“The parties appear to have defined the word [nominee] in much the same way that the blind men of Indian legend described an elephant-their description depended on which part they were touching at any given time.” Landmark Nat’l Bank v. Kesler, 216 P.3d 158, 166-67 (Kan. 2010).
We’re all having some issues here as far as selecting or choosing which is what or whom… so lets take a close look at the following cases that spell out the who’s what below. Perhaps its a figment of bankers imagination?
CHAMBERS, J. – In the 1990s, the Mortgage Electronic Registration
System Inc. (MERS) was established by several large players in the mortgage
industry. MERS and its allied corporations maintain a private electronic
registration system for tracking ownership of mortgage-related debt. This system
allows its users to avoid the cost and inconvenience of the traditional public
recording system and has facilitated a robust secondary market in mortgage backed
debt and securities. Its customers include lenders, debt servicers, and financial
institutes that trade in mortgage debt and mortgage backed securities, among
others. MERS does not merely track ownership; in many states, including our
own, MERS is frequently listed as the “beneficiary” of the deeds of trust that
secure its customers’ interests in the homes securing the debts. Traditionally, the
“beneficiary” of a deed of trust is the lender who has loaned money to the
homeowner (or other real property owner). The deed of trust protects the lender by
giving the lender the power to nominate a trustee and giving that trustee the power
to sell the horne if the homeowner’s debt is not paid. Lenders, of course, have long
been free to sell that secured debt, typically by selling the promissory note signed
by the homeowner. Our deed of trust act, chapter 61.24 RCW, recognizes that the
beneficiary of a deed of trust at any one time might not be the original lender. The
act gives subsequent holders of the debt the benefit of the act by defining
“beneficiary” broadly as “the holder of the instrument or document evidencing the
obligations secured by the deed of trust.” RCW 61.24.005(2).
Judge John C. Coughenour of the Federal District Court for the Western
District of Washington has asked us to answer three certified questions relating to
two home foreclosures pending in King County. In both cases, MERS, in its role
as the beneficiary of the deed of trust, was informed by the loan servicers that the
homeowners were delinquent on their mortgages. MERS then appointed trustees
who initiated foreclosure proceedings. The primary issue is whether MERS is a
lawful beneficiary with the power to appoint trustees within the deed of trust act if
it does not hold the promissory notes secured by the deeds of trust. A plain reading
of the statute leads us to conclude that only the actual holder of the promissory
note or other instrument evidencing the obligation may be a beneficiary with the
power to appoint a trustee to proceed with a nonjudicial foreclosure on real
property. Simply put, if MERS does not hold the note, it is not a lawful
The question before us–and one that homeowners and MERS are litigating
under similar state laws1–is whether MERS and its members can
avail themselves of Oregon’s statutory, nonjudicial foreclosure process for trust deeds.
Plaintiff is a homeowner who, like many other borrowers, executed a trust deed that
named MERS as the “beneficiary.” After plaintiff defaulted on her loan repayment
obligation, she received a notice of trustee’s sale that identified MERS as the
“beneficiary” of the sale and that asserted a power of sale under the trust deed. Plaintiff
then filed this declaratory judgment and injunctive relief action to stop the trustee’s sale,
arguing that, notwithstanding the labels used in the trust deed, MERS is not the
“beneficiary” of the trust deed for purposes of Oregon’s nonjudicial foreclosure laws.
The trial court granted summary judgment in favor of MERS and the other
defendants (the loan servicer and the trustee), ruling that MERS was the designated
“beneficiary” of the trust deed and that each statutory requirement for nonjudicial
foreclosure had been met–including the requirement that any assignments of the trust
deed must be recorded in the county mortgage records, ORS 86.735(1). Plaintiff now
appeals, again arguing that the “Oregon legislature intended the ‘beneficiary’ to be the one
for whose benefit the [deed of trust] is given, which is the party who lent the money,”
rather than MERS. We agree and hold that the “beneficiary” of a trust deed under the
Oregon Trust Deed Act is the person designated in that trust deed as the person to whom
the underlying loan repayment obligation is owed. The trust deed in this case designates
the lender, GreenPoint Mortgage Funding, Inc., as the party to whom the secured
obligation is owed. And, because there is evidence that GreenPoint assigned its
beneficial interest in the trust deed but did not record that assignment, the trial court erred
in granting summary judgment in favor of defendants.
Black’s Law Dictionary defines a nominee as “[a] person designated to act in place of another, usually in a very limited way”.
The Mortgage Assignment
In his affidavit Hyman also asserts that, Keri Selman, the person who signed the assignment, served as an officer of both Countrywide and MERS. He appended a copy of a MERS corporate resolution which appointed all officers of Countrywide Financial Corporation as assistant secretaries and vice presidents of MERS.
Even putting aside the fact that there is no evidence that Countrywide Financial Corporation and Countrywide Home Loans Inc., are the same entity, the fact that MERS authorized Countrywide officers to act on its behalf, is not evidence of the converse. It is no evidence that Countrywide authorized MERS officers to act as officers of Countrywide. Further, the fact that Selman may have been an officer of both Countrywide and MERS does not alter the fact that she executed the assignment on behalf of MERS.
The face of the assignment indicates that MERS is assigning the mortgage as nominee of America’s Wholesale Lender (a trade name of Countrywide), and more [*3]importantly that Selman executed the assignment as assistant vice president of MERS.
Hyman’s assertion that the assignment incorrectly lists Selman’s title as assistant vice president of MERS, instead of assistant secretary and vice president of MERS, is of no relevance other than to demonstrate the casual and cavalier manner in which these transactions have been conducted.
While Hyman further asserts in his affidavit that Selman “under her authority as an Assistant Secretary and Vice president of MERS, expedited the Assignment of Mortgage process on behalf of MERS, with the approval and for the benefit of Countrywide,” he provides no evidence that Countrywide in fact approved or authorized the assignment.
Similarly, William C. Hultman, Secretary and Treasurer of MERS, states in a conclusory fashion in paragraph 8 of his affidavit that Countrywide “instructed MERS to assign the Mortgage to Bank of New York” without offering the basis for that assertion, other than it role as nominee.
Plaintiff claims, that by the terms of the mortgage MERS as nominee, was granted the right “(A) to exercise any or all of those rights, including, but not limited to the right to foreclose and sell the Property, and (B) to take any action required of the Lender including, but not limited to, releasing and canceling this Security Instrument.” However, this language is found on page two of the mortgage under the section “BORROWER’S TRANSFER TO LENDER OF RIGHTS IN THE PROPERTY” and therefore is facially an acknowledgment by the borrower. The fact that the borrower acknowledged and consented to MERS acting as nominee of the lender has no bearing on what specific powers and authority the lender granted MERS as nominee. The problem is not whether the borrower can object to the assignees’ standing, but whether the original lender, who is not before the Court, actually transferred its rights to the Plaintiff.
Furthermore, while the mortgage grants some rights to MERS it does not grant MERS the specific right to assign the mortgage. The only specific rights enumerated in the mortgage are the right to foreclose and sell the Property. The general language “to take any action required of the Lender including, but not limited to, releasing and canceling this Security Instrument” is not sufficient to give the nominee authority to alienate or assign a mortgage without getting the mortgagee’s explicit authority for the particular assignment.
The MERS Agreement
Plaintiff also argues that the agreement between MERs and its members grants MERS the authority to assign the mortgages of its members. However a reading of the MERS agreement reveals only that MERS can execute assignments on behalf of its members when directed to do so by the member or its servicer.
Plaintiff cites Rules of MERS membership, Rule 2 section 5. However what that rule requires is that a member to warrant to MERS that the mortgage either names MERS as mortgagee or that they prepare an assignment of mortgage naming MERs as mortgagee.
In this case MERS was named in paragraph (c) of the mortgage as Mortgagee of record for the purpose of recording the mortgage. Being the mortgagee of record for the [*4]purpose of recording the mortgage does not confer the right to assign the mortgage absent an instruction to do so from the lender. Paragraph 2 of the MERS terms and conditions provide that “MERS shall serve as mortgagee of record with respect to all such mortgage loans solely as a nominee in an administrative capacity”, and that “MERS agrees not to assert any rights (other than rights specified in the governing documents) with respect to such mortgage loans or mortgaged properties”. Assigning or alienating a mortgage without an explicit instruction from a lender to do so, is not acting in an administrative capacity.
Further, paragraph 6 of the terms and conditions provides that, “the MERS system is not a vehicle for creating or transferring beneficial interests in mortgage loans.” (emphasis added)
Lastly, Section 6 of the MERS agreement provides that MERS shall comply with the instructions from the holder of the notes and that in the absence of instructions from the holder may rely on instructions from the servicer with respect to transfers of beneficial ownership.
What the MERS agreements and terms and conditions provide, is that MERS may execute an assignment when instructed to do so by the lender or its servicer. This is nothing
more than saying that if granted authority by the lender, or its agent, to assign a mortgage, MERs can assign the mortgage on behalf of the lender.
To read the MERS agreement as granting MERS authority to assign any of the mortgages of its thousands of members, on its own volition, without the instruction or consent of the member would lead to a nonsensical result.
Plaintiff has failed to meet the very basic requirement that proof of an agent’s authority must be shown from the mouth of the principal not from the agent. Lexow & Jenkins, P.C. v. Hertz Commercial Leasing Corp., 122 AD2d 25, 504 N.Y.S.2d 192 (2nd Dept 1986), Siegel v. Kentucky Fried Chicken of Long Island, Inc., 108 AD2d 218, 488 N.Y.S.2d 744 (2nd Dept 1985).
As Plaintiff has not shown that it owned the note and mortgage, it has no standing to maintain this foreclosure action. Therefore the renewed motion for an order of reference must be denied and the action dismissed.
The Court has raised the standing issue sua sponte because, in this case, it goes to the integrity of the entire proceeding. For the court to allow a purported assignee to foreclose, in the absence of some proof that the original lender authorized the assignment of the mortgage to them, would cast doubt upon the validity of the title of any subsequent purchasers, should the original lender or successor challenge the assignment at a future date.
In LaSalle Bank, N.A. v. Bouloute, No. 41583/07, 2010 WL 3359552, at *2 (N.Y. Sup. Aug. 26, 2010), the court analyzed the relationship between MERS and the original lender and concluded that a nominee possesses few or no legally enforceable rights beyond those of a principal whom the nominee serves. The court stated:
MERS… recorded the subject mortgage as “nominee” for FFFC. The word “nominee” is defined as “[a] person designated to act in place of another, usu. in a very limited way” or “[a] party who holds bare legal title for the benefit of others.” (Black’s Law Dictionary 1076 [8th ed 2004]). “This definition suggests that a nominee possesses few or no legally enforceable rights beyond those of a principal whom the nominee serves.” (Landmark National Bank v. Kesler, 289 Kan 528, 538 ). The Supreme Court of Kansas, in Landmark National Bank, 289 Kan at 539, observed that:
The legal status of a nominee, then, depends on the context of the relationship of the nominee to its principal. Various courts have interpreted the relationship of MERS and the lender as an agency relationship. See In re Sheridan, 2009 WL631355, at *4 (Bankr. D. Idaho, March 12, 2009) (MERS “acts not on its own account. Its capacity is representative.”); Mortgage Elec. Registrations Systems, Inc. v. Southwest, 2009 Ark. 152 -, 301 SW3d 1, 2009 WL 723182 (March 19, 2009) (“MERS, by the terms of the deed of trust, and its own stated purposes, was the lender’s agent”); La Salle Nat. Bank v. Lamy, 12 Misc.3d 1191[A], at *2 [Sup Ct, Suffolk County 2006])… (“A nominee of the owner of a note and mortgage may not effectively assign the note and mortgage to another for want of an ownership interest in said note and mortgage by the nominee.”). LaSalle Bank, N.A. v. Bouloute, No. 41583/07, 2010 WL 3359552, at *2; see also Bank of New York v. Alderazi, 900 N.Y.S.2d 821, 823 (N.Y. Sup. Ct. 2010) (nominee is “‘[a] person designated to act in place of another, usually in a very limited way.’”) (quoting Black’s Law Dictionary)).
In LaSalle Bank, N.A. v. Bouloute the court concluded that MERS must have some evidence of authority to assign the mortgage in order for an assignment of a mortgage by MERS to be effective. Evidence of MERS’s authority to assign could be by way of a power of attorney or some other document executed by the original lender. See Bouloute, 2010 WL 3359552, at *1; Alderazi, 900 N.Y.S.2d at 823 (“‘To have a proper assignment of a mortgage by an authorized agent, a power of attorney is necessary to demonstrate how the agent is vested with the authority to assign the mortgage.’”) (quoting HSBC Bank USA, NA v. Yeasmin, 866 N.Y.S.2d 92 (N.Y. Sup. Ct. 2008)).
Other than naming MERS as “nominee”, the Mortgage also provides that the Borrower transfers legal title to the subject property to MERS, as the Lender’s nominee, and acknowledges MERS’s rights to exercise certain of the Lender’s rights under state law. This too, is insufficient to bestow any authority upon MERS to assign the mortgage. In Bank of New York v. Alderazi, the court found “[t]he fact that the borrower acknowledged and consented to MERS acting as nominee of the lender has no bearing on what specific powers and authority the lender granted MERS.” Alderazi, 900 N.Y.S.2d at 824. Even if it did bestow some authority upon MERS, the court in Alderazi found that the mortgage did not convey the specific right to assign the mortgage.
The Court agrees with the reasoning and the analysis in Bouloute and Alderazi, and the other cases cited herein and finds that the Mortgage, by naming MERS a “nominee,” and/or “mortgagee of record” did not bestow authority upon MERS to assign the Mortgage.
The MERS membership rules
According to MERS, in addition to the alleged authority granted to it in the Mortgage itself, the documentation of the Assignment of Mortgage comports with all the legal requirements of agency when read in conjunction with the overall MERS System. MERS’s argument requires that this Court disregard the specific words of the Assignment of Mortgage or, at the very least, interpret the Assignment in light of the overall MERS System of tracking the beneficial interests in mortgage securities. MERS urges the Court to look beyond the four corners of the Mortgage and take into consideration the agency relationship created by the agreements entered into by the lenders participating in the MERS System, including their agreement to be bound by the terms and conditions of membership.
MERS has asserted that each of its member/lenders agrees to appoint MERS to act as its agent. In this particular case, the Treasurer of MERS, William C. Hultman, declared under penalty of perjury that “pursuant to the MERS’s Rules of Membership, Rule 2, Section 5… First Franklin appointed MERS to act as its agent to hold the Mortgage as nominee on First Franklin’s behalf, and on behalf of First Franklin’s successors and assigns.” (Affirmation of William C. Hultman, ¶7).
However, Section 5 of Rule 2, which was attached to the Hultman Affirmation as an exhibit, contains no explicit reference to the creation of an agency or nominee relationship. Consistent with this failure to explicitly refer to the creation of an agency agreement, the rules of membership do not grant any clear authority to MERS to take any action with respect to the mortgages held by MERS members, including but not limited to executing assignments. The rules of membership do require that MERS members name MERS as “mortgagee of record” and that MERS appears in the public land records as such. Section 6 of Rule 2 states that “MERS shall at all times comply with the instructions of the holder of mortgage loan promissory notes,” but this does not confer any specific power or authority to MERS.
Under New York agency laws, an agency relationship can be created by a “manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and the consent by the other to act.” Meisel v. Grunberg, 651 F.Supp.2d 98, 110 (S.D.N.Y. 2009) (citing N.Y. Marine & Gen. Ins. Co. v. Tradeline, L.L.C., 266 F.3d 112, 122 (2d Cir.2001)).
‘Such authority to act for a principal may be actual or apparent.’… Actual authority arises from a direct manifestation of consent from the principal to the agent…. The existence of actual authority ‘depends upon the actual interaction between the putative principal and agent, not on any perception a third party may have of the relationship.’
Meisel v. Grunberg, 651 F.Supp.2d at 110 (citations omitted).
Because MERS’s members, the beneficial noteholders, purported to bestow upon MERS interests in real property sufficient to authorize the assignments of mortgage, the alleged agency relationship must be committed to writing by application of the statute of frauds. Section 5-703(2) of the New York General Obligations Law states that:
An estate or interest in real property, other than a lease for a term not exceeding one year, or any trust or power, over or concerning real property, or in any manner relating thereto, cannot be created, granted, assigned, surrendered or declared, unless by act or operation of law, or by a deed or conveyance in writing, subscribed by the person creating, granting, assigning, surrendering or declaring the same, or by his lawful agent, thereunto authorized by writing.
See N.Y. Gen. Oblig. Law § 5-703(1) (McKinney 2011); Republic of Benin v. Mezei, No. 06 Civ. 870 (JGK), 2010 WL 3564270, at *3 (S.D.N.Y. Sept. 9, 2010); Urgo v. Patel, 746 N.Y.S.2d 733 (N.Y. App. Div. 2002) (finding that unwritten apparent authority is insufficient to satisfy the statute of frauds) (citing Diocese of Buffalo v. McCarthy, 91 A.D.2d 1210 (4th Dept. 1983)); see also N.Y. Gen. Oblig. Law § 5-1501 (McKinney 2011) (“‘agent’ means a person granted authority to act as attorney-in-fact for the principal under a power of attorney…”). MERS asks this Court to liberally interpret the laws of agency and find that an agency agreement may take any form “desired by the parties concerned.” However, this does not free MERS from the constraints of applicable agency laws.
The Court finds that the record of this case is insufficient to prove that an agency relationship exists under the laws of the state of New York between MERS and its members. According to MERS, the principal/agent relationship among itself and its members is created by the MERS rules of membership and terms and conditions, as well as the Mortgage itself. However, none of the documents expressly creates an agency relationship or even mentions the word “agency.” MERS would have this Court cobble together the documents and draw inferences from the words contained in those documents. For example, MERS argues that its agent status can be found in the Mortgage which states that MERS is a “nominee” and a “mortgagee of record.” However, the fact that MERS is named “nominee” in the Mortgage is not dispositive of the existence of an agency relationship and does not, in and of itself, give MERS any “authority to act.” See Steinbeck v. Steinbeck Heritage Foundation, No. 09-18360cv, 2010 WL 3995982, at *2 (2d Cir. Oct. 13, 2010) (finding that use of the words “attorney in fact” in documents can constitute evidence of agency but finding that such labels are not dispositive); MERS v. Saunders, 2 A.3d 289, 295 (Me. 2010) (designation as the ‘mortgagee of record’ does not qualify MERS as a “mortgagee”). MERS also relies on its rules of membership as evidence of the agency relationship. However, the rules lack any specific mention of an agency relationship, and do not bestow upon MERS any authority to act. Rather, the rules are ambiguous as to MERS’s authority to take affirmative actions with respect to mortgages registered on its system.
In addition to casting itself as nominee/agent, MERS seems to argue that its role as “mortgagee of record” gives it the rights of a mortgagee in its own right. MERS relies on the definition of “mortgagee” in the New York Real Property Actions and Proceedings Law Section 1921 which states that a “mortgagee” when used in the context of Section 1921, means the “current holder of the mortgage of record… or their agents, successors or assigns.” N.Y. Real Prop. Acts. L. § 1921 (McKinney 2011). The provisions of Section 1921 relate solely to the discharge of mortgages and the Court will not apply that definition beyond the provisions of that section in order to find that MERS is a “mortgagee” with full authority to perform the duties of mortgagee in its own right. Aside from the inappropriate reliance upon the statutory definition of “mortgagee,” MERS’s position that it can be both the mortgagee and an agent of the mortgagee is absurd, at best.
Adding to this absurdity, it is notable in this case that the Assignment of Mortgage was by MERS, as nominee for First Franklin, the original lender. By the Movant’s and MERS’s own admission, at the time the assignment was effectuated, First Franklin no longer held any interest in the Note. Both the Movant and MERS have represented to the Court that subsequent to the origination of the loan, the Note was assigned, through the MERS tracking system, from First Franklin to Aurora, and then from Aurora to U.S. Bank. Accordingly, at the time that MERS, as nominee of First Franklin, assigned the interest in the Mortgage to U.S. Bank, U.S. Bank allegedly already held the Note and it was at U.S. Bank’s direction, not First Franklin’s, that the Mortgage was assigned to U.S. Bank. Said another way, when MERS assigned the Mortgage to U.S. Bank on First Franklin’s behalf, it took its direction from U.S. Bank, not First Franklin, to provide documentation of an assignment from an entity that no longer had any rights to the Note or the Mortgage. The documentation provided to the Court in this case (and the Court has no reason to believe that any further documentation exists), is stunningly inconsistent with what the parties define as the facts of this case.
However, even if MERS had assigned the Mortgage acting on behalf of the entity which held the Note at the time of the assignment, this Court finds that 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.
This Court finds that MERS’s theory that it can act as a “common agent” for undisclosed principals is not support by the law. The relationship between MERS and its lenders and its distortion of its alleged “nominee” status was appropriately described by the Supreme Court of Kansas as follows: “The parties appear to have defined the word [nominee] in much the same way that the blind men of Indian legend described an elephant-their description depended on which part they were touching at any given time.” Landmark Nat’l Bank v. Kesler, 216 P.3d 158, 166-67 (Kan. 2010).
MERS asserts that Plaintiff has not shown an unfair or deceptive practice on its part, has not shown how any act of MERS impacts the public interest, and presents nothing showing injuries caused by an unfair or deceptive practice by MERS. The Court disagrees. Like her other claims arising under the Deed of Trust Act, Plaintiff’s CPA claims depend on whether MERS may be the beneficiary (or nominee of the beneficiary) under Washington state law. MERS’s attempt to serve as the beneficiary may have been improper under state law and it may have led to widespread confusion regarding home ownership, payment delivery, and negotiable positions. If MERS violated state law, its conduct may very well be classified as “unfair” under the CPA. There is no doubt that MERS’s conduct impacts the public interest. See Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 719 P.2d 531, 537-38 (Wash. 1986) (listing factors for determining public interest); Peterson, supra, at 1362 (“Although MERS is a young company, 60 million mortgage loans are registered on its system.”); R. K. Arnold, Yes, There Is Life on MERS, 11 Prob. & Prop. 32, 33 (1997) (“Some have called MERS the most significant event for the mortgage industry since the formation of Fannie Mae and Freddie Mac. Others have compared it to the creation of uniform mortgage instruments, which have become standard throughout the residential mortgage industry. This suggests that the journey to MERS will have a tremendous effect on the mortgage industry.”). And the harm Plaintiff may have suffered because of MERS’s conduct may include expending resources to avert an unlawful foreclosure and preventing Plaintiff from identifying the real beneficiary and negotiating a new arrangement to avoid foreclosure.
Plaintiff admits that she has been delinquent in her mortgage payments. A ruling favorable to Plaintiff in this case and others like it cannot and should not create a windfall for all homeowners to avoid upholding their end of the mortgage bargain—paying for their homes. But a homeowner’s failure to make payments cannot grant lenders, trustees, and so-called beneficiaries like MERS license to ignore state law and foreclose using any means necessary. Whether these and similar defendants complied with Washington state law remains unclear.
Gomes also relied upon the borrower’s acknowledgement of MERS’ authority to foreclose as nominal beneficiary. Gomes, 192 Cal. App. 4th at 1157-58; see also Pantoja, 640 F. Supp. 2d at 1189- 90. Even if US Bank had not replaced MERS as the foreclosing beneficiary by the time of the foreclosure here, MERS still had no authority to nonjudicially foreclose under Salazar’s DOT under its express terms. The Lender, not MERS, had the right to “invoke the power of sale” under the DOT, ‘l[ 13 22, here. This acknowledgement of MERS’ authority also did not extend so far as to permit it to foreclose. Salazar’s acknowledgement was limited to the situation where MERS’ enforcement actions were “necessary to comply with law or custom” (emphasis added). Whatever “necessary to comply with law or custom” means, and there is no evidence in the record to explain it, it should not mean that US Bank or MERS can contract away their obligations to comply with the foreclosure statutes.12
MERS System is not an Alternative to Statutory Foreclosure Law
The Court also rejects US Bank’s invitation to overlook the statutory foreclosure mandates of California law, and rely upon MERS as an extra-judicial commercial alternative.14 The full scope of California’s nonjudicial foreclosure law, found at Civil Code sections 2020-2955, exhaustively covers every aspect of the real estate foreclosure process and must be respected. I. E. Associates v. Safe co Title Ins. Co., 39 Cal. 3d 281, 285 (1985) (refusing to supplement the notice requirements found in Civil Code section 2924); Dimock, 81 Cal. App. 4th at 874 (holding a sale under a deed of trust by former trustee void as failing to comply with Civil Code section 2934); Moeller v. Lien, 25 Cal. App.4th 822, 834 (1994) (holding Civil Code section 2924 includes a myriad of rules relating to notice and right to cure, but no relief from forfeiture under Civil Code section 3275). To overlook statutory foreclosure requirements would require legislative action, of which the Court is not capable. Westside Apts., LLC v. Butler (In re Butler), 271 B.R. 867, 873 (Bankr. C.D. Cal. 2002). This Court instead joins the courts in other states that have rejected MERS’ offer of an alternative to the public recording system. In re Agard, No. 10-77338-reg, 2011 Bankr. LEXIS 488, at *58-*59 (Bankr. E.D.N.Y. Feb. 10, 2011); In re McCoy, No. J0-63814-fra13, 2011 Bankr. LEXIS 534, at *10 (Bankr. Or. Feb. 7, 2011); MERS v. Saunders, 2 A.3d 289, 295 (Me. 2010); LaSalle Bank Nat’/ Ass’n v. Lamy, No. 030049/2005, 2006 NY Slip Op 51534U, slip op. 2 (N.Y. Sup. Ct. 2006).
US Bank as the foreclosing assignee was obligated to record its interest before the sale despite MERS’ initial role under the DOT, and this role cannot be used to bypass Civil Code section 2932.5.
Since US Bank failed to record its interest, Salazar has a valid property interest in his residence that is entitled to protection through the automatic stay.
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The Nature of MERS’ Business
- MERS does not take applications for, underwrite or negotiate mortgage loans.
- MERS does not make or originate mortgage loans to consumers.
- MERS does not extend any credit to consumers.
- MERS has no role in the origination or original funding of the mortgages or deeds of trust for which it serves as “nominee”.
- MERS does not service mortgage loans.
- MERS does not sell mortgage loans.
- MERS is not an investor who acquires mortgage loans on the secondary market.
- MERS does not ever receive or process mortgage applications.
- MERS simply holds mortgage liens in a nominee capacity and through its electronic registry, tracks changes in the ownership of mortgage loans and servicing rights related thereto.
- MERS© System is not a vehicle for creating or transferring beneficial interests in mortgage loans.
- MERS is not named as a beneficiary of the alleged promissory note.
Ownership of Promissory Notes or Mortgage Indebtedness
- MERS is never the owner of the promissory note for which it seeks foreclosure.
- MERS has no legal or beneficial interest in the promissory note underlying the security instrument for which it serves as “nominee”.
- MERS has no legal or beneficial interest in the loan instrument underlying the security instrument for which it serves as “nominee”
- MERS has no legal or beneficial interest in the mortgage indebtedness underlying the security instrument for which it serves as “nominee”.
- MERS has no interest at all in the promissory note evidencing the mortgage indebtedness.
- MERS is not a party to the alleged mortgage indebtedness underlying the security instrument for which it serves as “nominee”.
- MERS has no financial or other interest in whether or not a mortgage loan is repaid.
- MERS is not the owner of the promissory note secured by the mortgage and has no rights to the payments made by the debtor on such promissory note.
- MERS does not make or acquire promissory notes or debt instruments of any nature and therefore cannot be said to be acquiring mortgage loans.
- MERS has no interest in the notes secured by mortgages or the mortgage servicing rights related thereto.
- MERS does not acquire any interest (legal or beneficial) in the loan instrument (i.e., the promissory note or other debt instrument).
- MERS has no rights whatsoever to any payments made on account of such mortgage loans, to any servicing rights related to such mortgage loans, or to any mortgaged properties securing such mortgage loans.
- The note owner appoints MERS to be its agent to only hold the mortgage lien interest, not to hold any interest in the note.
- MERS does not hold any interest (legal or beneficial) in the promissory notes that are secured by such mortgages or in any servicing rights associated with the mortgage loan.
- The debtor on the note owes no obligation to MERS and does not pay MERS on the note.
Beneficial Interest in the Mortgage Indebtedness
- MERS holds legal title to the mortgage for the benefit of the owner of the note.
- The beneficial interest in the mortgage (or person or entity whose interest is secured by the mortgage) runs to the owner and holder of the promissory note and/or servicing rights thereunder.
- MERS has no interest at all in the promissory note evidencing the mortgage loan.
- MERS does not acquire an interest in promissory notes or debt instruments of any nature.
- The beneficial interest in the mortgage (or the person or entity whose interest is secured by the mortgage) runs to the owner and holder of the promissory note (NOT MERS).
MERS’ Rights To Control the Foreclosure
- MERS must all times comply with the instructions of the holder of the mortgage loan promissory notes.
- MERS only acts when directed to by its members and for the sole benefit of the owners and holders of the promissory notes secured by the mortgage instruments naming MERS as nominee owner.
- MERS’ members employ and pay the attorneys bringing foreclosure actions in/via MERS’ name.
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