The Supreme Court of Kansas deals a blow to MERS.
For years, MERS has had a free and very lucrative ride acting for ten to hundreds of thousands of pooled notes held by investors who have simply registered to a member of this Delaware entity. MERS' name almost always appears as the beneficiary of the trust or mortgage deed that secures the note a borrower signs wherein certain real property is the collateral of that loan. The deed of trust/mortgage is recorded, as everyone who has ever signed a mortgage or trust deed recognise.
Clearly, a litigation tsunami is on its way and it will likely attack mortgage brokers loan officers, attorneys who participated in putting these deals together, many of the so-called Wall Street Giants will no doubt not be immune from being named as defendants as well. In order to see the reason for this prediction, some further description of how MERS was set up and why is in order.
Now with the uncontrolled number of defaulted loans, and foreclosure actions being filed and pursued across the country more judges are being called upon to determine whether MERS who acts as the plaintiff to those lawsuits, has any standing or right to be the forelcosing party. MERS is not the note holder, it is not a party to any of the countless assignments/sales of the promissory note, in the vast majority of cases, it cannot even produce evidence such as the original promissory note--even from the current note holder to show a basis for MERS to be a plaintiff in these foreclosure suits. On the other end of the spectrum, the borrower had no knowledge of, let alone was a borroer ever a party to any of these post funding agreements through to and including the securitization proces.
Recently, the Supreme Court of Kansas, agreed and dismissed a lawsuit seeking foreclosure relief on the above and several other grounds. The Kansas case was followed shortly by two similar cases out of Ohio and Massachusetts. It should be only a matter of time before the majority or our state and federal courts get on board and force these anto-transparency, clandestine riddled transactions to substantiate who the note holder is, produce the note that is the subject of the case and let the court see the endorsements on the reverse side of the note, most of which are in blank. Once this occurs, the courts will likely look MERS and determine that it has no business "fronting" for all these investor note holders of securitized instruments.
Each assignment afreement of each note is required to be recorded against the property that is the collateral for the loan. None of these assignments are recorded, nor will Mers even give out it's contact information in the mortgage or deed of trust, other than to say it is a Delaware corporation. A really interesting and also shocking discovery is that even the current noteholder is not able to produce a copy ot hte note(s) or pool of notes that it is holding in a way that will identify or not whether the note at issue in a particular case is within that pool
Eliminating the "Straw Man" Shielding Lenders and Investors from Liability
The development of "electronic" mortgages managed by MERS went hand in hand with the "securitization" of mortgage loans -- chopping them into pieces and selling them off to investors. In the heyday of mortgage securitizations, before investors got wise to their risks, lenders would slice up loans, bundle them into "financial products" called "collateralized debt obligations" (CDOs), ostensibly insure them against default by wrapping them in derivatives called "credit default swaps," and sell them to pension funds, municipal funds, foreign investment funds, and so forth. There were many secured parties, and the pieces kept changing hands; but MERS supposedly kept track of all these changes electronically. MERS would register and record mortgage loans in its name, and it would bring foreclosure actions in its name. MERS not only facilitated the rapid turnover of mortgages and mortgage-backed securities, but it has served as a sort of "corporate shield" that protects investors from claims by borrowers concerning predatory lending practices.