DARREL BLOMBERG points out that the 9th Circuit might be just as confused as trial judges about MERS. The Court acknowledges in the opinion that MERS owns nothing and in fact is intended to own nothing, acting merely as a placeholder for whatever entity is eventually “designated” by unknown players in the securitization game. Yet at page 16985, the court’s opinion contains the following paragraph:

“At the origination of the loan, MERS is designated in the deed of trust as a nominee for the lender and the lender’s “successors and assigns,” and as the deed’s “beneficiary” which holds legal title to the security interest conveyed. If the lender sells or assigns the beneficial interest in the loan to another MERS member, the change is recorded only in the MERS database, not in county records, because MERS con- tinues to hold the deed on the new lender’s behalf. If the ben- eficial interest in the loan is sold to a non-MERS member, the transfer of the deed from MERS to the new lender is recorded in county records and the loan is no longer tracked in the MERS system.”

Darrel’s point is that the court is confused, if it is reporting that MERS or any actual beneficiary is the holder of any title. The Deed of Trust is signed by the homeowner and vests title in a Trustee for the benefit of the beneficiary. If the beneficiary were the actual recipient of title, the non-judicial power of sale would be inapplicable. In order for non-judicial sale to occur, there MUST be an intervening “objective” party that provides some assurance of due diligence to protect the interests of the homeowner and the beneficiary.

It is possible that the Court was merely reporting the scheme of the “lenders” rather than the actuality, but if that is the case, the opinion is unclear. As it stands,  the opinion appears to be saying that the actual title is vested in the named beneficiary. If so, besides the point raised above, the deed on foreclosure would need to be issued and executed by MERS or whatever party was named as beneficiary. Thus the chain of title would be further corrupted by  having an on-record transfer from homeowner to trustee followed by an on-record transfer of title from beneficiary to whomever submitted the “credit bid.”

Darrel is right, I think. And I don’t think it is merely some scrivener’s error. It demonstrates the confusion of even the higher courts of appeal with the entire process of non-judicial sale, a CHOICE that is selected by “lenders” which was intended to be a very narrow window but has now become the greatest escape hatch of all time. Through that window pretender lenders are throwing millions of homes that otherwise could not have been foreclosed because the pretenders were just that — pretenders, who had no interest in the loan, and who had no right to submit a credit bid because they were not the creditor. How could US Bank or BOA et al submit a credit bid on a loan where they were neither the holder nor the owner of the debt, much less both the holder and the owner?

These parties are using non-judicial foreclosure to side-step the due process requirements of Arizona law and the law of other states that allow non-judicial foreclosure. If they truly could prevail in a well-pleaded complaint and prove their case according to established rules of evidence, they undoubtedly would have done so, just to prove that the borrowers’ cries of “foul” were mere technicalities and not based upon the reality that they took out a loan and now don’t want to pay for it. A few cases in each state and the argument would be over. The pretenders are avoiding reality — the one in which THEY are seeking to get a free house.

The 9th Circuit was mistaken in its language quoted above. MERS, or for that matter ANY beneficiary holds an equitable interest, not legal title. They are the beneficiaries of a trust enabled by statute in which the home is the asset, the trustor is the homeowner and the trustee is a party who will hold title until the loan obligation is satisfied. The beneficiary does not hold legal title. It holds no title at all. It is the beneficiary of the trust and is entitled to receive the proceeds of sale should the house be sold to satisfy the loan.

The error quoted here is an example of how the courts are attempting to accommodate the banks and in so doing trying to put their left foot in their right pocket. Adding the name “MERS” adds nothing to the rights of a beneficiary, because to even entertain any other construction would be to violate the enabling non-judicial statute, and violate the due process clauses in the U.S. and State constitutions. Where MERS is named as beneficiary, it has the right to receive the proceeds of sale if the home is sold in foreclosure. The problem is that MERS was intentionally named only as a placeholder (nominee, straw-man) and the deed of trust says so, because it distinguishes between the “lender” and the “beneficiary.”

Nothing in legislative notes in any state that I have researched indicates that this dichotomy between “lender” and “beneficiary” was considered, nor is there anything to suggest it would have been permitted by any of the legislatures if it had been considered. Quite the reverse is true.

The legislative presumption was that the lender and beneficiary were one and the same. The presumption was that non-judicial sale applied in non-adversarial  situations in which it was necessary to conduct a foreclosure sale, the lender was the beneficiary and therefore was also the creditor, and therefore capable of submitting a credit bid and worthy of receiving, without objection from the homeowner, the deed from the foreclosure sale. It is only in this context that enabling statutes for non-judicial sales are constitutional in their construction and application.

Here we have a different situation. MERS specifically disclaims any rights to such proceeds even though it is named as beneficiary. It does so consistent with the new distinction, created outside the enabling statutes for the power of sale, in which there is a  difference between “lender” and beneficiary.” So the “lender” is actually the beneficiary even though MERS is named as beneficiary. Although awkward, this might fly if the lender actually made the loan and was the creditor. But in most cases, the “lender” is also a placeholder. See any of the bankruptcy schedules and orders entered for mortgage originators that were designated as “lenders.”

Thus Cervantes stands on a loose foundation: we have a beneficiary that admits it is not entitled to anything and a lender who in fact is not entitled to anything because it was also just a placeholder for an undisclosed principal. Neither one of them can submit a credit bid and neither one of them has ever possessed the power to instruct the Trustee on the deed of trust to issue the notice of default and notice of sale. The original trustee would obviously have no part of a foreclosure sale in which it was receiving instructions from parties that never appeared on the deed of trust or the chain of title. And that, my friends, is the reason why we have yet another new entry of new terms without meaning: the substitute trustee.

When you think about it, the securitizers were obviously making it up as they went along, which is why there were lawyers who refused to draft any of these documents, because in their own words, they thought it was not just illegal it was probably criminal. By inserting a nominee lender and nominee beneficiary into the transaction without disclosing the principal from whom the loan was obtained and by substituting their own people as trustees, they were assured of grabbing millions of properties while appearing to comply with statutes. They neither complied with statutes nor with the standards of good faith and fairness required under those statutes.

But here is the rub for them which the banks are desperately trying to avoid: in the vast majority of transactions in which a securitized debt was involved, the use of a placeholder, in lieu of a real party in interest, was not just part of the transaction — it was the whole transaction. At the time of execution of the mortgage, there was no real party in interest named or described in the mortgage — the very thing that the legislature of each state meant to avoid when they passed recording statutes.

Thus at the time of execution, the homeowner borrower was being intentionally kept in the dark about the identity of the creditor. In fact, when the mortgage was recorded, the general public was being intentionally kept in the dark about the identity of the creditor. There is no state in which that kind of document gives rise to a valid lien against the property, nor could it. Recording is intended to provide notice to the world that someone has a lien. In the case of nearly all transactions involving securitized debt, the “someone” that had a lien was a fictitious character, like Donald Duck. In all such instances, state law provides that the mortgage  does not attach as a lien.

The promissory note is another story entirely subject to its own problems. Suffice it to say, that if you check with an attorney who is competent and licensed in the jurisdiction in which your property is located, you will find that your mortgage, while it exists, is not a lien against your property. That might sound like a contradiction in terms, but it is nevertheless true. Thus the obligation you owe, if any, is unsecured. Do not act on this until you consult with counsel.

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  1. Kathryn says:

    Did you research Minnesota non-judicial foreclosure (by advertisement) under MN Statute 580.02, etc? Also, what’s your take on the MN Supreme Court case Jackson / MERS 2008? This case seems to have slammed the door on homeowners trying to fight this rampamt fraud in MN. It’s pretty much impossible to find a lawyer who will touch this.



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