An Open Letter to Dean Martin Arizona State Treasurer: You are leaving Money on the Table — MERS and Securitization — Hundreds of millions of dollars in receivables go uncollected

January 4, 2008

info@aztreasury.gov

Dear Mr. Martin:

The Arizona Republic reports today that you and others in government have asserted that the State of Arizona is about out of cash. Others have described the state as “broke.”

What you are missing is one very large receivable due to the state and county governments — hundreds of millions of dollars in taxes, recording and registration fees for all the companies that side-stepped Arizona Law in the great Mortgage Meltdown of 2001-2008.

This isn’t a long letter because it doesn’t need length — it needs action. State Receivables are not being collected and State expenses are rising as people lose their homes, their jobs and the ability to put a roof over their heads and food on the table. As unregistered, unchartered, unregulated companies created billions of dollars in illegal profits (undisclosed and unreported to the State, but reported to Federal Agencies) from “mortgage” transactions tens of thousands of Arizonians were defrauded and the State was cheated.

Mortgage Electronic Registration Systems was invented by the financial services industry as an illegal scheme to avoid recording changes in ownership of the mortgage rights, changes in Trustees, assignments etc. Arizona law requires any interest in real estate to be recorded. The reason for the recording requirement, besides revenue, is simple — it is the only way to keep track of who owns which property. MERS (currently banned in the State of California and under attack in at least 2 dozen other states) is a cloak which the financial services industry is using to avoid paying the taxes, stamps and fees on each step of the securitization process, plus a way to obfuscate the real ownership and to essentially choose later who will be designated to be the “owner” of the mortgage rights — i.e., who will be said to own the mortgage note and thus be a successor to the beneficiary under the Deed of Trust.

Hundreds of millions of dollars are owed to Arizona by entities that now claim rights to foreclose on property using the state’s non-judicial procedures, when they are not the record owner nor even the actual owner or lender on the transaction. The required condition that they record every element in the chain of title has been ignored because if they file a judicial foreclosure they would be required to make allegations that are fraudulent. Thus they avoid the filing fees, and  service fees attendant to judicial foreclosure as they are committing a fraud on the government and the homeowners.

Further, the state requires any trust, corporation or lending company, plus any bank, credit union or other financial institution to register in the state (more fees owed to the State). Instead, using MERS as their cloak, unregistered, unchartered, unregulated individuals and companies have operated with the the State of Arizona without registering, obtaining a charter, or paying required taxes on property interests, income taxes, and normal annual fees.

At the heart of this is a potential liability for the State of Arizona beyond its current economic woes, and beyond these enumerated uncollected receivables, to wit: the fact that the state has ignored the issues raised by the use of MERS does not improve the title that is reflected on the record. The fact remains that companies are getting certificates of title transferred to them when there is nothing in the record to support the chain of title. Thus Arizona faces an enormous challenge and potential lawsuits in failing to enforce its recordation laws. One day, in the not distant future, some lawyer is going to take a close look at these transactions and realize that not one of the modification, refinancings, short sales, foreclosure sales and subsequent third party sales is supported by a proper chain of title in the record. The effect on the solvency of title insurers is immeasurable.

As an Arizonian, I am concerned that the State is about to borrow money and probably raise taxes when the State has a clear right of action and an ability to collect fees, stamps and taxes against hundreds of investment banks, Special Purpose Vehicles, Mortgage Aggregators/Wholesalers, “lenders” whose charters were essentially rented in most “mortgage” transactions, each of whom have operated and are operating illegally within the State.

Note that in table funded loans of this sort the real lender is not the named payee on the note or the named beneficiary on the deed of trust — but it is the source of funds. The named payee on the note, the beneficiary under the deed of trust was paid an extra fee to drop its underwriting standards in favor of whatever was dictated by the securitizers, which makes the securitizers the successor trustee, successor beneficiary and possibly the successor payee. It means that companies are operating as “trustees” when they have failed to register or qualify as Trust Companies.

As Treasurer of the State of Arizona you stand in a unique position to save the economy of the State and to correct the thousands of title deficiencies in state and county records. My immediate recommendation to the State is that it seek receivership (and recovery of fees, taxes, damages and interest) over all participants in financial services that launched and executed this scheme, taking care NOT to interfere with the many community banks and credit unions that DID play by the rules and that didn’t do anything wrong.

Thank you for your time.

Sincerely,

Neil F. Garfield, Esq. (Licensed in Florida only)

www.livinglies.wordpress.com

Tags: bailout, credit crisis, disclosure, foreclosure defense, foreclosure offense
Posted in bubble, Corruption, Eviction, securities fraud |