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“We’re a nation of laws. Everyone knew that MERS didn’t have the right to appear as a beneficiary, but it would have been inconvenient to act on this because MERS was in widespread use throughout the banking industry. It was wrong, wrong, wrong, but everyone was doing it. Just like they were doing ‘no-doc’ loans and other sleights of hand. Just like the banks were doing so many bad things to homeowners. All they wanted to do was increase their profits – no matter who it hurt or how wrong their practices might be.” — Philip Kramer
BANKS THOUGHT THEY HAD IT FIXED, BUT AGENCY GOES FORWARD ANYWAY
Editorial Note: The agencies are starting to realize that MERS is like a cancer that spread throughout the mortgage markets and spilled over onto the balance sheets of banks who were “members.” The banks that are regulated by OCC now must deal with the fact that their balance sheet assets, many of which are considered to be tier 1 assets are not just downgraded to Tier 3, but in actuality are wiped off completely.
The effect of this action, is to cast doubt, at a minimum, on a substantial amount of the assets on the balance sheets of such banks. This in turn reduces the reserve that banks must keep against lending and other activities. The net effect is going to be a reduction in the size of many banks as they crank down to reflect the reality that has been true all along: the mortgage, notes and obligations claimed on the balance sheet neither existed, nor were they ever assets of the bank.
In turn, the effect on the marketplace and the cases that have gone through the court system and the cases that are going through the court system, is that any MERS mortgage or Deed of Trust is obviously flawed, defective, unenforceable just as we have been saying all along. The effect of naming MERS was the same as naming Donald Duck as Mortgagee or Beneficiary. There was, in effect, no Mortgagee or beneficiary, which means that (a) the loan specified in the promissory note executed by the borrower was never secured by a perfected lien and the Mortgage Deed or Deed of Trust, can now be attacked in a quiet title action, and (b) any foreclosure based upon a MERS deed should be dismissed. This would reduce the “asset” to an unsecured claim against a homeowner who is probably broke, and without any collateral on which to they can rely to mitigate “damages.”
But there are no damages. The effect also includes a probable consequence with respect to the obligation itself. As the agencies unravel this scheme of the illusion of securitization, they are coming to realize that the note itself does not describe the actual transaction that occurred. At a minimum this would allow in parole evidence, but beyond that it creates the presumption that the note was invalid to begin with and was merely a sham instrument used as an excuse for the feeding frenzy that followed the sale of mortgage bonds to investors. Thus not only is the “asset” unsecured, it obviously does not even exist. The real asset is the obligation that arose as a result of the Borrower accepting the benefits of funding of the loan, and that was and remains undocumented, because the real creditors are the investors — no matter how you split hairs.
Since the real creditors are the investors, the asset, if it belongs to anyone, is held strictly for the benefit of the investors who can use said asset as a derivative asset on THEIR balance sheet. In fact, this is what they do. But the investors have marked down the value of their “asset” to whatever claim they have for being tricked into buying empty defective bogus mortgage bonds. The investors, who now know of all the fraud perpetrated against themselves find no difficulty in accepting the fact that the homeowners were deceived as well by the same fraud. Thus the investors, who are the creditors, have chosen NOT to pursue the collection of the obligation against homeowners who have all sorts of affirmative defenses and counterclaims for fraud, violations of statute and a long list of other torts and breaches of contract.
Instead the investors, who are the real creditors in the actual cash transaction, since the money came from them, have elected to sue the investment bankers for 100 cents on the dollar rather than bring a claim against the homeowner for pennies on the dollar, which could morph into a net loss if the damages owed to the homeowner exceed the putative damages owed to the investor for advancing the funds.
Philip Kramer Weighs in on latest settlement agreement between the U.S. government and MERS Corp.Kramer Kaslow: Office of Comptroller of the Currency signs Cease and Desist Order with MERS Corp.
Calabasas, CA (PRWEB) June 03, 2011
The Office of the Comptroller of the Currency
has just signed a Cease and Desist settlement agreement with MERS Corp (Mortgage Electronic Registration Systems). Among other things, the Cease and Desist order finds, “We have identified certain deficiencies and unsafe or unsound practices by MERS and MERSCORP that present financial, operational, compliance, legal and reputational risks to MERSCORP and MERS, and to the participating Members.” (OCC No. AA-EC-11-20; Board of Governors; Docket Nos. 11-051-B-SC-1,11-051-B-SC-2; FDIC-11-194bOTS No. 11-040; FHFA No. EAP-11-01)
Noted attorney Philip Kramer, a senior partner at the law firm of Kramer & Kaslow provides insight, “MERS Corp is the owner of Mortgage Electronic Registration Systems (MERS), one of the cornerstones of the current banking crisis. In order to cut up loans and move the pieces around the world at the speed of electronics again and again and again, until no one is sure who owns what, financial institutions have been using MERS as the “beneficiary”, a legal term which in practical terms means they are entitled to foreclose on behalf of the lender – except MERS is nothing more than an electronic database. They are often named as beneficiary. However in order to legally be named as beneficiary they would have had to put up funds on the loan. Not to mention the fact that the recordation itself is not even official. BUT most importantly, MERS is never a Holder in Due Course.”
Philip Kramer goes on to observe that, “We’re a nation of laws. Everyone knew that MERS didn’t have the right to appear as a beneficiary, but it would have been inconvenient to act on this because MERS was in widespread use throughout the banking industry. It was wrong, wrong, wrong, but everyone was doing it. Just like they were doing ‘no-doc’ loans and other sleights of hand. Just like the banks were doing so many bad things to homeowners. All they wanted to do was increase their profits – no matter who it hurt or how wrong their practices might be.”
The full text of the consent decree can be found at the following URL:
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