Can MERS Assign the Debt?

The answer is complicated.

On its face and on its own the answer is obvious: since MERS never has any ownership of the debt or the note, it cannot transfer either one. It specifically disclaims such interests on its website and all agreements in which it is a party. Since it has nothing to convey it conveys nothing even in a written instrument that says otherwise.

THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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But the real issue is whether (a) the debt has been transferred in some other way or (b) whether MERS could somehow execute a document that transferred the debt from another party to yet another party. Some courts have used a backwards of analysis stating that if an assignment were executed the debt must have been transferred. But that is clearly not what the law requires.

Keep in mind that all states basically hold that an assignment of mortgage without the debt means nothing.

Transfer of the note, with delivery, is often used as the basis for saying the debt has been transferred.  BUT that is true only if the transferor was in fact the owner of the debt. Confusion abounds here because a holder might well be able to successfully sue on the note without ever being able to enforce the mortgage. The rules are different. See  Article 3 vs Article 9 UCC. You don’t need to be the owner of the debt to collect on a note. But you do need to be the owner of the debt to enforce the mortgage.

So the answer is that there is no case I have ever seen where the MERS assignment was in fact a transfer of the debt. Accordingly the assignment, without extrinsic evidence, transferred nothing. The extrinsic evidence must be proof that the transferee paid value for the subject debt.

Receipt of the note may raise the presumption that the debt was transferred but that presumption, if it is applied, is rebuttable. If you demand to see the proof of valid paid for the debt and they can’t give it to you then the presumption is rebutted. Hence the case fails because the prerequisite to bringing the foreclosure proceeding was that the party named as bringing the claim actually had a claim.

Some people think this is all technical. It isn’t. It is doing exactly what the law is intended to prevent — using the courthouse as in instrument of fraud. Somebody should win this fight and I can’t think of a single legal or moral reason why it shouldn’t be the homeowner.

When you look at the encumbrance itself (mortgage or deed of trust) this gets even more interesting. If the document says it secures the debt, then it is in compliance with Article 3 UCC adopted as state law. If it says it secures the debt and the note then the reasonable interpretation is that ti secures the debt in accordance with the terms expressed in the note.

But where it often states that it secures the note only then the document does not facially comply with Article 3. It must be implied from extrinsic (parole) evidence that the debt was included. But that turns out to be a problem. Because the debt was often changed immediately from both an legal and equitable obligation owed to one person to an equitable obligation potentially to investors and a legal one potentially to the investment banker but in all events not the party who is NAMED as bringing the foreclosure action.

Hence neither the legal nor equitable owner of the obligation of the borrower is set to receive the remedy being applied in the courts in favor of conduits controlled by third party strangers.  As far as I can tell the way the courts handle this problem is by pretending it doesn’t exist. Back when judges looked over foreclosure documentation carefully, such split personalities would not have been tolerated without a lot of clear and certain explanation.

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