14 December 2015

MERS is In the News Again.

I am referring to the Mortgage Electronic Registration Systems, not Middle East Respiratory Syndrome.

To refresh your memory, it is an electronic registry created by the big banks.

They created it to evade registry fees when they sliced and diced mortgages, and sold them to greater fools.

Additionally, it creates a shell game where all sorts of skulduggery is hidden in a labyrinth of obfuscation.

The banks, and MERS, have claimed that it does, and does not, own the mortgage, and now the Tennessee Supreme Court has ruled that they have no property interests in the mortgages that they transfer:
Chattanooga, Tennessee — The Chattanoogan.com news site is reporting that in a lawsuit filed to set aside a tax sale of mortgaged land in Hamilton County, the Tennessee Supreme Court has held that Mortgage Electronic Registration Systems, Inc. was not entitled to prior notice of the sale because MERS did not have an interest in the land that is protected under the Due Process Clause of the U.S. Constitution!

READ THE OPINION HERE: MERS v DITTO_TN Supreme Court rules against MERS! The Tennessee Supreme Court is the first to rule in such a manner!

The site is reporting that the purchaser of the Hamilton County land borrowed money from a MERS member lender, signing a promissory note secured by the property by a deed of trust, which was recorded in the Hamilton County Register of Deeds office. The deed of trust described MERS as “a separate corporation that is acting solely as nominee for [the lender]” and said that MERS was the beneficiary of the deed of trust “solely as nominee” for the lender and any successor to the lender. As is customary in the MERS® System, the originating lender sold the note to another lender. Subsequent to that, the property owners failed to pay their 2006 property taxes, so Hamilton County initiated tax foreclosure proceedings.

The county sent notice of the foreclosure and the tax sale to the borrowers and to the original lender, but not to MERS. Eventually, the property was sold at a tax sale to Carlton Ditto. Just like in the Cabrera, Robinson and Johnston cases in California, after learning of the action, MERS filed a lawsuit to set aside the tax sale, naming Hamilton County and Mr. Ditto as defendants. MERS argued that Hamilton County violated its constitutional right to due process of law by selling the land without notifying MERS. This crap is the same argument propounded in the California cases, where MERS claimed that the deed of trust gave MERS its own independent interest in the Hamilton County property, so it was constitutionally entitled to prior notice of the tax sale. In California, MERS also wanted the courts to rule that the California Quiet Title Statutes were unconstitutional and that the judges who rendered the quiet title judgments in all three cases were civil co-conspirators, something this blogger has learned has infuriated the state judges! (I sure hope MERS doesn’t show up in front of one of them any time soon! LOL)


The Supreme Court considered whether Hamilton County was required to give MERS prior notice of the tax sale. The Court recognized that the Due Process Clause of the U.S. Constitution generally applies when the government sells a taxpayer’s land to satisfy unpaid taxes, so if the government fails to give the taxpayer such notice, the sale is unconstitutional and void. The Court then considered whether MERS had an interest in the land that was protected under the Constitution. The Court first noted that the deed of trust for the Hamilton County transaction used contradictory language to describe the role of MERS in the property loan transaction; it described MERS as a “beneficiary” but also said that MERS acted “solely as nominee” for the lender. Considering the parties’ roles in the loan transaction, the Court also held that MERS was not in fact a beneficiary but only an agent for the true beneficiary, the note holder, and that MERS acquired no independent interest in the Hamilton County land. Because MERS did not have an interest that was constitutionally protected, Hamilton County was not required to give MERS notice before it sold the land to pay the unpaid tax obligation. For this reason, the Supreme Court affirmed the trial court’s judgment in favor of Hamilton County and the tax sale purchaser, Mr. Ditto.


From gandering at the opinion issued by the Court, it appears they quoted MERS’s own counsel on company policies! Many attorneys have told me, as have certain legislators in DC, that just because MERS has a “business model” doesn’t mean: (1) it’s perfectly okay to rip off 3,007 counties across America in denying fees while obfuscating the real parties in interest from the borrowers; and (2) it should be accorded the same interests as the Lender, especially when the Lender doesn’t have a recorded (perfected) interest that still could be challenged.
(emphasis original)

Mortgage and property law has developed over hundreds of years through trial and error.

This process was pushed along by the very real need for property owners, lenders, and local governments to have certainty and protections on a process that would otherwise be rife with criminality and risk.

MERS was developed to short circuit that process, and it's nice that some courts are recognizing that just because someone in Wall Street comes up with a way to make money, it doesn't mean that it is legal.

FYI, you can also read a somewhat more sedate account of these cases, you can go here.


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