COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

“This could potentially mean that 60 percent of homeowners in this country are currently paying on unsecured debt – which can be dealt with in bankruptcy.”

EDITOR’S COMMENT: A couple of million here, a couple of million there, the next thing is you’re talking real money. Here is one County looking at only 2010 and coming up with a  figure of around $2 million owed. A fair assumption is that the figure would rise to over $20 million going back to the beginning of this mess, especially if you add interest, penalties for non-filing etc. And then there is the question of other taxes and fees that might apply to such transfers, especially if a fee or profit was involved.

You know what I’m going to say next. If all the counties received all the money they should have received in recording fees, the budget crisis probably wouldn’t be that bad, would it? I think the County might have a right to a lien on the mortgage or the property and could probably work out a nice payment plan with the current or former homeowner, if the property has already gone through foreclosure and is now claimed as REO property based upon a fake “credit” bid.

Richard Zombeck

Richard Zombeck

Eyes and Ears Mortgage Specialist and Founder

Posted: November 29, 2010 01:31 PM

About a week ago, John O’Brien, Register of Deeds in Essex County Massachusetts, sent a letter to Massachusetts Attorney General Martha Coakley asking that she look into whether MERS (Mortgage Electronic Registration Systems, Inc.) failed to pay legally required recording fees in Massachusetts when a MERS-mortgage is assigned to another entity, like a trust or a bank.

MERS is a privately held company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States.

MERS has seen a lot of attention of late because of the number of robo-signing cases popping up at banks and mortgage servicers. MERS has no employees, it simply assigns and designates an estimated 20,000 unpaid VPs and officers around the country as certifying officers to sign off on mortgage transfers, foreclosures, and assignments, according to R.K. Arnold, President and CEO of Mortgage Electronic Registration Systems, Inc., in a recent testimony before Congress.

The recording fees Essex County has missed out on as a result of MERS purportedly bypassing normal recording channels was O’Brien’s primary concern.

In his November 18 letter to Attorney General Coakley, O’Brien wrote, “I am writing to ask that you investigate and provide me with an official opinion as to whether or not the Mortgage Electronic Registration Systems, Inc. (MERS) has failed to pay the proper recording fees required under Massachusetts statute when a lender assigns a mortgage to another entity.”

O’Brien’s action in sending that letter, picked up by a local paper, was just the tip of the iceberg.

“As the keeper of the land records in Essex County, I take my job very seriously,” O’Brien told “The Marblehead Reporter“, a North Shore newspaper. “Every day, hard-working people come into the Registry to record their documents, and they pay the proper fees. It troubles me greatly that these major lenders may have devised a scheme to avoid paying what the average citizen is legally required to pay. In many cases, MERS has assigned homeowners’ mortgages dozens of times to various MERS-related entities, thereby avoiding recording the proper assignments in the respective registries of deeds.”

According to Kevin Harvey, 1st Assistant Register, who was fielding phone calls from media outlets for the better part of the day before Thanksgiving, MERS may have wrongfully bypassed Massachusetts recording requirements, making it difficult, if not impossible for the borrower to know who is actually collecting on the mortgage.

Massachusetts law requires a fee of $75.00 each time a mortgage is assigned. “Individually it’s not a lot of money,” Harvey said. “But do that a million times and now we’re talking about real money.”

To put that into perspective, between November 12, 2010 and November 26, 2010, MERS was involved in 808 mortgages that were recorded in Southern Essex County. That’s $60,600.00 in potential lost revenue, just from one week, just for recordation fees, just in one county. Assuming even an average of 500 mortgages per week, this year alone, Southern Essex County has lost a potential $1.95 million in recording fees because of the MERS system of “avoiding” recording assignments.

In a response to O’Brien’s letter, MERS posted a press release on its site. “In fact, MERS greatly reduces the workload of county recorders, resulting in lower operating expenses for the county recorder’s office. Moreover, it would be the borrower, and not the lender, who ultimately pays the costs of recording assignments, either directly or indirectly,” the statement says.

So somehow stealing millions of dollars in potential revenue is justified by claiming it saves counties from having to pay someone – someone with a family and potentially a mortgage. But why stop there? Blaming the homeowner seems to be all the rage and the statement also makes the claim that the homeowner is somehow responsible for the lost revenue. In other words, if MERS were to transfer a mortgage from one mortgagee to another twenty times (not unheard of), in Massachusetts the homeowner would be on the hook for $1,500 in fees, according to MERS’ logic – a claim Harvey says is an “absolute falsehood”.

These fees, in many cases by the way, are used to fund the county offices and in most cases contribute to county and state revenue. Some counties use real property recording fees to fund their courts, police departments, legal aid offices, and schools – the apparent lower operating expenses.

With an additional $1.95 million in the Registry’s budget, Southern Essex County could easily afford to hire more employees to handle the extra work that MERS claims to have saved them. Hence, it could be argued that MERS has contributed to the job loss, economic downturn and deterioration of entire school systems in not only Massachusetts but the entire country as a result of lost recording fees to county Registries and Recorders of Deeds.

“If we had just a percentage of that money we could afford to re-hire the twelve people we lost as a result of budget cuts,” Harvey said.

If that weren’t enough, that’s not quite the whole iceberg.

There’s a lot wrong with MERS and plenty of arguments against it. If you’re interested in knowing more about MERS, I’ve provided some links at the end of this post to get you started, but the abridged version and what’s important for the purposes of this story is that somewhere in the mid-1980s securitization came along – a process of pooling piles of mortgages into a trust and selling it off in chunks on Wall Street.

In the mid-1990s, mortgage bankers (including the Mortgage Bankers Association, Fannie Mae, Freddie Mac, Bank of America, Nationwide, HSBC, American Land Title Association, and Wells Fargo, among others) decided that since they were flinging mortgages around like monkeys fling poop, they didn’t want to pay recording fees for assigning mortgages anymore, so they came up with MERS, a bogus company that would pretend to own all the mortgages in the country and bankers wouldn’t have to record assignments since all the mortgages were “owned” by the same company. Now, 66 million mortgages (nearly 60 percent of all mortgages in the country) are recorded in the name of MERS as opposed to a bank, trust, or company that actually has any interest in the debt being repaid.

Another gigantic potential issue is that roughly 90 percent of all residential mortgage loans originated over the last decade have been sold to either Fannie Mae, Freddie Mac, or to private securitization trusts, few of whom prepared, and none of whom actually recorded a complete unbroken chain of assignments of the mortgage together with the notes, so the mortgages (borrower IOU) have been separated from the note (proof of ownership, i.e. collateral).

This separation, known as bifurcation, means that the entity that purchased and allegedly holds the note does not have the legal rights contained in the mortgage.  The consequence of this bifurcation is that the debt has become unsecured. Unsecured debt is when a lender loans money without the security of an underlying asset – like a house.

Yves Smith of Naked Capitalism wrote:

“In 45 states, that position would seem to be a non-starter. In those states, the note (the borrower IOU) is the critical document; in these states, the mortgage is a mere “accessory” to the note and has no independent force. Indeed, in these states, you cannot be a mortgagee unless you are also the creditor. But in depositions, MERS has repeatedly acknowledged that it does not lend money and does not collect interest payments. But MERS effectively takes the position that you can separate the mortgage from the note and reunite them, a position that was rejected in an 1873 (no typo) Supreme Court decision, Carpenter v. Longan (Carpenter v. Longan, 83 U.S. 271, 21 L.Ed. 313 [1873])):
“The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity. Case law in virtually every state follows Carpenter.”

This could potentially mean that 60 percent of homeowners in this country are currently paying on unsecured debt – which can be dealt with in bankruptcy.

Taking into consideration the number of loans currently under water (where the home is worth less than the money owed), that’s a gigantic iceberg.

If you’re interested in more information about MERS here are some places to start:

Mortgage Electronic Registration Systems, Inc.: A Survey of Cases Discussing MERS’ Authority to Act

Get D Shirtz

Clouded Titles

Where’s The Note, Who’s The Holder:  Enforcement Of Promissory Note Secured By Real Estate – by Hon. Samuel L. Bufford & Hon. R. Glen Ayers

Christopher Lewis Peterson Professor of Law University of Utah – S.J. Quinney College of Law

MERS 101 at StopForeclosureFraud

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21 Responses

  1. neidermeyer,

    Since those banks have not posted the bond in the state of FL, I presume you are indicating that they have not appropriately registered as lenders at all. Did they use THEIR names on the original mortgage?

    If those ‘banks’ are the ‘named lender’ on the mortgages, OH BOY. Bad doggie, bad bad doggie banker. Doggie should piddle on the wee-wee pad, not print up mortgages that might as well be written on a wee-wee pad. Doggie had a lot of help getting those wee-wee pad mortgages printed.

  2. I filed 15 complaimts at the 9th district FL 3 weeks ago regarding out of state banks that lack standing due to capacity ,, the judges here treat state law demanding a bond from foreign corps. as if it’s optional ,, costing our county alone a cool million or two a year just on the current foreclosure filings, the responses are starting to come back … I’ll be going to the papers with the responses (and the judges names who are refusing to look out for my/our/taxpayer interests) along with demands that MERS be backcharged for every instance of non-recording ..

    We all need to become “the sand in the vaseline”.

  3. steevo, that not totally true they can late file to the county. They have been by ro boing it.

  4. I think it’s best to avoid talking about MERS.

    The recorded document, that is the only thing we need to go by. Anything else? Forget it.

  5. Say what you will about MERS, but the unfortunate fact here in MN is that our supreme court took the bait hook line and sinker. MERS doesn’t have to prove anything here. They don’t have to record at the clerk’s office. You don’t need to know who your true creditor is. It’s none of your damn business. You’re behind on your payments, right? Well then, pay the man or get the hell out, DEADBEAT!

  6. Leapfrog…mers is only a symtom of the problem. The bank did not perfect the loans correctly for standing in BK court from the onset regardless if they filed with the county or MERS. The banks are robo signing the assignments trying to catch up. Sooo plead that because they did not use the county each time shows unclean hands and cannot ask the court for equity.Using MERS is self serving because MERS will say anything unlike a county recorder.Mers is not nuetral to the parties.

  7. I wonder how the “reasonable person standard”, especially in the professional capacity of the title people, loan officers, banksters might appeal to a jury. One never knows.

    Most “reasonable people” don’t anticipate the follies of MERS or for that matter even know what it is.

  8. Leapfrog, I agree however California courts have ruled that not reading your docs is no excuse. There binding period. The only excuse is pleading that you don’t speak english.

  9. john: I didn’t “agree” to use MERS. I didn’t even know what it was or that it was there – nothing explained to me – we blazed through the signing process – a stack of docs 4 inches thick in 30 minutes. How many are given the chance to review? How many are told what MERS is? How many are told they can still obtain a loan if they refuse to acknowledge MERS? How many would be willing & eager to have MERS cloud their titles? MERS is FRAUD. MERS under DURESS. MERS is GOING DOWN within the next 18 months and I will be shedding no tears.

  10. This idea of using the taxpayer to enrich yourself has become very prevalent in America in many industries. I worked in a restaurant for a while. I found out that they hire older people–over 50–because they get grant money from the government for this. However, after only a few weeks, they make it impossible to work in the restaurant, because they harass the older worker until he has to quit. Not only have you created a “hostile work environment” but another person badly in need of a job has no job. The MERS extravaganza is just another one of those bamboozle jobs on the government, the county government, American citizens and let’s not forget the investors. Unfortunately for us, Fannie and Freddie are also part of the team that created MERS. Fannie and Freddie need to be abolished also.

  11. I’m still thinking BK is our best hope because they must prove ownership of the debt. Just because the creditor owes the county for fee’s doesn’t excuse the debt. Make them prove you owe them and then plead you have the right to negotiate with your ceditor’s also plead inequity because of the banks unclean hands not following proper lending procedures causing housing meltdown.

  12. It seems to me that the gist of all this is the only deed you can consider valid is the recorded one. Publicly recorded by a government official in their official capacity. And that is what the title search searches, by the way.

    Anything that has not been recorded can safely be discounted and essentially ignored.

    That someone would keep property ownership records in a private computer system, or on a note pad on their desk, or on scraps of paper on a bulletin board is of no consequence to the actual ownership of the property. That can only be determined by the actual recorded documents.

    Anything else, well it’s just illegal.

  13. VA Bankruptcy Judge slams Deutsche Bank for robo-signing.

    On November 8, 2010, a U.S. Bankruptcy Judge in the Eastern District of Virginia, Alexandria Division, slammed Deutsche Bank National Trust Company appearing as a securitization trustee and alleged creditor for using a Deed of Appointment (a document initiating foreclosure in Virginia) that was fraudulently signed by Mr. Liquenda Allotey, now a known robo-signer and employee of Lender Processing Services (LPS), a company under investigation by at least one State Attorney General.
    The judge stated:

    “It is certainly true that in Virginia recitals in a recorded instrument are prima facie evidence of the truth of those matters but prima facie does not mean conclusive and a party can always present evidence to show that the recitals are incorrect. I believe that the plaintiff here has produced enough evidence to call into serious questions whether Allotey [the robo-signer] was in fact a vice president and a person authorized to sign the deed of appointment of substitute trustees; and since I have counsel for the firm here, I would strongly suggest that . . . it obtain a new deed of appointment of substitute trustees, signed by someone who actually was an officer of Deutsche Bank.”

  14. Leapfrog….it’s like the BBB, they are their if you want to use them but if you agreed to use MERS in your loan docs so be it.

  15. Deb Wynn

    Do not leave anything on the table. Do tell it all.


    great slide show to cover deeds of trust, warranty deeds, and promissory notes with their assignments.

  17. we need to share this info with all our neighbors, we also need to bring our fight to our street level, neighborhoods,schools, firestations, police department, local government unions, etc

    this is total common sense, when did our land records office sign an outsourcing contract for fees to be collected and not paid to the county?, when did our county officials agreed to forego millions of dollars in fees and then turn around and increase our taxes to cover the loss?

    when did MERS was last elected to office by all of us or appointed to become our foreign land records entity, without paying us the tax payers for that illegal and unauthorized land records franchise?

  18. I have read the statement about those 45 states over and over and cannot find which states at NOT in this group. Does anyone know where I can find that information?

    Here’s an error in this article, just before the bifurcation paragraph. Someone needs to correct this:

    so the mortgages (borrower IOU) have been separated from the note (proof of ownership, i.e. collateral).

  19. I’m headin for is atty generals office and az generals office reca certain judge

  20. dear leapfrog, sending an email can only pronpt unofficial response. send these clowns a certified letter and also notify the land records office that you are sending copies of the letter to the news lapers, county council and tell them you will post it on the internet may be here for all to see and that you are forming a group of concerned citizens that will mail a copy of the letter to all the residents of the county.

    I can guarantee you will get a different response, I am surr the fire department, the school system and yhe police unions would like to know wwhat happened to all that money and why they are not getting the funding they deserve

  21. I sent my county recorder an e-mail with the story link and asked them what they intended to do about it. I received this in reply: “We collect recording fees at the time we record a document. Only the State and Federal Government receive a bill for recording of documents. If you have any other questions please let us know. Have a nice evening.”

    Argh! We live in a total idiocracy!

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