MERS Tells Servicers to Stop Foreclosing in Their Name

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MERS Tells Servicers to Stop Foreclosing in Their Name
By: David Dayen Thursday February 17, 2011 7:04 am

Since MERS is owned by the big banks, this has the effect of MERS telling itself to stop existing. But it’s quite significant. In a memo to its members (the member banks who own it), MERS announces that their name should essentially be taken out of all foreclosure operations. Over the past several months, the inclusion of MERS in foreclosure documents, despite not having a material stake in the loan, has generated multiple lawsuits, many of which showed that MERS cannot foreclose, including a recent case in bankruptcy court in New York. That may have been the tipping point. Here’s the relevant language in the release:

1. MERS is planning to shortly announce a proposed amendment to Membership Rule 8. The proposed amendment will require Members to not foreclose in MERS’ name. Consistent with the Membership Rules there will be a 90-day comment period on the proposed Rule. During this period we request that Members do not commence foreclosures in MERS’ name. If a Member determines that it will commence a foreclosure in MERS’ name during this 90-day period, two weeks advance notice must be given to MERS to permit verification of the appointment and current status of the Certifying Officer proposed to participate in the foreclosure. No foreclosure may be processed in MERS’ name without first obtaining this verification. We encourage Members to bring foreclosures only in the name of the holder of the note, in the name of the trustee or the servicer of record acting on behalf of the trustee.

2. MERS Members shall have a MERS Certifying Officer (also known as MERS Signing Officer) execute assignments out of MERS’ name before initiating foreclosure proceedings. Assignments out of MERS’ name should be recorded in the county land records, even if the state law does not require such a recording (see MERS Membership Rule 8).

You may recall that the MERS “Certifying Officer” is really just an employee at one of the member banks who MERS magically turns into a certifying officer whenever asked. They have over 20,000 certifying officers despite having a skeleton staff, and none of those certifying officers get any compensation or benefits from MERS. The memo details a new method for appointing a certifying officer to pull off these assignments out of MERS’ name, and promises new safeguards on that policy. They also tell members in the memo to “ensure the accuracy of the information” in the foreclosure documentation they use (good luck with that), and to conduct a review of its employees who have been designated as certifying officers, ensuring that they have the proper training to carry out responsibilities.

This essentially gets MERS out of the foreclosure business. It has been ruled that they lack standing to foreclose one too many times. So there’s this attempt to after-the-fact get MERS out of the process by assigning mortgages out of MERS’ name – and paying the recording fee – to essentially allow for a quick exit.

But I don’t know if this does anything, outside of provide a small boost in recording fees to local governments, to clean up MERS’ legal problems. As Barry Ritholtz notes:

Keep in mind, that MERS has always been a legal fiction, simultaneously principle and agent. The courts are increasingly recognizing this, and finding they do not have any standing to bring foreclosure actions […]

I expect we will continue to see a ongoing reduction in the role of MERS over the next several quarters.

What follows will either be its eventual dissolution, and replacement with a legal entity — or retroactive legislation making its reckless illegality somehow legal. Watch Congress closely for signs they are rolling over for this.


21 Comments Spotlight Tags: foreclosures, foreclosure fraud, judicial branch, servicers, MERS
Related Posts
•Comptroller of the Currency Announces MERS Investigation November 18, 2010
•MERS’ R.K. Abandons Sinking Ship January 23, 2011
•MERS CEO R.K. Arnold Bolting? January 21, 2011
•MERS-y, Mercy Me: The Sewer Drain at the Bottom of the Housing Market October 17, 2010
•County Recorder in Massachusetts Goes After MERS December 1, 2010
21 Responses to “MERS Tells Servicers to Stop Foreclosing in Their Name”
janeeyresick February 17th, 2011 at 7:37 am 1There’s a great article in today’s Huffington by L. Randall Wray on the Bankruptcy Court decision which includes a link to the decision which he says is a great read, and indeed it is. The judge basically comes down on MERS and says in so many words, “just because you say it’s so, doesn’t make it so.”

Also interesting today from the Wall Street Journal an article about Big Banks facing fines for the actions of the servicers.

(I tried to post the links unsuccessfully, sorry!)

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Watt4Bob February 17th, 2011 at 7:44 am 2“If a Member determines that it will commence a foreclosure in MERS’ name during this 90-day period, two weeks advance notice must be given to MERS to permit verification of the appointment and current status of the Certifying Officer proposed to participate in the foreclosure.”

The way I read that;

If you want to foreclose in our name, you have to give us time to arrange for a patsy to sign the forged documents necessary to prevent us being laughed out of the courtroom.

Is there anybody left in this country who is stupid enough to claim they are a Certifying Officer for MERS?

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earlofhuntingdon February 17th, 2011 at 7:55 am 3This looks rather a lot like a shell game, with no pea.

Taking MERS out of the equation is probably a good thing; it seems to add no value other than to facilitate how its “member banks” avoid complying with applicable state laws. Those relate, in part, to recording mortgages and disclosing the actual owners of interests in real property, paying the fees that maintain the system that documents land ownership, and performing the necessary administrative tasks that keep promissory notes and mortgage grants together so that the mortgage debt remains secured by a primary interest in the underlying property.

MERS seems to do none of those things; rather it facilitates avoiding them, all within an opaque corporate structure that hides which banks and bank executives, administrators and lawyers are the real actors involved here.

What taking MERS out of the equation in this fashion seems to do is pixie dust away the harm it and its “member banks” and the Wall Street securitization machine have already done.

It doesn’t solve paying the billions in unpaid recording fees from earlier transactions that went unrecorded. (Anyone not aware that every state is operating under excruciating budget constraints, raise your hand.) It doesn’t disclose who has valid mortgage liens on much of the residential real estate in America.

Most importantly, it does nothing to cure intentional and knowing past failures to maintain minimum records, steps that severed the legally mandated ties between the promissory notes – which record the debt borrowers owe the banks – and the mortgage agreements – which, together, give the lenders a secured interest in the real estate. It’s that which gives them a valid right to foreclose for non-payment on the notes.

This “action” by MERS seems to be the bankers’ Hail, Mary pass. If MERS exits stage right, perhaps the audience of borrowers, judges and prosecutors will ignore its studiously inept performance and allow this play’s directors to continue their show.

A related matter, of course, is that taking MERS out of the play’s production does nothing to address the egregious terms in mortgages and loan documents, and the more egregious ways in which those are administered, which generate exorbitant fees from current and troubled borrowers alike.

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earlofhuntingdon February 17th, 2011 at 8:05 am 4Lest anyone forget, MERS was created to facilitate a trillion dollar business: issuing and trading “mortgage backed” securities. The value of those securities is dependent on and directly tied to two things, one of which MERS was sold as facilitating, which it actually failed to do: administer notes and mortgage agreements in such a way as to keep valid the right to foreclose on troubled debtors.

The other, equally large problem, is that a large percentage of the loans that were thrown willy nilly into the securitization process were rated “investment grade” when in fact underwriters hadn’t a clue whether they were worth the paper they were no longer written on, and were actively discouraged from finding out. But nothing to see here, move along….

16 Responses

  1. Obama the Recession is over.

    Here I will give you a European version

    Lies – Thompson Twins

  2. Right on Soliman But none of you fools answered my question is this MERS announcement good for us?. They lied to us. They played us the fool.

    LL Cool J-That’s A Lie

    “You lied about the lies that you lied about.”f

  3. What U can’t censor . . .U can try and drown out with volumes of gibberish !

  4. “A” MAN …Don’t stop thinking about tomorrow Listen brother – Keep the fight alive! From RESPA to TILA to Section 32 to Garne St Germaine. Its all window dressing to appear to protect the consumer under the most impossible set of circumstances.



  5. So is this good for us or bad for us? And make it a short answer Soliman.

  6. MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems

    MERS President and CEO R.K. Arnold Appears Before U.S. Senate

    Washington, D.C., Nov. 16—R.K. Arnold, president and CEO of MERSCORP, Inc., testified today before the United States Senate Committee on Banking, Housing and Urban Affairs. To download a copy of his testimony, please click here. For questions, please contact Karmela Lejarde at 703-761-1274.

    1 MERSCORP, Inc. is structured as a privately held stock company. Its principal owners are the Mortgage Bankers Association, Fannie Mae, Freddie Mac, Bank of America, Chase, HSBC, CitiMortgage, GMAC, American Land Title Association, and Wells Fargo. MERS is headquartered in Reston VA.

    2 Members tend to register only loans they plan to sell. Wells Fargo and JP Morgan Chase are the principal members in this regard. They service most of the loans they originate themselves, so registering their retail business on the MERS® System is of less practical value to them. However, when these institutions purchase loans from others, known as their correspondent business, they do require that those loans be registered on the MERS® System.

    3 MERS makes its money through an annual membership fee (ranging from $264 to $7,500) based on organizational size, and through loan registration and servicing transfer fees. MERS charges a one-time $6.95 fee to register a loan and have Mortgage Electronic Registration Systems, Inc. serve as the common agent (mortgagee) in the land records. For loans where Mortgage Electronic Registration Systems, Inc. will not act as the mortgagee, there is only a small one-time registration fee ($0.97). This is known as an iRegistration. Transactional fees (ranging from $1.00 to $7.95) are charged to update the database when servicing rights on the loan are sold from one member to another.

    4 The originating lender may be the servicer in some cases.

    5 A copy of a sample mortgage document can be found in Attachment One. A short summary of MERS prepared by the Mortgage Bankers Association can be found in Attachment Two.

    6 This action tells the world that there is a lien against the property. This is done to protect the lender’s interest. The recording of the mortgage puts future purchasers on notice of any outstanding claims against the property.

    7 The promissory note is not (and never has been) recorded or stored with the county land records office. The note is a negotiable instrument that can be bought and sold by endorsement and delivery from the seller to the note purchaser. This activity is governed in all fifty states by the Uniform Commercial Code (UCC) Article 3.

    8 The MERS® System is the database; MERSCORP, Inc is the operating company that owns the database; and Mortgage Electronic Registration Systems, Inc (“MERS”) a subsidiary of MERSCORP, Inc., which serves as mortgagee in the land records for loans registered on the MERS® System. For discussion purposes, “MERS” may be used in this testimony to refer to all three entities unless specifically stated otherwise.

    9 The design of the MERS® System always anticipated and required that borrowers would be able to access the system to determine the servicer of their loans. Providing such information to MERS is a requirement of membership and loan registration.

    When Congress acted last year to require that borrowers be told when their note is sold and the identity of the new note-owner,

    MERS established, within a matter of weeks, a new service called Investor ID. Of the 3,000 members of MERS, 97% agreed to disclose the identity of the note-owner through the MERS® System. Fannie Mae opted to be disclosed. Freddie Mac chose not
    to be disclosed.

    10 The issue of whether transfers of residential mortgage loans made in connection with securitizations are sufficient to transfer title and foreclosure rights is the subject of a “View Point” article entitled “Title Transfer Law 101” by Karen Gelernt that appeared in the October 19, 2010 edition of the American Banker. A copy can be found in Attachment Three.

    11 A 1993, 36-page white paper entitled “Whole Loan Book Entry Concept for the Mortgage Finance Industry” addresses the concepts underlying MERS and the problems it was designed to address. It is available upon request.

    12 The essential elements of the legal principles underlying MERS can be found in “MERS Under Attack: Perspective on Recent Decisions from Kansas and Minnesota,” an article by Barkley and Barbara Clark in the February 2010 edition of Clark’s Secured Transactions Monthly. A copy of this article can be found in Attachment Four.

    13 On loans originated by correspondent lenders or brokers (where MERS is not the mortgagee), the costs of preparing assignments and the associated filing fees are listed on the HUD-1 and paid directly by the borrower.

    14 Individual states handle real estate foreclosures differently. In some states the foreclosure process is judicial, and in some states it is non-judicial. Under both systems, time frames and terms vary widely from state to state. A brief, general, description of both processes prepared by the Mortgage Bankers Association can be found in Attachment Five.

    15 Some important recent cases upholding the rights of MERS include:

    16 A review of the use of MERS in all fifty states was done by Covington and Burling in 1996 and 1997 as part of the due diligence associated with the creation of MERS. It is available upon request.

  7. My home was foreclosed with a note with a blank endorsement.

    *Its actually something required by insurers, beleive it or not. Not an element of any viable arguments..

  8. Are those MERS assignments valid?
    * If not properly challenged I am afraid they are valid. MERS is, in my opinion, subject to defining what wholesale price manipulation is. MERS is “Lot” securities manipulation timed for trading into and out of “pools” and is something Wall Street knows very well is from undermining both the informational and transactional role of financial markets stands in securities offerings – it is a reciprocal element for arguments based on the routine aka rational exploitation of market power or private information.

    If they never owned any interest in these loans, how can they assign to the foreclosing entities?
    * They usually substitute the trustee. You none the less permitted them to act as a nominee when executing the deed

    Just what are they assigning?
    * They are allegedly assigning the beneficial interest in an asset owned by the party who is foreclosing – the trust preferred certificate holders. (Based on the theory that preferred shareholders are true creditors)

    You can’t assign what you didn’t own, right?
    * A nominee is foreclosing on creditors’ rights to shares held in a QSPE and earning with no direct link to loans. Your correct…but must articulate the answer.

    Here’s my assessment. First, if you don’t like Th answer – that’s fine. No harm no foul. Second, if you do not like the answer, then wait till this fall to see the fed or FDIC rule against or preempt the same thing i am talking about now.

    Third, know what you’re pleading or where the affirmative responses rest.

    A little later I’ll try and leave you with a fail-safe procedure to NEVER EVER LET MERS emerge again as an argument to justify or satisfy the courts understanding of a proper foreclosure. [See Benign strategies include restricting the quantity traded to avoid price impact (Albert S.Kyle (1985), Kyle (1989)),


  9. The 93 US Attorney Generals can’t pick a side. They are under the Constitution under the Executive Branch and enforce law.

    They don’t pick sides.

    They protect the states as Plaintiff bring complaints before the court with Jurisdiction over the Subject Matter.

    The Court reviews the evidence of the Plaintiff and Defendants.

    When no more evidence is left, the COURT rules in accordance with law.

    Under Article I of the Constitution
    Congress is vested powers to create law.
    Sadly, Congress is vested powers over commerce period.

    Sadly, Congress looks the other way and offers superior class of consumer banks operating as financial holding companies ‘sanctions’ instead of enforcing laws created to protect the welfare of the nation.

    Sadly, President OBama continues to look forward, apparently to the next term.

  10. Another tip Donald Trump is fighting the Banksters on his loans. I would look at his arguements.

  11. A Good Bankster is a Jailed Bankster
    Is’nt this a good bumper sticker?

    Regarding MERS so how are they still foreclosing?
    That is BofA or Wells Fargo or dont they have to remove the notice of defaults?

    What the Hell is going on here?

  12. Are those MERS assignments valid? If they never owned any interest in these loans, how can they assign to the foreclosing entities? Just what are they assigning? You can’t assign what you didn’t own, right?

  13. Here’s an article I dug up. I Google “MERS” every 3 days or so to see what they are up to, what kind of legislation is cooking or what recent articles have come out. I liked this one.

    “It appears to me MERS at some point collaborated in a scheme to allow the alleged servicers to run the show, with very little if any regard for the actual owners of the notes. Most of what I have seen of MERS’ material concentrates on assignments of servicing rights and its memo’s are directed toward servicers, not note owners.

    Why do I say the system is absurd? For one reason because there is no governance of the voluntary entries made solely by the members into the MERS’ data base. There is no diligence and can be no diligence. Entities with no real tie to someone’s home can nonetheless make off with it. Might we pause a moment to consider what the big rush was to trade these notes multiple times, such a rush that recordation of the assignments in land records would thwart , even be the alleged death knoll for the business plan? It just doesn’t read. In fact, it’s lame.”

  14. Wasn’t it more signifigant last year when Fannie Mae said the same thing?

  15. So let me get this straight. MERS was and is instrumental in avoidin proper recording and the servicers and pretenders foreclose with bubber stamped blank endorsements, robo signing galore etc.

    The fact they will no longer foreclose on their name does not by itself fix the 65,000,000 toxic titles out there.

    My home was foreclosed with a note with a blak endorsement. The pretender had been in BK for the last four years. Never serviced the loan, never transferred the note to the REMIC, never disclosed the name of the trust and true creditor, but held on to the note.

    The judge did not want to hear anything, even though we had proof that the loan had been sold forward.

    How can we realistically use this news as leverage. I already lost my home, but there are millions of victims out there who have no idea of what is going on. Our voices are not being heard, the Federal Government and State governments have already sold out to the wall street criminals.

    what can we do as a massive group over 20,000,000 American families in peril.

  16. On Tuesday March 29, thousands of Americans will participate in a nationwide call-in day, demanding that their Attorney General “stand with homeowners, not the big banks.”

    The Attorneys General need to pick a side – the millions of homeowners they’ve sworn to protect or the big banks that have bankrupted our communities and country. Let’s help them make the right decision.

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