The curious MERS cases of originators “out of business” or “bankrupt”

Posted on September 26, 2022 by Neil Garfield

The membership rules and procedures also state that MERSCORP cannot hold liens owned or serviced by terminated members. Id. ¶ 36. The terminated member is responsible for executing a release of the security instrument upon termination. Id. ¶ 40. MERSCORP is required to provide notice to the terminated member regarding their release responsibilities, and if the terminated member fails to take proper action, MERSCORP has the right to release the liens that MERSCORP is holding on their behalf. Id. ¶ 41; Doc. 7-1 at 14- 15. After Dreambuilder’s termination, MERSCORP was not able to identify all of the liens MERSCORP might be holding on Dreambuilder’s behalf due to Dreambuilder’s failure to properly update the system. Doc. 7 ¶ 37.

see DreamBuilder-Invs.-v.-Merscorp-Holdings-Inc

Bill Paatalo and I have both commented on this case before. But there is far more to say. In order to absorb the significance of a ruling like this, the reader must be in a quiet place and be prepared to read this a few times. There is no simple way to explain it, but once mastered, it is fatal to many, if not most, attempts to invoke foreclosure procedures across the country.

The problem, of course, is always the same. There is no unpaid loan account and hence there is no underlying obligation — but everyone thinks the loan must exist since that is what was intended by the homeowner. Lawyers for the foreclosure mills capitalize on that widely held erroneous presumption and thus can gloss over, avoid and even mislead the court about the facts of the case.

While the holding is clear about the claimed authority of MERS after termination of the membership for the originator, the fact that MERS had no idea what liens could be attributed to the prior member speaks volumes about the entire MERS apparatus. MERS is merely a platform that allows access to “members” for the input of data and export of “reports,” usually in the form of an appointment of the user as an officer of MERS.

It has never been used as a source for proving ownership of anything because MERS does not know. It has no employees who are tasked with checking data to see if it is correct or true, corrupted or part of an illegal scheme. MERS doesn’t care. It is used as a sham conduit to allow for transfers of mortgage liens from one name to another despite the absence of any transaction in which the lien was sold.

You will find constant references to MERS data or MERS rules. MERS has no data, and it has no rules. The servers operated by MERS serve at the pleasure of and control of members who can say anything they want on the MERS platform, without any knowledge of any MERS officers or employees about the truth or falsity of the “statement” (i.e., data input).

The so-called “rules” are nothing more than contractual undertakings between MERSCorp. Holdings and the “member.” The use of the word “rules” is intended to give it the shine of an administrative or quasi administrative agency. It isn’t. It is not associated or affiliated with any government operation or agency. Somehow calling those terms “rules” makes it seem that the contractual provisions are law. They are not.

Note that the only legally accepted source for data regarding the chain of title for real property is in the county in which the property is located in an office that operates solely to accept documents for recording in the public record. There is no exception.

All originators who went out of business become terminated members — even if MERS or MERS rules do not expressly state that. You can’t have any legally recognized relationship with a person or business entity that no longer exists. If MERS has already terminated the membership of the out-of-business originator, then you have an even stronger case.
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The case is that any document that purports to be a conveyance of a mortgage is both false and fabricated if the document is executed on behalf of MERS with a date that is later than the going out of business date of the originator. Such a document is void and not merely voidable. There is nobody to ratify it later by definition.
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This involves some brain teasing analysis that is far from being a page-turner. But it is deadly to lawyers who represent foreclosure mills. They have been glossing over this problem and sliding it past homeowners and lawyers for homeowners.
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They accomplish this feat by simply claiming that MERS is now representing a “successor” of the originator. However, there is no such successor if the ownership of the implied or alleged underlying obligation (See UCC 9-203) was never sold for value paid. There is also no such successor if the so-called “sale” occurred after the originator went out of business or went bankrupt.
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The bankruptcy of the originator is the death knell of any claim to being the successor of the originator unless (a) the alleged successor purchased the underlying obligation (i.e., the implied unpaid loan account) for value paid before the bankruptcy or (b) the alleged successor purchased the implied unpaid loan account from the U.S. Trustee in bankruptcy and in cases where the FDIC got involved, with acknowledgment and consent from the FDIC receiver.
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No such transactions have ever occurred in the world and context of what is now widely viewed as false claims of securitization.
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While you can get copies of the schedules of assets and liabilities from the bankruptcy court clerk, this information can also be obtained through effective use of QWRs and DVLs followed up by complaints for violation of the FDCPA and RESPA. It can also be enforced through discovery — if the window is open for discovery during litigation.
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The bottom line here is that in virtually all cases where there exists a claim of succession or implied succession, no such vent has occurred.
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And oral argument, it should be pointed out, is not something that the judge can or should consider as evidence.
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The appropriate objection and motion is that counsel is testifying, and you want him in sworn in if he has personal knowledge of the facts — particularly since he has been unwilling to answer simple questions on behalf of his alleged client. You can even move to strike his argument from the record where it relied on facts that are not “in evidence.”
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And that argument will be met with resistance, but you can still win it. Opposing counsel will argue that the documents are “in evidence” or at least in the record. This is based upon the false and fabricated documents that have been prepared to exhibit (i.e., give the appearance of) facial validity. Such documents carry a presumption of validity unless the court decides not to apply those presumptions because of the lack of credibility of the source or any other substantive reason for doubting their authenticity.
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If the presumption of validity is not applied, it does not mean that the lawyer for the foreclosure mill automatically loses. He or she has an opportunity to simply prove the case using actual evidence of the truth of the matters asserted. And foreclosure mill attorneys fight so hard to avoid such a ruling because no such evidence exists.
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The mistake made by the defense attorney is in not challenging the underlying premise of that argument in the context of discovery contests. Since the attorney for the foreclosure mill has failed or refused to provide corroboration in discovery or has not provided corroboration in response to a poorly phrased QWR or DVL, he should not be presumed to be allowed to use legal presumptions arising from the documents that contain references to transactions that are not corroborated — and that never existed.
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Neil F Garfield, MBA, JD, 75, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business, accounting and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. THE COMMENTS ON THIS BLOG AND ELSEWHERE ARE BASED ON THE ABILITY OF A HOMEOWNER TO WIN THE CASE NOT MERELY SETTLE IT. OTHER LAWYERS HAVE STRATEGIES DIRECTED AT SETTLEMENT OR MODIFICATION. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.

But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 12 years or more. In addition, although currently rare, it can also result in your homestead being free and clear of any mortgage lien that you contested. (No Guarantee).

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One Response

  1. CHARLES REED, on September 26, 2022 at 2:40 pm said:

    I am approaching the agencies and Senate with exactly what Neil is talking about and it seem that I am getting a different answers. Wells Fargo Bank (Wells) who must be getting some questions about the situation is clearly now putting Ginnie front a center in their responses as the entity that directed them to Robo sign the documents.

    We got a situation in Washington Mutual Bank (WAMU) where it should have been known that when the bank failed and the Fed Gov Backed mortgage loan are 95% Ginnie pooled and WAMU having 1.3 million of them being serviced by Wells that were not included in the JPMorgan arrangement with the FDIC when purchase WAMU bank operation.

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