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Detective Krum

Detective Krum

The Mortgage Electronic Registration company known as “MERS” is not a party in a foreclosure action.  Many mortgages, especially in Florida, were processed through MERS.  When a property is foreclosed, MERS has apparently tried to collect a percentage of the foreclosure judgment. The courts have had their say in the matter.

The clip from an article was first picked up, by me, at renowned financial wiz Catherine Austin Fitts site located here.  For those in foreclosure now, amendments should be made to any court actions naming MERS. Here is the article clip:

The Supreme Court of Kansas recently referenced a Bankruptcy Court from Massachusetts that said:

“When the role of a servicing agent [MERS] acting on behalf of a mortgagee is thrown into the mix, it is no wonder that it is often difficult for unsophisticated borrowers to be certain of the identity of their lenders and mortgagees.” In re Schwartz, 366 B.R. 265, 266 (Bankr. D. Mass. 2007).

Then cited the Supreme Court of New York (Kings County) that said:

“[T]he practices of the various MERS members, including both [the original lender] and [the mortgage purchaser], in obscuring from the public the actual ownership of a mortgage, thereby creating the opportunity for substantial abuses and prejudice to mortgagors . . . , should not be permitted to insulate [the mortgage purchaser] from the consequences of its actions in accepting a mortgage from [the original lender] that was already the subject of litigation in which [the original lender] erroneously represented that it had authority to act as mortgagee.” Johnson, 2008 WL 4182397, at *4, 873 N.Y.S.2d 234 (2008).

When a court references these slams you know that the House of Cards that is MERS (Mortgage Electronic Registration Systems) is gonna take a hit.

TECHNICAL STUFF: Seems that when a first lienholder was foreclosing it sent notice to the originator of the second lien even though MERS was shown to be mortgagee on the second lien (as nominee of the lender).  Of course, the second lien originator had previously transferred its interest to a new lender, and the new lender did not get notice of the foreclosure and was wiped out by the foreclosure by the first lienholder.  The question was whether MERS was entitled to notice of the foreclosure.  The answer was no. (See another description of the case here.)

The relationship that MERS has to (to holder of a loan) is more akin to that of a straw man than to a party possessing all the rights given a buyer. A mortgagee and a lender have intertwined rights that defy a clear separation of interests, especially when such a purported separation relies on ambiguous contractual language. The law generally understands that a mortgagee is not distinct from a lender: a mortgagee is “[o]ne to whom property is mortgaged: the mortgage creditor, or lender.” Black’s Law Dictionary 1034 (8th ed. 2004). By statute, assignment of the mortgage carries with it the assignment of the debt. K.S.A. 58-2323. Although MERS asserts that, under some situations, the mortgage document purports to give it the same rights as the lender, the document consistently refers only to rights of the lender, including rights to receive notice of litigation, to collect payments, and to enforce the debt obligation. The document consistently limits MERS to acting “solely” as the nominee of the lender.

Landmark Nat’l Bank v. Kesler, 2009 Kan. LEXIS 834 (Aug 28, 2009), here.

The Kansas Court went on:

What stake in the outcome of an independent action for foreclosure could MERS have? It did not lend the money to Kesler or to anyone else involved in this case. Neither Kesler nor anyone else involved in the case was required by statute or contract to pay money to MERS on the mortgage. [citation omitted](”MERS is not an economic ‘beneficiary’ under the Deed of Trust. It is owed and will collect no money from Debtors under the Note, nor will it realize the value of the Property through foreclosure of the Deed of Trust in the event the Note is not paid.”). If MERS is only the mortgagee, without ownership of the mortgage instrument, it does not have an enforceable right.

Landmark Nat’l Bank v. Kesler, 2009 Kan. LEXIS 834 (Aug 28, 2009), here.

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September 24, 2009 - Posted by | 1 | , ,

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