MERS Tells Servicers to Stop Foreclosing in Their Name

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MERS Tells Servicers to Stop Foreclosing in Their Name
By: David Dayen Thursday February 17, 2011 7:04 am

Since MERS is owned by the big banks, this has the effect of MERS telling itself to stop existing. But it’s quite significant. In a memo to its members (the member banks who own it), MERS announces that their name should essentially be taken out of all foreclosure operations. Over the past several months, the inclusion of MERS in foreclosure documents, despite not having a material stake in the loan, has generated multiple lawsuits, many of which showed that MERS cannot foreclose, including a recent case in bankruptcy court in New York. That may have been the tipping point. Here’s the relevant language in the release:

1. MERS is planning to shortly announce a proposed amendment to Membership Rule 8. The proposed amendment will require Members to not foreclose in MERS’ name. Consistent with the Membership Rules there will be a 90-day comment period on the proposed Rule. During this period we request that Members do not commence foreclosures in MERS’ name. If a Member determines that it will commence a foreclosure in MERS’ name during this 90-day period, two weeks advance notice must be given to MERS to permit verification of the appointment and current status of the Certifying Officer proposed to participate in the foreclosure. No foreclosure may be processed in MERS’ name without first obtaining this verification. We encourage Members to bring foreclosures only in the name of the holder of the note, in the name of the trustee or the servicer of record acting on behalf of the trustee.

2. MERS Members shall have a MERS Certifying Officer (also known as MERS Signing Officer) execute assignments out of MERS’ name before initiating foreclosure proceedings. Assignments out of MERS’ name should be recorded in the county land records, even if the state law does not require such a recording (see MERS Membership Rule 8).

You may recall that the MERS “Certifying Officer” is really just an employee at one of the member banks who MERS magically turns into a certifying officer whenever asked. They have over 20,000 certifying officers despite having a skeleton staff, and none of those certifying officers get any compensation or benefits from MERS. The memo details a new method for appointing a certifying officer to pull off these assignments out of MERS’ name, and promises new safeguards on that policy. They also tell members in the memo to “ensure the accuracy of the information” in the foreclosure documentation they use (good luck with that), and to conduct a review of its employees who have been designated as certifying officers, ensuring that they have the proper training to carry out responsibilities.

This essentially gets MERS out of the foreclosure business. It has been ruled that they lack standing to foreclose one too many times. So there’s this attempt to after-the-fact get MERS out of the process by assigning mortgages out of MERS’ name – and paying the recording fee – to essentially allow for a quick exit.

But I don’t know if this does anything, outside of provide a small boost in recording fees to local governments, to clean up MERS’ legal problems. As Barry Ritholtz notes:

Keep in mind, that MERS has always been a legal fiction, simultaneously principle and agent. The courts are increasingly recognizing this, and finding they do not have any standing to bring foreclosure actions […]

I expect we will continue to see a ongoing reduction in the role of MERS over the next several quarters.

What follows will either be its eventual dissolution, and replacement with a legal entity — or retroactive legislation making its reckless illegality somehow legal. Watch Congress closely for signs they are rolling over for this.

Indeed.

21 Comments Spotlight Tags: foreclosures, foreclosure fraud, judicial branch, servicers, MERS
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•County Recorder in Massachusetts Goes After MERS December 1, 2010
21 Responses to “MERS Tells Servicers to Stop Foreclosing in Their Name”
janeeyresick February 17th, 2011 at 7:37 am 1There’s a great article in today’s Huffington by L. Randall Wray on the Bankruptcy Court decision which includes a link to the decision which he says is a great read, and indeed it is. The judge basically comes down on MERS and says in so many words, “just because you say it’s so, doesn’t make it so.”

Also interesting today from the Wall Street Journal an article about Big Banks facing fines for the actions of the servicers.

(I tried to post the links unsuccessfully, sorry!)

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Watt4Bob February 17th, 2011 at 7:44 am 2“If a Member determines that it will commence a foreclosure in MERS’ name during this 90-day period, two weeks advance notice must be given to MERS to permit verification of the appointment and current status of the Certifying Officer proposed to participate in the foreclosure.”

The way I read that;

If you want to foreclose in our name, you have to give us time to arrange for a patsy to sign the forged documents necessary to prevent us being laughed out of the courtroom.

Is there anybody left in this country who is stupid enough to claim they are a Certifying Officer for MERS?

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earlofhuntingdon February 17th, 2011 at 7:55 am 3This looks rather a lot like a shell game, with no pea.

Taking MERS out of the equation is probably a good thing; it seems to add no value other than to facilitate how its “member banks” avoid complying with applicable state laws. Those relate, in part, to recording mortgages and disclosing the actual owners of interests in real property, paying the fees that maintain the system that documents land ownership, and performing the necessary administrative tasks that keep promissory notes and mortgage grants together so that the mortgage debt remains secured by a primary interest in the underlying property.

MERS seems to do none of those things; rather it facilitates avoiding them, all within an opaque corporate structure that hides which banks and bank executives, administrators and lawyers are the real actors involved here.

What taking MERS out of the equation in this fashion seems to do is pixie dust away the harm it and its “member banks” and the Wall Street securitization machine have already done.

It doesn’t solve paying the billions in unpaid recording fees from earlier transactions that went unrecorded. (Anyone not aware that every state is operating under excruciating budget constraints, raise your hand.) It doesn’t disclose who has valid mortgage liens on much of the residential real estate in America.

Most importantly, it does nothing to cure intentional and knowing past failures to maintain minimum records, steps that severed the legally mandated ties between the promissory notes – which record the debt borrowers owe the banks – and the mortgage agreements – which, together, give the lenders a secured interest in the real estate. It’s that which gives them a valid right to foreclose for non-payment on the notes.

This “action” by MERS seems to be the bankers’ Hail, Mary pass. If MERS exits stage right, perhaps the audience of borrowers, judges and prosecutors will ignore its studiously inept performance and allow this play’s directors to continue their show.

A related matter, of course, is that taking MERS out of the play’s production does nothing to address the egregious terms in mortgages and loan documents, and the more egregious ways in which those are administered, which generate exorbitant fees from current and troubled borrowers alike.

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earlofhuntingdon February 17th, 2011 at 8:05 am 4Lest anyone forget, MERS was created to facilitate a trillion dollar business: issuing and trading “mortgage backed” securities. The value of those securities is dependent on and directly tied to two things, one of which MERS was sold as facilitating, which it actually failed to do: administer notes and mortgage agreements in such a way as to keep valid the right to foreclose on troubled debtors.

The other, equally large problem, is that a large percentage of the loans that were thrown willy nilly into the securitization process were rated “investment grade” when in fact underwriters hadn’t a clue whether they were worth the paper they were no longer written on, and were actively discouraged from finding out. But nothing to see here, move along….

Tags: borrower, disclosure, foreclosure, foreclosure defense, foreclosure offense, fraud, Lender Liability, MERS, mortgage meltdown, predatory lending, rescission, securitization
Posted in bubble, Corruption, Eviction, securities fraud |