MERS: C-Conspirator or Unwitting Accomplice?

by john gault | 2011/03/24 |

A discussion of the machinations of the MERS' machine, the devolvementof its role as
deed of trust placeholder, and the legally skewed actions of its members.

I don't think in the final analysis it really matters if MERS intended to be a bad actor or to
participate in unlawful actions by its members or not. Intent is not required as a matter of
law for culpability.

The whole MERS concept is absurd. I'm not yet clear that it started out that way or
devolved. I think the original idea to have members use its computer system as a data
base for entries of sales of notes might not have been so tweaked and damaging had they
stopped there. If there were any form of diligence or ways to assure proper and complete
entries by members, which there isn't, and most of which entries called for recordation of
assignments of the deed of trust in land records when the beneficial interest in the note
was transferred to a non-member like a trust had been followed, it wouldn't have been so
bad, nor be indicative of actual intent.

Because the thing there is that the whole reason MERS alleged it was going to be useful
to its members was to accomodate quick sales of promissory notes in the secondary
market. The secondary market involves trusts and securitization of notes, which required
assignment recordation in land records, so really how did the data base accomodate
anything other than ultimately hiding the owners of the notes? The assignments to non-
members weren't recorded. Does this not undermine any argument that MERS was not
complicit by design?

If one looks at MERS' membership rules and terms and conditions, etc. one sees that its
isms are actually addressed more to servicers than anyone else. One of the big reasons I
can think of for this is because the actual noteowners are not MERS' members. So what's
MERS doing issuing memo's about property interests it's no longer even remotely
connected to? Unless MERS' real corporate officers are deaf, dumb, and blind, they know
these notes generally are securitized.

It appears to me MERS at some point collaborated in a scheme to allow the alleged

servicers to run the show, with very little if any regard for the actual owners of the notes.
Most of what I have seen of MERS' material concentrates on assignments of servicing
rights and its memo's are directed toward servicers, not note owners.

Why do I say the system is absurd? For one reason because there is no governance of the
voluntary entries made solely by the members into the MERS' data base. There is no
diligence and can be no diligence. Entities with no real tie to someone's home can
nonetheless make off with it. Might we pause a moment to consider what the big rush was
to trade these notes multiple times, such a rush that recordation of the assignments in land
records would thwart , even be the alleged death knoll for the business plan? It just doesn't
read. In fact, it's lame.

Does this not point to intent and collusion among these players?

If ABC noteowner sells the note to XYZ, and ABC makes no (voluntary) entry in the
computer data base of that sale, who would know? If XYZ sells the note into a pool but
doesn't make an entry of the sale, who would know? Unfortunately, no one. "Garbage in,
garbage out." Ish. There isn't even any interface with PSA's. I've actually seen one
servicer tender a copy of a PSA in discovery wherein it purported to identify the subject
loan only by loan amount and zip code. That same loan could have been sold into 5 trusts
with that kind of 'identification', and actually, this is true even if notes are properly identified
in PSA's, REMIC's, SAMI''s, whatever. The point is, no one knows or can know if sales of
notes are entered by the members or not. It's just difficult to believe that a system which
could accomodate such a vast amount of shenanigans does so incidentally and not
willfully.

The second reason I use the word 'absurd' is that MERS states in the deeds of trust or
other collateral document that it is the nominee and also that it is the beneficiary. Which is
it? If MERS had not planned to be conplicit in its members' actions, why call itself the
beneficiary in the deed of trust? MERS was originally to act as a 'placeholder' to avoid
recordation of the deeds of trust when sales of notes are made to members, not an
intended beneficiary with any real interest in the note and deed of trust. MERS started off
ostensibly as the 'nominee', and to hold that status as long as the note was owned by one
member or another to obviate the need to record the changes in the land records by way
of assignments of the deeds of trust.

This, however, gave MERS no cognizable interest in the deeds of trust - it was just a
'placeholder' for its members. No jibberish can change that. If it had stayed the course and
only acted as that placeholder for its members, not that bad, if one doesn't consider the
lost revenue to recorders.

But, not satisfied with that, its members, who do everything regarding assignments and
foreclosures (no true MERS' officer or employee -there are NO employees fyi -actually
does any of that) in the name of MERS by way of their 'straw' certifying officers, saw
'opportunuty', got bolder yet, and decided to assert that MERS actually did have an
interest in the deeds of trust by being named as nominee of the beneficiary (and as
beneficiary itself, simultaneously) in the deed of trust. In other words, a system originally
designed allegedly to have MERS be a placeholder to obviate the need for recordation of
assignments to members, somewhere along the road allowed its members to assert
MERS actually had a cognizable interest in the deeds of trust /mortgages.

This allowed servicers, also parties with no real interest in the notes and deeds of trust, to
foreclose in the name of MERS without having to deal with the actual ownership of the
notes and deeds of trust. People who had done no or sloppy paperwork – at a minimum -
avoided multiple duties, including one to properly demonstrate the chain and to foreclose,
by hiding behind "MERS". For years these servicers or other entities foreclosed with
impunity in the name of MERS, never having to produce anything, not even evidence they
were the servicer. And, again, let's not forget that MERS computer records show only that
which any member bothered entering. Whether or not what was entered had any basis in
reality can only be speculative. No one would know. It isn't like MERS has some records to
go compare its members' entries with - it doesn't. I don't know for sure yet how this deal
devolved to members foreclosing in MERS' name. But at some point MERS acquiesced.
They no doubt received more fees. The whole stinking thing was supposedly so members
could save a few scheckels in recording fees. Oh, and trade notes like there were no
tomorrow.

So, as I understand it, as it 'devolved', when a member wanted to foreclose in MERS'

name, the member was to make some kind of entry in the MERS' computer system and
pay the fee. As long as the member showed as the servicer (hopefully the records should
have at least shown that member as the servicer, but remember that carte blanche thing)
and paid the fee, MERS did not interfere. And as I also understand it, it didn't matter who
owned the note. And as I further understand it, in order to foreclose in MERS' name, the
servicer was tacitly implying to "MERS" that the member was in possession of the
promissory note endorsed in blank, relying on an interpretation of the UCC that possession
of a 'bearer' note provided legitimate right to enforce, with which I wholeheartedly
disagree. The reason the servicer had to tacitly iimply possession of the note is because
the servicer had an employee who was a straw / certifying officer of MERS; this, to MERS,
equated possession by MERS of the note allegedly endorsed in blank and so the gospel
according to MERS said MERS could foreclose, i.e., its member could foreclose in MERS'
name.

By the way, when a note is proferred which does not have all the endorsements on it, it is
not a true and correct copy of the note unless enforcement is sought by the original payee
on the face of the note, because when someone other than the original payee is
attempting to enforce, there is necessarily at least one endorsement. And sometimes a
note is produced with no endosements and then later, usually much, another note (copy) is
produced now showing endorsments. It's never possible for a homeowner to tell if the
endorsements are actually on his or her own note because when you only see a copy, the
'back' side of the last page, the one with the endorsements,is not attached other than with
a staple to the copy of the note, and could easily be the back of John Smith's note for all
we know.

The servicer may have had (but likely did not have) possession of the note, but the
servicer had no interest in the note and was not really entitled to enforce it in this writer's
opinion, but that's another story for another day. At any rate, if they'd hadthem, they would
hve forked them over. Maybe they had one here and there. Problem with that, though,is if
they produced one here an there, tey would be expected to do it all the time. See the
problem? So they started the biggest discovery pi—ing match the world has ever seen.

MERS would have no way of knowing if the member possessed the note or not, however.
If servicers actually had possession of the notes, one might ask why. Notes are supposed
to be held by the custodian of the trust, properly (key word) endorsed. Many notes were
not properly endorsed . That's one reason 'they' don't want to produce them, even if they
COULD locate them, and this is why I opine vigorously that deed of trust trustees are not
being given proper evidence of anyone's right to foreclose.** But the point here the way I
see it is that MERS allowed foreclosure in its name in return for fees, with no evidence that
the straw certifying officer at the servicer's actually had such possession. Fortunately,
albeit extremely belatedly (years, in fact), MERS has abandoned this baloney, i.e., allowing
foreclosures in its name.

This whole MERS' schematic begged abuse if it weren't just plain collusive and abusive
itself, which it appears to be. Maybe the MERS' president who recently retired wanted to
do some sailing, or maybe he had enough of this and the attendant exposure. Retirement
won't save him, however, if MERS ever faces charges for actions taken on his watch.
Maybe he's busy making himself bulletproof.

MERS started out as the 'nominee' placeholder in lieu of proper recordation. MERS, rather
its members, then became emboldened further and claimed MERS was their agent. There
are two forms of agency- expressed and implied. Clearly the alleged 'agency' isn't
expressed in any contract. MERS deliberately avoided that word and chose 'nominee'
instead. An automatic assumption that nominee = agent is positively errant.

I believe there were 2 reasons for this. One, agency comes with liability. Second, on info
and belief, MERS when originally formulated perhaps had no intent or idea its members
would use MERS to foreclose. MERS was just to be a placeholder in the deeds of trust to
avoid recordation, right? There was no reason to allege an agency until members starting
doing things, like foreclosing in MERS' name. I don't believe that MERS' "implied' agency
would be found in the governing documents, no way, no how. If it is, I haven't found it yet.

"Courts may look to intent in the formation of a contract", and as stated, I find no indication
of agency intent in the MERS' contract; therefore it is not likely agency is implied.

Had MERS intended to be an 'agent,. it coud have used that word. Mostly only attorneys
who practice certain areas of law, generally contract law, understand 'agency', and so far,
none of those attorneys have addressed this issue to my knowledge. When we don't use
info learned years ago, we have a tendancy to forget it, and apparently this applies to
judges, too. That's one way to look at some adjudications, anyway..........

Which brings me to the second reason MERS is absurd. Attorneys for MERS', which are
by and large the same attorneys representing the servicers in the same litigation and thus
actually make the arguments for MERS, have alleged in different litigations that MERS is
the nominee one day, the agent another, and the beneficiary yet another. There does
seem to be real potential for conflict of interest between MERS and members who have
taken certain actions in MERS' name, so it is somewhat surprising that MERS and its
members are still sharing counsel.

But let's assume arguendo that MERS is an agent of its members. That makes the
member its principal, right? "Agency 101". Generally, in the principal - agent relationship, it
is the agent who contractually 'does things' in the name of its principal or may bind its
principal. Like a listing agent on a house, say. In the 'illusion' that is MERS, it is actually the
members, or principals, who act in the name of the agent! It is the members who execute
assignments of deeds of trust and command foreclosure in the name of the agent, MERS.
This is not a cognizable relationship. It's bass ackwards. And members are actually
assigning deeds of trust to themselves by using their own employees (or foreclosure mills)
slash MERS straw / certifying officers to execute the assignments in the name of MERS.

Additionally, I have seen members actually allege to be the agents of MERS, in which case

THE PRINCIPAL PURPORTS TO BE THE AGENT OF ITS AGENT

Say what?

One way or another, when members take actions in the name of MERS, THE PRINCIPAL
IS ACTING IN THE NAME OF ITS ALLEGED AGENT.

This is LEGAL FICTION.

So did MERS willfully design this mockery of the law? Or was it just an unwitting
accomplice?

The fat lady isn't singing on MERS' complicity by and of its initial 'plan', which is to say
there are factors supporting different conclusions, but surely the writing is on the wall as to
a zillion subsequent actions.

** Posted here as "Trustees, Fiduciary, and Breach of Fiduciary"

I am an advocate for the proper application of the law. The opinions expressed are my
own.