Ellen Brown, August 18th, 2010
WEBofDEBT

Over 62 million mortgages are now held in the name of MERS, an electronic recording system devised by and for the convenience of the mortgage industry. A California bankruptcy court, following landmark cases in other jurisdictions, recently held that this electronic shortcut makes it impossible for banks to establish their ownership of property titles—and therefore to foreclose on mortgaged properties. The logical result could be 62 million homes that are foreclosure-proof.

Mortgages bundled into securities were a favorite investment of speculators at the height of the financial bubble leading up to the crash of 2008. The securities changed hands frequently, and the companies profiting from mortgage payments were often not the same parties that negotiated the loans. At the heart of this disconnect was the Mortgage Electronic Registration System, or MERS, a company that serves as the mortgagee of record for lenders, allowing properties to change hands without the necessity of recording each transfer.

MERS was convenient for the mortgage industry, but courts are now questioning the impact of all of this financial juggling when it comes to mortgage ownership. To foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. But MERS has acknowledged, and recent cases have held, that MERS is a mere “nominee”—an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. Recent court opinions stress that this defect is not just a procedural but is a substantive failure, one that is fatal to the plaintiff’s legal ability to foreclose.

That means hordes of victims of predatory lending could end up owning their homes free and clear—while the financial industry could end up skewered on its own sword.

California Precedent

The latest of these court decisions came down in California on May 20, 2010, in a bankruptcy case called In re Walker, Case no. 10-21656-E–11. The court held that MERS could not foreclose because it was a mere nominee; and that as a result, plaintiff Citibank could not collect on its claim. The judge opined:

Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.

In support, the judge cited In Re Vargas (California Bankruptcy Court); Landmark v. Kesler (Kansas Supreme Court); LaSalle Bank v. Lamy (a New York case); and In Re Foreclosure Cases (the “Boyko” decision from Ohio Federal Court). (For more on these earlier cases, see here, here and here.) The court concluded:

Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.

The broad impact the case could have on California foreclosures is suggested by attorney Jeff Barnes, who writes:

This opinion . . . serves as a legal basis to challenge any foreclosure in California based on a MERS assignment; to seek to void any MERS assignment of the Deed of Trust or the note to a third party for purposes of foreclosure; and should be sufficient for a borrower to not only obtain a TRO [temporary restraining order] against a Trustee’s Sale, but also a Preliminary Injunction barring any sale pending any litigation filed by the borrower challenging a foreclosure based on a MERS assignment.

While not binding on courts in other jurisdictions, the ruling could serve as persuasive precedent there as well, because the court cited non-bankruptcy cases related to the lack of authority of MERS, and because the opinion is consistent with prior rulings in Idaho and Nevada Bankruptcy courts on the same issue.

What Could This Mean for Homeowners?

Earlier cases focused on the inability of MERS to produce a promissory note or assignment establishing that it was entitled to relief, but most courts have considered this a mere procedural defect and continue to look the other way on MERS’ technical lack of standing to sue. The more recent cases, however, are looking at something more serious. If MERS is not the title holder of properties held in its name, the chain of title has been broken, and no one may have standing to sue. In MERS v. Nebraska Department of Banking and Finance, MERS insisted that it had no actionable interest in title, and the court agreed.

An August 2010 article in Mother Jones titled “Fannie and Freddie’s Foreclosure Barons” exposes a widespread practice of “foreclosure mills” in backdating assignments after foreclosures have been filed. Not only is this perjury, a prosecutable offense, but if MERS was never the title holder, there is nothing to assign. The defaulting homeowners could wind up with free and clear title.

In Jacksonville, Florida, legal aid attorney April Charney has been using the missing-note argument ever since she first identified that weakness in the lenders’ case in 2004. Five years later, she says, some of the homeowners she’s helped are still in their homes. According to a Huffington Post article titled “‘Produce the Note’ Movement Helps Stall Foreclosures”:

Because of the missing ownership documentation, Charney is now starting to file quiet title actions, hoping to get her homeowner clients full title to their homes (a quiet title action ‘quiets’ all other claims). Charney says she’s helped thousands of homeowners delay or prevent foreclosure, and trained thousands of lawyers across the country on how to protect homeowners and battle in court.

Criminal Charges?

Other suits go beyond merely challenging title to alleging criminal activity. On July 26, 2010, a class action was filed in Florida seeking relief against MERS and an associated legal firm for racketeering and mail fraud. It alleges that the defendants used “the artifice of MERS to sabotage the judicial process to the detriment of borrowers;” that “to perpetuate the scheme, MERS was and is used in a way so that the average consumer, or even legal professional, can never determine who or what was or is ultimately receiving the benefits of any mortgage payments;” that the scheme depended on “the MERS artifice and the ability to generate any necessary ‘assignment’ which flowed from it;” and that “by engaging in a pattern of racketeering activity, specifically ‘mail or wire fraud,’ the Defendants . . . participated in a criminal enterprise affecting interstate commerce.”

Ellen Brown wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Ellen developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she shows how the Federal Reserve and “the money trust” have usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are webofdebt.com, ellenbrown.com, and public-banking.com.

DISMISSED!

May 20, 2010

Today, a Key West, Florida Circuit Court Judge dismissed a foreclosure action filed by Florida Default Law Group (FDLG), which was representing Bank of New York as the alleged “Trustee” of a Bear Stearns securitized mortgage loan trust. The borrower, who was represented by FDN’s Jeff Barnes, Esq., had served discovery on FDLG in late February, 2009. FDLG filed one of its form “open ended” Motions for Extension of Time to respond to the discovery (that being with no date certain for the response). FDLG failed to respond to Mr. Barnes’ good-faith request as to how much time FDLG needed to respond to the borrower’s discovery. The first “response” from FDLG came over 13 months later when FDLG objected to practically everything which Mr. Barnes asked for.

FDLG also failed to comply with the Court’s Pretrial Order, and had a history in the case of violating court orders and actually paid sanctions on prior Motion filed by Mr. Barnes. The Court dismissed the case and conditioned any re-filing on full compliance with Mr. Barnes’ discovery and the Court’s Orders.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

May 12, 2010

New York Judge Arthur Schack has dismissed another foreclosure case, this time with prejudice, as a result of an illegal MERS assignment which was “executed” by an attorney in the office of counsel for the Plaintiff, finding that the alleged assignment violated the New York Rules of Professional Conduct as doing so was a conflict of interest.

The Plaintiff was US Bank, N.A. as Trustee for the SG Mortgage Securities Asset-Backed Certificates, Series 2006-FRE2. The original lender was Fremont Investment and Loan. The purported Assigment of Mortgage (which did not assign the Note at all) was executed by a New York attorney as “Assistant Secretary and Vice-President” of MERS. As this attorney, signing for the assignor, listed her business address as that of the law office of the Plaintiff’s counsel (Steven J. Baum P.C.), which represented the assignee US Bank as Trustee, the Court found this to be a conflict of interest in violation of 22 NYCRR sec. 1200.0 Rules of Professional Conduct. Judge Schack dismissed US Bank’s foreclosure action with prejudice and cancelled the Lis Pendens.

We know that there are literally hundreds (if not thousands) of these MERS assignments which have been executed by paralegals and others from the law offices of the Plaintiff’s foreclosure counsel as alleged “Vice Presidents” or “Assistant Secretarys” of MERS. This decision indicates that all such purported assignments are most likely illegal, void, and that any foreclosure action based on such an assignment should be dismissed with prejudice.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

RELATED STORY: Lasalle Bank N.A. v Smith 2010: NY Slip Judge Schack does it again! Slams BAUM Law Firm!

[ipaper docId=31290340 access_key=key-1up82qp1gfs9guxgg2a5 height=600 width=600 /]

Mr. Garfield is a GENIUS

Wells Fargo’s Attorney– “We are the HOLDER of THE NOTE!

Later the attorney stated “Excuse me, I MISSTATED…We are ONLY the SERVICER”

Mr. Garfield “At which point I gave the lawyer an elbow, and I said “That means WE DON’T HAVE A HOLDER OF THE NOTE in this court room.” 

I really enjoy MR. BARNES work!

July 23, 2008

William Jeff Barnes, Esq. 1515 North Federal Highway
Atrium Building, Suite 300
Member of Florida and Colorado Bars Boca Raton, Florida 33432
Certified Mediator (Florida, Minnesota)
Certified Arbitrator (Florida) telephone: (561) 864-1067
telefax: (702) 804-8137
Ruth Barnes: International/Multilingual
Certified Mediator (Florida, Minnesota) e-mail: wjbarnes@cox.net
Certified Arbitrator (Florida)

July 2, 2008

VIA FAX AND MAIL
(954) 233-8333
Maria M. Solomon, Esq.
Law Offices of David J. Stern, P.A.
801 South University Drive, Suite 500
Plantation, Florida 33324

Re: Wells Fargo Bank, N.A. v. Defendant (Key West, Florida): FORMAL STATUTORY

DEMAND TO DISMISS FORECLOSURE ACTION WITH PREJUDICE, CLEAR
TITLE TO REAL PROPERTY, REFUND MONIES PAID, AND FOR PAYMENT
OF ATTORNEYS’ FEES AND COSTS PURSUANT TO FLA.STAT. SEC. 57.105

Dear Ms. Solomon:
This letter is being provided to you, the Law Offices of David J. Stern, P.A., and your client Wells Fargo Bank, N.A. (Plaintiff in the Action identified herein) as formal notice, pursuant to the matters herein and Fla.Stat. sec. 57.105, of this Firm’s client Defendant demand that you immediately and forthwith dismiss, with prejudice, that certain civil action styled Wells Fargo Bank, N.A. v. Defendant et al., 16th Judicial Circuit Court Case No. 2007-CA-1120-K (Key West, Florida, hereafter referred to as the “Action”); to provide clear title to the real property the subject of the Action; for refund of all monies paid by Defendant incident to the alleged “loan” the subject of the Action; and for payment of attorneys’ fees and costs which are awardable under various Federal and state statutes violated by your filing of the Action. This letter is also being sent as formal notice of Defendant’s Motion for Sanctions (copy attached hereto) which will be filed and set for hearing unless, pursuant to Fla.Stat. sec. 57.105(4), within twenty-one (21) days of today, Defendant’s demands as set forth herein are not complied with in writing confirmed by fax receipt, by this Firm, of the July 2, 2008 57.105 demand and notice to Maria Solomon, Esq. re: Wells Fargo Bank, N.A. v. Defendant et al., page 2 of 3

necessary documents to legally effect the demands made herein. The facts supporting this demand and the attached Motion are as follows, which are admissions by you, as an agent of the Law Offices of David J. Stern, P.A., in the Complaint which you filed:

(a) On or about August 22, 2007, you, as an agent and attorney of the Law Offices of David J. Stern, P.A., caused a civil action for foreclosure and to “enforce loan documents” to be filed in the 16th Judicial Circuit in and for Monroe County, Florida, which has been assigned case number 2007-CA-1120-K;

(b) In paragraph “5.” of Count I of the Complaint, you affirmatively represent to the Court that “The Plaintiff owns and holds the Note and Mortgage”;

(c) In paragraph “4? of Count I, you affirmatively represent to the Court that the mortgage was “subsequently” assigned to the Plaintiff “by virtue of an assignment to be recorded” (that being some time in the future);

(d) In paragraph “20? of Count II, you affirmatively represent to the Court that “The Plaintiff is not presently in possession of the Note and Mortgage” and “the Plaintiff cannot reasonably obtain possession of the Note and Mortgage because THEIR whereabouts cannot be determined (original emphasis):

(e) In paragraph “22? of Count II, you affirmatively represent to the Court that “The Plaintiff will agree to the entry of a Final Judgment of Foreclosure wherein it will be required to indemnify and hold harmless the Defendant(s) [sic] Defendant, from any loss they [sic] may occur by reason of a claim by another person to enforce the lost Note and Mortgage.”;

(f) The Action thus inconsistently but affirmatively alleges, in Count I, that “Plaintiff owns and holds the Note and Mortgage” when in fact the admissions in Count II demonstrate, by the allegations of paragraphs “20? and “22? of the Complaint, that the Plaintiff DOES NOT and CANNOT legally establish possession or ownership of the Note or the Mortgage and that same is/are in the possession of an unknown party or parties;

(g) A copy of the Note is not even attached to the Complaint (only an alleged “ledger of loan”);

(h) By virtue of the admissions of the Plaintiff in paragraphs “20?, “21?, and “22? of the Complaint, the Plaintiff has actual knowledge that it never, at any time material, had possession of either the mortgage or the note as same were sold, assigned, or transferred as part of the single-transaction securitization process which resulted in the subject mortgage and/or note being sold as

July 2, 2008 57.105 demand and notice to Maria Solomon, Esq. re: Wells Fargo Bank, N.A. v. Defendant et al., page 3 of 3

parceled obligations and becoming part of one or more tranches within a special investment vehicle;

(i) that the Plaintiff cannot establish that the subject note or mortgage is owned or controlled by the Plaintiff “indenture trustee” for unnamed holders of a series of asset-backed bonds (a copy of which are not even attached to the Complaint);

(j) As a direct and proximate result of the transaction referred to in paragraph “h” above, the Plaintiff does not and cannot establish legal standing to even institute a foreclosure action;

(k) As such, the allegation by the Plaintiff in paragraph “5? of the Complaint constitutes matters which are completely devoid of factual or legal support and are thus “frivilous” within the meaning of Fla.Stat. sec. 57.105;

(l) As the primary and threshold issue of legal standing to institute the Action cannot be satisfied (which was known to you, the Law Offices of David J. Stern, P.A., and the Plaintiff at the time that the Action was instituted), the Action is a patently frivilous claim within the meaning of Fla.Stat. sec 57.105 and the filing and prosecution thereof constitutes a fraud upon the Court.

Your client and your Firm are thus charged with actual notice of the filing of an frivilous claim, as you, your client, and the Law Offices of David J. Stern, P.A. knew or should have known that the Action was both not supported by the material (and record) facts necessary to establish the claim for foreclosure and would not (and could not) be supported by the application of then-existing law to the material (and record) facts.

As such, this Firm has been directed to file and set for hearing, after the expiration of twenty-one (21) days from today (that being Thursday, July 24, 2008), the attached Motion for Sanctions and to seek attorneys’ fees from both your client and your Firm if the demands set forth herein for immediate dismissal of the Action with Prejudice, providing of clear title to the property the subject of the action, refund of all monies paid by Defendant in connection with the original “loan” the subject of the Action, and payment of all attorneys’ fees and costs associated with this demand are not complied with in writing by the close of business (5:00 p.m.) Wednesday, July 23, 2008.

Sincerely,

Jeff Barnes, Esq.

WJB/bhs
attachment (enclosed with mailed original)
copy to: Defendant (w/attachment)

Source: foreclosuredefensenationwide.com