BKR Judge Finds MERS Has No Right To Transfer Mortgages, Finds Entire MERS Process Illegal

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STATUS OF 50% OF ALL MORTGAGES NOW QUESTIONABLE

BLOOMBERG: U.S. Bankruptcy Judge Robert E. Grossman in Central Islip, New York, in a decision he said he knew would have a “significant impact,” wrote that the membership rules of the company’s Mortgage Electronic Registration Systems, or MERS, don’t make it an agent of the banks that own the mortgages…”

““MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage-recording process,” Grossman wrote. “The court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.”

EDITOR’S NOTE: “Significant impact” is an understatement. By finding that the enabling documents of MERS membership do NOT create an agency relationship, Judge Grossman has correctly pointed out one of the most important reasons why our title systems throughout all 50 states are now corrupted. His finding casts a very dark shadow on the question of whether ANY mortgage involving MERS is secured by the property, and finds no doubt that virtually all foreclosures of MERS-related (nominee) mortgages were invalid.

This clearly means that the requirements for a clear chain of title are left unsatisfied. Any certificate or deed issued in which MERS was previously named in the chain of title is probably void (not voidable). Any homeowner who thinks they lost their home in foreclosure probably still legally owns that home. Any petitioner in bankruptcy whose estate included a home on which there was a purported encumbrance with MERS named as nominee had a much larger estate than the one filed with the help of automated computer schedules.

Any Motion to Lift Stay that involved MERS that was granted was done improperly — and is subject to reversal by an action to quiet title, an action for wrongful foreclosure, or a motion for reconsideration based upon representations being a fraud upon the court.

Any modification, short-sale or mediated settlement involving MERS, any auction sale or post auction sale of property, will need to be unwound and returned back to status quo with the homeowner possessed of fee ownership of the property. And then there is this question: if the party identified as “lender” did not lend the borrower the money, and if MERS is not an agent that can be recognized at law, was a mortgagee or beneficiary identified in the mortgage or deed of trust? Clearly, not. Does that mean the instrument purporting to create an encumbrance is simply a wild instrument to be ignored, or is some court action required to either remove it or correct it? Who has standing to correct it?

For 3 1/2 years I’ve been saying, contrary to many other analysts including those on the borrowers’ side, that the mortgages and notes were invalid and that the only thing left was a liability owed to an unknown third party that for its own reasons has not sought to collect on that liability and whose claim was both undocumented and unsecured. This conclusion is corroborated by extrapolating the consequences of Judge Grossman’s decision, which is the only decision that could be made if we are to follow the rule of law. “We’re big and this is how we have been doing it for years”does not trump “this is the law and you didn’t comply with it.”

Submitted by Tyler Durden on 02/14/2011 15:31 -0500

There was a time when news, especially very bad news, moved stocks. The last time that occurred was in the middle of 2009, before most robots had any idea just how massive the chairsatan’s schizoid break with reality was. Now, that the appropriate sociopathology is fully priced in, bad news tends to have an even more profound upside impact on stocks than good news, as it guarantees that the Zimbabwe stock market will be upon us far sooner than if the economy were to have to go through another inter-QE episode. Which is why the just released news out of US Bankruptcy Judge Robert Grossman of Central Islip, New York, that MERS lacks rights to transfer mortgages will likely send the entire S&P circuit breaker up.

From Bloomberg:

“Merscorp Inc., operator of the electronic-registration system that contains about half of all U.S. home mortgages, has no right to transfer the mortgages under its membership rules, a judge said…U.S. Bankruptcy Judge Robert E. Grossman in Central Islip, New York, in a decision he said he knew would have a “significant impact,” wrote that the membership rules of the company’s Mortgage Electronic Registration Systems, or MERS, don’t make it an agent of the banks that own the mortgages…”

“MERS’s theory that it can act as a ‘common agent’ for undisclosed principals is not supported by the law,” Grossman wrote in a Feb. 10 opinion. “MERS did not have authority, as ‘nominee’ or agent, to assign the mortgage absent a showing that it was given specific written directions by its principal.”

“MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage-recording process,” Grossman wrote. “The court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.

“An adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States,” Grossman wrote. “It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices.”

“Without more, this court finds that MERS’s ‘nominee’ status and the rights bestowed upon MERS within the mortgage itself, are insufficient to empower MERS to effectuate a valid assignment of mortgage,” the judge wrote. “MERS’s position that it can be both the mortgagee and an agent of the mortgagee is absurd, at best.”

And with MERS now found to be a fraud, we expect MERS Commercial authority to be likewise eliminated. Which means that the entire US mortgage market, both residential and commercial, is a lie, and built on fraudulent foundations, and that every single MERS-mediated transaction will likely have to be unwound.

In reality what will happen, is that the Banker lobby will have to purchase a few more Appelate Judges, and in the worst case, a SCOTUS dude here and there, appeal the ruling to death, and end up victorious. After all, it is only taxpayer money.

Tags: agency, MERS, MERS Commercial
Posted in bubble, Corruption, Eviction, securities fraud |