery and possession along the way of either the note or deed of trust or any assignment of the deeds of trust. There was probably no payment, either. No money changing hands = no interest created or at least no right to enforce. No possession = no transfer.

Now, a promise to pay for the note might transfer interest IF the note is physically delivered. I'm not clear on this one, although I uderstand the significance of the answer. But you can't enforce a note you haven't paid for. Promises to pay don't cut it for enforcement.

After closing, where did the debt and collateral instruments go? If any of them went right to the trust custodian (or were destroyed), then surely there was no possession by anyone whose endorseable or assignable interests were as a matter of law dependent on that possession.
There is a reason there were 'intermediaries' between the originators and the trusts having to do with bankruptcy-remoteness, which discussion is not up my alley. If someone were to put the two together - 1) the no money and no possession arguments and 2) why the intermediaries were necessary (bankruptcy-remoteness), maybe we'd have a shot at arguments and need to know clearances judges could only find reasonable, and in fact indispensable to adjudications.

We'll probably never know, but is the reason they needed those TARP funds because their little private registry either failed in 'system-integrity', in which there could be 'accidents', or for lack of recordation of the collateral instruments allowed one note to be 'sold' multiple times to different entities and or trusts. What is the old saying? "A stitch in time saves nine"?

TARP was meted out ostensibly for the greater good. I can't help wondering if in 2012 it isn't (past) time to consider the economic impact of following the law as to foreclosures, which entails appropriate discovery, because, to borrow a phrase (Olds?), "This isn't your father's car", your honor.

If this necessary discovery results in routine findings of unenforceable obligations to homeowners, wouldn't that be a heck of a stimulus to our sputtering economy? It's the same ship which is sinking, regardless of whether it's at the aft or stern. It would also signal a return to the law and rights on which our country was founded and without which we will not survive.

It is certainly challenging for any of us mere mortals to try to figure out what is actually going on with this whole mess. It's been proven in more than one case, for instance, that a loan was not transferred into a trust by psa cut off dates or at all. Other trusts appear to me messed for other reasons, some of which are decidely over my head. I am a mere-mortal-plebe-, but even as such, I can see problems for the trusts and others with these "fouls". So if I, a plebe, can see this, what is really going on with people who should know more than me, specifically people who are charged with responsibility to protect the law? I think that's a pretty important question. Last I heard, for instance, the IRS was undecided about how it was going to treat income to investors which didn't really qualify for the favored tax status they thought they were getting with their investments. Some trust investors, as we know, are fighting mad over various issues with the bill of goods they were sold, but to my knowledge, none of their suits quarrel about whether or not loans made it into a trust. The suits are centered around the quality and ratings on the loans. Apparently they can't admit the loans didn't make it without conceding the tax consequence of their received payments.

Is this the alleged dilema? Is there a struggle, for one, by and large for the powers that be between the consequences of an acknowledgement these are taxable events to one group, and in order to avoid that acknowledgement with its broad consequences (and this of course includes to people aka Wall Street & Co. who truly should be bearing the brunt of those consequences), blind eyes are turned toward what is wrongful foreclosure, in which case, the homeowner certainly loses? Is there a pi$$ing match of whom should bear the economic brunt of the misdeeds and or systemic failures (this struggle would be true only for those literati with any kind of conscience at all). Better for the governmental literati to sit on the bench and let us all sort it out (but AFTER the TARP hand-outs) as best we can in the interests of "Something", and that "Something" not including the welfare of American homeowners, for whose benefit laws were enacted, and which 'something' in fact must ignore the law? Is there some mass conclusion, some consensus, by those in power that the winner of the struggle should not be the homeowner, who, after all, is perceived to have gotten the benefit of the bargain? Is this our enemy?

Well, if so, that's just wrong and a damn sad commentary.

Duties of The Deed of Trust Trustee - What Documents Must He Be Provided?

john gault — Sun, 30 Oct 2011 02:41:26 EST

This material discusses the duties of the deed of trust trustee and what documentation he should be reviewing. If the trustee received those documents, it would benefit all of us. Well, most of us.

From the time I took my first r.e. courses in 1977, I was taught that the trustee should be given the original note and deed of trust to foreclose, along with evidence of the default. Title companies were the trustees named in deeds of trust, which makes sense because they’re in the business, they have staff attorneys, and real estate is "what they do".

What the trustee should get is the note with all endorsements and the dot with
any and all assignments (which should have been recorded). There's no reason a borrower
should not get copies of these documents, as well, at least on request.
I’m pretty certain the handy ‘blank’ endorsement on a note first became widely and rampantly used in securitization and at the advent of MERS, although it’s always been available for legitimate use. The
‘old’ notes were likely endorsed to a named party and that was the party with the last assignment of the dot, also.

The trustee’s job for one is to receive and review the defaulted note and all endorsements, the deed of trust, and all assignments of the deed of trust. The trustee must ascertain that the party telling him to foreclose is the right party. Today’s trustees are not doing any such thing, and that is one of our CORE
problems. This failure is right there at the heart of what ails us. They don't get much of anything.
What they get, I'm told, is a password for the servicer’s database to go in and find the default in the database. (And it's my understanding this gives them carte blanche access to other borrower's private information, including social security numbers.) There is no regard given by the trustee for who owns the note and dot. If he doesn't get the documents, he simply cannot know this. The trustee seems to be relying solely on the default showing in the database at the servicer's. Given that up until mid 2010, MERS made no attempt to show the noteowner in its own database, which information was made as a strictly voluntary entry by its members with no oversight in the first place, it could not be said that trustees had or have other sources of information beyond the default figures $$ shown in the servicer's system. Even if a trustee could have or could now access noteowner / beneficiary information in MERS' database, by its own admission, MERS does not stand on the accuracy of that information. There is no reasonable argument that such reliance by a deed of trust trustee, a party with such an important task, would be appropriate.

The trustees are actually vulnerable imo to a zillion lawsuits for breach of the ficuciary imposed by the deed of trust or alternatively or additionally for violation of the covenants of good faith and fair dealing. The trustee may only act for the beneficiary of the deed of trust, who to gain the benefit of the
collateral instrument, the dot, must also own the right to payment evidenced by the debt instrument, the note. The dot only authorizes a trustee to act for the proper party.

As evidence that the trustee isn’t getting these docs which define the proper party to command foreclosure, one need only look at all the unfortunate, court-clogging lawsuits. If a homeowner says ABC is a stranger to me, ABC could just get their original docs back from the trustee or tender certified copies, but they don’t and can’t because he never got them. And speaking of certified copies, if the lender will not release his originals to the trustee, as may be the case, the trustee should at least be given certified copies.

The trustee never got them because the endorsements on notes and assignments of the deeds of trust are non-existant and missing. The original note may be MIA, as well. This is the beginning of the crime (never minding other arguments about sec’n, swaps, insurance, never made it into the trust, etc.) of
wrongful foreclosure. If all the rules had been followed by the lender, its successors and assigns, the trustee could and would be given the appropriate documents he is in truth to be given to perform his duties.

Today's players didn’t follow the rules and cannot produce these documents for the trustee. So today’s trustee’s are acting as mere collection agents for strangers, strangers even to the trustee.

The deed of trust is a three party instrument and the instrument was created that the trustee would act on behalf of the other two parties – the beneficiary and the trustor (borrower) - so lenders could skip
judicial foreclosure – with the ‘aid’ of the trustee, a neutral party.
But trustees these days outrageously might be just any yahoos with little more than a pulse. When trustees abandon their duties to the deed of trust, they should be called out in whatever manner possible for dereliction of duty.

MERS enables and participates in a lot of bad acts, but that is no excuse for the trustee not fulfilling his obligations to the terms of the deed of trust. He just canNOT do this when he doesn’t
get the documents. I foresee many suits against any rotten-apple trustees in the near future. Trustees are far from bit players; they are major players because it’s their mandate to follow the terms of the deed of trust, to protect the very significant interests of the other two parties, and if they did, strangers wouldn’t be making off with real property, litigation would abate significantly, buyers could buy legitimate foreclosures and sleep at night, and title companies would not be put in a moral, legal, and economic, and thus unfair, catch 22 over insurance.

MERS' DEED OF TRUST AND THE STATUTE OF FRAUDS

john gault — Thu, 13 Oct 2011 01:38:01 EST

This material discuss the MERS'-crafted deed of trust, the laws of agency, and the

statute of frauds.

The standard language in the MERS' deed of trust may not withstand scrutiny.

The attorneys (presumably) who crafted the MERS' dot were apparently missing some essential experience. With a background in real estate, agency, and the statute of frauds, they might have recognized that the term "mortgagee" is inappropriate in a deed of trust. The term "mortgagee" is used to describe a party in a two-party instrument who owns a note and a lien on real property securing it, but has no application in a deed of trust.

The deed of trust was originally formulated and legislated to do away with the time and costs of
judicial foreclosure required in the enforcement of mortgages, including the borrower's lengthy right of redemption.
Regardless of any recitations in a dot, there are only three parties, and none of them is appropriately called a mortgagee. The three parties are the trustor, the trustee, and the beneficiary and these are the only legitimate names for these parties.
It is today's deed of trust's, specifically MERS' deeds of trust, reference to "mortgagee" and "lender" which causes if not encourages confusion. While there has been no head-on adjudication on the confusion in the MERS' deed of trust, courts have found similar confusion to render a contract unenforceble.

MERS' - crafted deeds of trust might legitimately have stated that MERS was to act as
the agent of the beneficiary. The agency might have been unambiguously expressed and such
expression would arguably have been ratified by the trustor, the borrower, except that, and this is a big 'except that' as discussed below, it was not the borrower who most urgently needed to expressly
appoint Mers as agent - it was the beneficiary.

Significantly, MERS chose not to call itself the agent of the beneficiary and the "why not" question is unavoidable. The reason appears three-fold. 1) MERS did not have a proper understanding itself of the parties to a deed of trust, 2) MERS made a conscious decision to avoid "agency" for the liability which comes with it, and 3) the deed of trust would have required the signature of MERS as
well as the beneficiary. It may also be that MERS had no intent to allege the useful 'agency' when its dot was formulated. At any rate, MERS chose the restrictive word 'nominee' instead, a mighty distinction recognized by a justice of the Massachusetts Supreme Court in recent oral arguments before the court. For its failure to correctly understand and identify the parties in a dot, MERS asserted inappropriately-named (extra) parties in the dot and then errantly gave itself more than one identity in the instrument. MERS' dot says MERS is both a nominee and the beneficiary itself, a legal impossibility evidencing its own misunderstanding of the parties to a deed of trust.

If MERS had named itself as the agent of the beneficiary in the deed of trust, there would in this writer's opinion be no potentially fatal confusion about the identity of the party with the beneficial interest in the deed of trust, for MERS does not hold a beneficial interest in any deeds of trust. On first thought, one might posit the deed of trust could recite "ABC is the beneficiary of this deed of trust and MERS is
the agent of ABC its successors and or assigns." (The successors and or assigns is another story, as usual). However, even had an agency relationship been otherwise appropriately stated, because of the statute of frauds, it still would not pass muster.

Only the trustor, the borrower, signs the deed of trust. The lack of the other signatures on the
instrument would vitiate any finding of agency. And this, too, in the writer's opinion is born of the unbelievably reckless crafting of the MERS' deed of trust.

The Statute of Frauds of most if not all states requires that all contracts pertaining to the sale of or interests in land, which is a description of a deed of trust, must be in writing to be enforceable. Therefore a contract appointing an agent to make other contracts, having reference to the conveyance of interests in land such as an assignment, must be in writing under the statutes. Significantly, such agency must be clearly expressed and may not be found impliedly.

The statute of frauds requires that certain contracts be in writing, and that they be signed by ALL parties to be bound by the contract. In the case of the deed of trust, this would mean the trustor, the trustee, the beneficiary, and MERS. The purpose of a "statute of frauds" is, as the name suggests, to prevent injury from fraudulent conduct. The abuses these statutes were designed to prevent are quite real.

MERS is not the beneficiary of a deed of trust. Having failed the litmus test for agency, MERS may not be found to be the agent of the beneficiary nor its successors and or assigns. What position, if any, this leaves MERS to occupy in the deed of trust remains to be seen as courts squarely confront the matter and its attendant issues, including assignments done in its name by its members.

Judge Slams MERS etal Head-On over Bogus MERS' Assignment

john gault — Thu, 09 Jun 2011 05:14:51 EST

The court was not amused upon learning the person who signed the "MERS" assignment was in fact an employee of a processing company, and was not an employee of MERS. This is the first time I've seen this particular issue addressed head-on in a case.

Normally, I write my own articles. Attorney Lyn Syzmoniak has done a very good job with her analysis of this case and I doubt this writer could match it or do it better.

"On September 30, 2010, U.S. Bankruptcy Judge Harry C. Dees, Jr., Northern District of Indiana, South Bend Division, confronted head-on the widespread practice of employees of mortgage servicing companies signing Mortgage Assignments with false job titles, in Koontz v. EverHome Mortgage and Mortgage Electronic Registration Systems, Inc., Case No. 09-30024, Proc. No. 10-3005. In this contested foreclosure, EverHome and MERS moved for summary judgment, while the plaintiff homeowners argued that there were genuine issues of material fact that precluded summary judgment. One such issue involved a Mortgage Assignment signed by Bethany Hood as Vice President of Mortgage Electronic Registration Systems, Inc. (“MERS”). (Regular readers of Fraud Digest will recognize that Bethany Hood is a clerical employee of Lender Processing Services who works in the Mendota Heights, MN office and who signs thousands of mortgage documents monthly using at least 20 different job titles.)

Here is what the Court said about this: “MERS, in its Answer to the plaintiff’s Complaint, admit(ted) that Bethany Hood is not an employee of MERS. (cite omitted). The debtor claimed that the document [assignment signed by Bethany Hood as a MERS officer] was fabricated and MERS has offered no other explanation, nor has it submitted properly authenticated documentation of an assignment. It appears to this Court that a fraudulent recorded Assignment of Mortgage might still be found today in the St. Joseph’s County Recorder’s Office, despite MERS’ knowledge of the false signature.

Indeed, MERS has completely sidestepped the fact that this Assignment was signed by someone representing herself to be a Vice President of MERS, and it has declined to explain why this false document was attached to the amended Proof of Claim… In the view of this court, the conduct of the EverHome defendants and the MERS defendant – reflecting a lack of transparency and determination not to provide information or documents until required – has burdened both the debtor and this Court…

On this case, the Creditors have been forced to admit that a non-employee signed the Assignment of Mortgage, representing herself to be a Vice President of MERS and other banks or mortgage companies held the Mortgage and or Note at issue… Having determined that genuine issues of material fact exist, the Court denies the Motions for Summary Judgment filed by the EverHome defendants and MERS….."

How many other Mortgage Assignments signed by individuals falsely claiming to be Vice Presidents of MERS have been filed since 2008? It is likely that the number is greater than ten million."

JG: I note the judge also stated, ".... the debtor identified the bogus MERS' employee signing the documents and thus demonstrating the assignment's invalidity and fabrication."

This decision also has an interesting discussion of the applicable rules regarding proofs of claims in bankruptcy cases.The court found the alleged creditor had not met its burden on that score. The court pointed to the the lack of a chain of title as another genuine issue. MERS, as indicated, declined to answer regarding the bogus MERS' assignment.

The homeowner was awarded fees.

This decision will probably pop-up in an internet search for those who may want to read it in its entirety. I would think, however, that while it's good new for many of us, those who insure foreclosed properties these days based on these bogus assignments won't find much comfort in it. It's a heck of a mess, isn't it? One to which none of us should have been exposed.

Preservation of Rights and Interests Post-Foreclosure

john gault — Wed, 18 May 2011 02:31:27 EST

This material deals with an almost certain wave of new challenges to foreclosure and its subsequent impact on re-sales of foreclosed properties.

It's no secret homeowners are engaged in an uphill battle with wrongful foreclosure actions.

One fairly new suit, Depauw etal v MERS in MI, has some new and interesting allegations regarding those foreclosures. Even so, the fat lady isn't singing just yet. Only time will tell.

But wait! Until that time, there’s another matter on the horizon. Instead of filing a lis pendens after f/c which might p.o. a judge, there is something called a “Notice of Intent to File Suit”. It’s a document one may record in contemplation of filing a lawsuit and also has something to do with the statute of limitations on an action, I believe, in this case the wrongful foreclosure by whatever name. These suits will ultimately include claims for conversion, theft, etc. and whatever else the leaders of the charge have gotten sustained.

If I remember correctly, one may record a notice of intent to file a lawsuit at some point in the future. Then one doesn't actually have to file the lawsuit just then, but it will probably cloud the title all the same by noticing the intent (and thus interest) to defend that interest in the future. Any purchaser thus has notice and takes the property with notice, defeating one of the three tenets of bonafide purchaser: 1) in good faith, 2) for value and 3) without notice of a claim or interest).

I’m hard pressed to believe any title company would not "except" the notice of intent from its commitment/ policy; thus it is not insured / covered. Even if a title company chose to write a special rider (my apologies - can't think of the word), to cover the event of the actual suit, which I think is hugely unlikely, it would not change the fact of the buyer's notice.

Then when proper avenues to sustain wrongful foreclosure actions, by any other name, are identified as they will be -it's just a matter of time -homeowners will actually file the suit within the statute of limitations. It seems to me that the notice of intent tolls the SOL, but I can’t remember.

And by the way, everyone is being named in the Notice, anyone remotely connected to the foreclosure, includng John Does 1 – 10,000.

I am wondering if one could now record a lis pendens in conjunction with the Notice of Intent to File Suit to further stem alienation of the property by the bankster? I don't know if this is a gray area or not. The distinction is that a law suit is not actually pending, but notice has been given of the intent to bring an action. Would a lis pendens under these circumstances be appropriate? Because if one can record a lis pendens, I don’t think the lis pendens could be expunged until the suit, the subject of the intent notice, has been resolved. Regardless, the Notices of Intent should preserve and protect the homeowner's interest and rights, if any, and provide requisite notice because recordation is statutory notice. (As to notice, at least one court has even ruled that a property offered for significantly less than its value is notice, as I recall.)

Homeowners can and will fight back and thwart the alienability, the sale, of the property by the banksters. Maybe every American who has been forced out of his or her home wrongfully will file these Notices of Intent where there is a sincere belief things were done 'inappropriately'.

In the fwiw dept - my decison to join the use of the word 'bankster' is my reaction to the sham of HAMP, another story for another day, but one which begs to be told.

But may I say in a nutshell that I believe I can demonstrate that these billions of dollars were accepted under false pretenses and that they will never be used by the IGMXU group (think TARP fund recipients) for their stated purpose, the retention of homes by the American family.