Banks Attempting to Fight MERS Decision With Public Relations

Nov 20, 2012

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Editor’s Analysis: The banks are threatening to slow down lending because of the Oregon MERS decision. They want to be fear in the hearts of realtors and sellers alike who will no doubt be recruited to join in lobbying efforts to change the law in Oregon to allow MERS in the chain of title. People who live in Oregon should be VERY vigilant to see that such a provision doesn’t get tacked onto to some innocuous bill that has nothing to do with MERS, foreclosures, mortgages or even real property.

Here is the problem for the banks: The reality is that that under real property law in every state you must record transfers of interest in real property if you want to be able to protect yourself against subsequent buyers or lenders who nothing about prior off-record dealings. Recording is what stabilizes the market. Where the recording rules are followed then there is notice to the world of who has what stake in any particular piece of property. A buyer or lender can buy or lend without worrying if they are really getting title or a perfected lien.

MERS is an intentional parallel universe in which transfer are NOT recorded and someone can pop up later claiming to be the new owner, beneficiary, trustee or whatever. It creates uncertainty in the marketplace which is bad for business generally and no doubt is going to spawn thousands of lawsuits on title insurance and title claims because MERS by its own admission never handles a dime, never gets the origination documents, and never does anything except maintain a relatively unsecured technology platform in which the members make, change, alter or amend data relating back to the so-called origination of the loan.

They attempt to cure this fatal defect with signed affidavits and other documents fabricated only when there is litigation executed by unauthorized people, robosignors, surrogate signors without corporate resolutions that the bank would require from borrowers but don’t want applied to themselves. The robo-signed, fabricated or fraudulent documents become part of the record but on close reading say nothing, which means that under case law in all the states the filings would be considered “wild” which means that it is out of the chain of title.

But the problem lies even deeper than that. MERS is the nominal trustee on the deed of trust or the nominal mortgagee on a mortgage. It disclaims any interest in the obligation, note or mortgage, saying that it is there to “facilitate” the transfer, sale or securitization of loans and other forms of credit — a function easily performed for a statutorily required fee by the statutorily authorized recording office in each county in which each property is located.

If you drill down a little deeper, you will find that MERS, as nominee is named as nominee for an apparently disclosed principal identified as the “lender.” But the “lender” loans nothing in most of these transactions, as the wire transfer receipt and wire transfer instructions will show.

So what you REALLY have is a nominee for a nominee for an undisclosed principal, whom we all know should be the investors or their REMIC, but isn’t because the investment banks took the ownership diverting the paperwork and the money away from the investors, leaving them, and the borrowers, holding an empty bad or perhaps better said “a holographic image of an empty paper bag.”

These are table funded loans (predatory per se as per TILA and Reg Z) on steroids. While the banks are temporarily claiming ownership, they are trading selling and hedging and insuring the loans in packages making a fortune while the investors are left with fatally defective, unenforceable claims against he borrowers (see the various complaints filed by investors against the investment banks).

The flow of money from insurance — promised to investors and hedge products promised to investors never materializes because the banks kept the loans as though they owned them and then sold them at a premium to pools that were never funded with the investors’ money. Their money went to the banks as well which the banks used as their own money to make all those trades.

So the Oregon Supreme Court is scheduled to hear a case called Niday vs. GMAC Mortgage because the lower appellate court said that in order to collect or foreclose on a debt, the debt must be owed to you and not someone else. This is also the law in all states — only an actual creditor who is owed money from the borrower can submit a “credit bid”in lieu of cash assuming the debt is owed in connection with the financing of the property.

So the Banks and servicers are getting the story out through the media wherever they can that these rulings are misguided and will have terrible consequences on the marketplace when in fact the reverse is true. What the banks and servicers are doing is introducing a level of uncertainty that has never been seen before in the American marketplace. Their response to attempts to curb their illicit practices has been to threaten the marketplace with a freeze on lending. In other words, they are trying to bully us into letting them get away with it. Will you let them?

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Tags: disclosed principals, MERS, nominees, PREDATORY LOANS, public relations, table funded loans
Posted in bubble, Corruption, Eviction, securities fraud |