At the center of the foreclosure fraud crisis lies something called "MERS," which is usually described in news reports as a computer system and database. But a thorough review of the company's publicly available documents show it's much more than that. We reviewed hundreds of pages of bulletins, newsletters, and manuals, along with PowerPoint presentations, user forums and other website material and several hours of training videos and other recordings. This is the first of a series of reports on what we found.
As the following images show, MERS is a nebulous, database-driven entity created by the mortgage industry. It's designed to let lenders swap mortgages electronically without being slowed down by inconvenient courtroom rules. MERS is "Digital Life" for mortgages, an electronic shell game that makes it hard to track the real party behind a loan.
The company's own publicly available documents paint the picture of a legal shapeshifter that appears before the court as the lender and title holder, then morphs itself into a mere service organization when it's time to take responsibility.
Who is MERS?
Here's a list of the owners:
"MERSCORP" is an entity created by the mortgage industry, including the Mortgage Bankers Association (yes, that would be the same Mortgage Bankers Association that appears to have walked away from its own commercial real estate loan -- after its CEO lectured homeowners on honoring their debts). The other owners are a who's who of TARP recipients, HAMP violators, and known lawbreakers.
"MERS Inc." is a subsidiary of MERSCORP which was created for the sole purpose of acting as if it held the note on a home loan.
Why do institutions use MERS? Here's their pitch:
Judges across the country might not be amused to learn that MERS promises"no recording or re-recording of assignments," since that's exactly the problem at hand. As for "ease of delivery into secondary markets" -- that is, the bundling and re-selling of mortgages -- there's no question that MERS has enabled that. MERS provides the chips for the housing market casino. And as for the claim that there will be "no chain of title issues," that's a hard claim to defend now that Attorneys General for all fifty states are investigating the matter.
Artificial MOMs
There are at least two ways "MERS Inc." (that synthetic company that's a MERSCORP "subsidiary" becomes the mock holder of a loan, but the preferred way is to have lenders employ a "MOM" arrangement. MOM stands for "MERS as Original Mortgagee." Some nerdy types may remember the sinister corporation run by an overlord named "Mom" in Futurama. While this "MOM" is also technology-driven, it's essentially a legal device:
In order to obtain their home loan, the lender demands that the borrower -- that's you, Mr. and Mrs. Homeowning American -- "mortgages, grants, and conveys" their property to the vague "MERS Inc." The homeowners agree that MERS "holds legal title" and has the authority to exercise all mortgagee rights, "including foreclosure."
So MERS owns the note, right? Not so fast:
Got that? "No interests are transferred," they're "just tracked." MERS "holds legal title," but "no interests are transferred." In other words, this virtual entity has all of the rights to act against homeowners, with none of the responsibility. The party facing you in a courtroom is not your legal adversary. They're only pretending to be.
Having a "MOM" doesn't make MERS Inc. the genuine note holder any more than wearing a dress makes Norman Bates his own mother.
"But Mother, she's just a stranger ..."
If your home loan was produced with a "MOM," the court has no record of who issued your original loan. If you need to challenge the legality of that loan, you're dependent on MERS to tell you who the other party really was. When it comes to the title, the courts know nothing -- and mother knows best.
That can lead to a Catch-22 situation: When homeowners want to bring the lender to court, MERS is the entity that shows up. But MERS bears no legal responsibility: It didn't issue the loan and can't defend the transaction. And when homeowners or their representatives contact MERS, they're told its not MERS' responsibility to update the court records to reflect the true identity of the title holder.
But that's what the court record is supposed to show.
"MERS Inc." Is Everyone ... and No One
MERS Inc. -- the title holder of record -- is a legal entity. As far as the courts are concerned -- at least the ones that have accepted its ruse -- they hold your note. But that's a legal fiction. The real holder of the note is usually a bank you'd recognize -- like Bank of America, Wells Fargo, JPMorgan Chase, or Citigroup.
Who are the officers of this fictitious entity?
"Designated officers of the servicers" are "elected" as officers of MERS so that they can act on behalf of their own company while pretending to act for this artificial one.
"Loan servicers" are the companies that collect and process loan payments, and the big banks themselves act as loan service companies. As the Associated Press reported last year, Billions of dollars the government is spending to help financially pressed homeowners avert foreclosure are passing through -- and enriching -- companies accused of preying on the people they're supposed to help." These companies actually target people who are struggling to pay their bills, because they make more money from late fees.
Who are the largest loan servicers? Bank of America, Wells Fargo, JPMorgan Chase. and Citigroup Inc. That's right: The artificial corporation called "MERS Inc." holds your note as a facade, and it could very well name as its officers the very same bankers who issued your loan in the first place. (Or, as we're about to find out, not.) But in this case they're officers of "MERS," not their own organization.
There have already been lawsuits against loan servicers for wrongful foreclosure, misrepresentation, breach of contract, conspiracy, violation of state debt collection laws, and predatory lending, just to name a few. It's not as if we need another layer of obfuscation, confusion, and secrecy to further cloud the legal process. The owners of MERS are turning the corridors of justice into a hall of mirrors.
The Judge Calls It Fraud
Would a prestigious bank like JPMorgan Chase really deceive a court of law about ownership of a title? From a recent court ruling: " "The court finds WAMU (now owned by Chase), with the assistance of its previous counsel, Shapiro and Fishman ... knew that ... WAMU never owned or held the note and Mortgage ... the Court finds by clear and convincing evidence that WAMU, Chase and Shapiro & Fishman committed fraud on this Court ... a knowing deception intended to prevent the defendants from discovery essential to defending the claim."
Chase was only the servicer for this loan, but it wanted to score a foreclosure so it pretended that it actually held the title on the loan. That's the kind of deception that becomes vastly easier to carry out using the legal and electronic instruments provided by MERS. Was that why MERS was designed? They say no. MERS documents claim that the system was designed to provide transparency, consistent data, and a more streamlined system.
It hasn't worked out that way.
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IN OUR NEXT EPISODE: How MERS "navigates through foreclosures." We'd feel a lot better about their attitude toward struggling borrowers if one of their training videos didn't use "Harry Homeowner" on "Poverty Lane" in Jacksonville as a test case. It doesn't make it look as if sympathy toward struggling homeowners is their Number One concern:
As you've probably guessed, there is no "Poverty Lane" in Jacksonville, FL - yet.
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Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light.
He can be reached at "rjeskow@ourfuture.org."
Website: Eskow and Associates
Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow
(All tongue in cheek, of course)
The process, it seems, was meant to have MERS own the note and collateral, so that within the MERS system, it could be easily transferred - not by way of actual transfer of a direct interest (e.g. ownership), but by way of transferring a beneficial interest (like transferring one's interest in the corpus of a trust). So, a few accounting entries changes who is the beneficiary of the legal ownership in the collateral, and not the owner itself.
As far as the MOM recording requirements, it seems as if those are met. The deed of trust is filed with the appropriate county clerk. Thus, the title chain is complete.
The only way it would seem anything is illegal is if one concludes that beneficial, as opposed to legal, ownership is prohibited by law. I can't see how this could be. The separate concepts of beneficial vs. legal ownership have been around for centuries.
Washiington's Blog
Foreclosure Expert Confirms Mortgages Pledged Multiple Times, Not Actually Securitized, Document Problem Is Really a System of "Push Button Fraud"
So the reason why the paperwork is all out of order is that there was no paperwork. There only entries on databases and spreadsheets. The loans were not in actuality assigned to any one particular trust or any one particular bond or any one particular individual or group of investors. They were “allocated” as receivables multiple times to multiple parties usually to an extent in excess of the nominal receivable itself.
This is why the servicers keep paying on loans that are being declared in default. The essential component of every loan that was never revealed to either the lenders (investors) nor the borrowers (homeowner/investors) was the addition of co-obligors and terms that neither the investor nor the borrower knew anything about. The “insurance” and other enhancements were actually cover for the intermediaries who had no money at risk in the loans, but for the potential liability for defrauding the lenders and borrowers.
The result, as anyone can plainly see, is that the typical Ponzi outcome — heads I win, tails you lose.
http://www.globalresearch.ca/index.php?context=va&aid=21523
THe USA is about 6 months, and a bad law or executive order away from surpassing the title problems of eastern europe of post WWII
A Ponzi scheme, perpetrated by computer and supported by billions of dollars in bribes, willingly paid and willingly swallowed by fools who never imagined that 310 million people in this country (and billions more, outside of it) actually possess neurons in the area between their ears.
There is such a thing as layering on SO many piles of flim-flam that you're betting on the idea that the person you're defrauding will never actually figure out what the hell just happened to him ... that he will just give up.
Or, maybe you just duped the title-insurance (sic) company ... a company that, after all, has sold its policies for good profit for many years and has NEVER actually had to make-good on any of those promises. (And that therefore really doesn't have the financial capacity to do so, if it were ever pressed to do so, which it never has.)
http://www.mersinc.org/about/bod.aspx
*Note that MERS chairman & CEO is probably not a Dem Obama supporter living in Birmingham, Alabama.
http://www.freddiemac.com/governance/bod.html
http://www.fanniemae.com/governance/board/index.jhtml;jsessionid=ZTWPQXUIPN4INJ2FQSISFGA?p=Corporate+Governance&s=Board+of+Directors
http://www.americanbanker.com/profile/index.html?zkDo=showPwd
Here is a few excerpts:
- By Karen Gelernt
“…residential mortgage notes are negotiable instruments which, by their nature, are intended to be liquid and easily transferable by certain key actions outlined in the law. Challenging this notion, irresponsibly questions a well-established body of law affecting trillions of dollars of mortgage loans as well as trillions of dollars of other types of negotiable instruments.
In this way, a residential mortgage note is analogous to a check. In the case of the mortgage note, it is payable to the order of a mortgagee. Similar to a check, which is transferred by endorsement, a mortgage note is also transferred by endorsement.
Similarly, the ownership by an entity of a mortgage note endorsed in blank should not, in the ordinary course, be challenged.
In other words (and aside from the separate issue of whether the circumstances that are required to commence foreclose exist with respect to the mortgage loan), mere possession of a promissory note endorsed in blank (whether a check or a mortgage note) should provide the presumption of ownership of that promissory note by the current holder.
Any other outcome would call into question the foundations and liquidity of negotiable instruments..”
I think people are confusing the 'note' with the 'title'. Sure fine, the banks have a note they pass around that says who owes who what. That apparently was fungible - the tangible aspect of the security, if you will. Keep it blank, fill it in at the end. What could go wrong?
Aside from that, there is the issue of the title. I believe that is more related to the actual land ownership. That goes with the house even when there is no mortgage. Perhaps it is I who am mixing the things up. But it seems, even if they claim fungibility of the note, they still have to register the title each time, do they not?
PS - Not all tea-partiers are loonies, just the ones they show on the teevee.
It is the Oligarchy moving to take from us not just the American Dream of home ownership, but the feeling of power and independence that ownership confers on us.
Feudalism depends on the masses being poor--abjectly poor--and politically powerless.
Putting people onto the street or into houses owned by the New Landed Gentry accomplishes that, and more.