Massachusetts has joined several other states in saying they would oppose a foreclosure fraud settlement if it includes certain liability releases, particularly those relating to MERS. Massachusetts Attorney General Martha Coakley (yes, that Martha Coakley) wants to retain the ability to pursue lawsuits against the banks and their subsidiaries over state consumer protection violations and fraud upon state courts.

“Massachusetts will not sign on to any global agreement with the banks if it includes a comprehensive liability release regarding securitization and the MERS conduct,” Coakley wrote to the Norfolk County register of deeds in Dedham, Massachusetts. “These investigations must continue.” The registry keeps records of real estate in the county […]

Last week, Delaware Attorney General Beau Biden said in an interview that he had “strong reservations” about releasing claims that go beyond the servicing of mortgages.

New York Attorney General Eric Schneiderman’s office said in a statement last week that he “remains concerned by any settlement agreement that would preclude state attorneys general from conducting comprehensive investigations of the mortgage crisis.” [CONTINUE READING]

This certainly heats up an already explosive situation.  Whether the creators of MERS (its members) will throw MERS under the bus remains to be seen.  Massachusetts is just setting an example all states should follow if they value the land upon which their states are defined.  Otherwise states may well lose their own identity.
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PUNCH NO. 2

Abigail Field, a freelance writer for high profile finance such as Daily Finance and Fortune, best describes MERS this week in her REALITY CHECK blog by clarifying what most academics have already determined…  MERS was created to defraud America – if not the entire world.

The Meaning of MERS
 By Abigail Field

People have learned a lot about MERS, but in general we haven’t really focused on what it all means. In short, it means that the mortgage industry decided that it was above the law.

MERS was set up thoughtlessly, without regard to its basic legality, and designed with only two objectives: lowering the mortgage industry’s costs and maximizing its convenience. As a result, MERS has none of the advantages of the centuries-old system it was intend to replace, and largely has. MERS is not accurate, not transparent, and not accountable to the public. To let MERS continue simply allows it to continue wreaking havoc on property records and the legal morass it’s created to continue tangling foreclosure and bankruptcy cases nationwide.

The Ultimate Answer: Legislate MERS Out of Existence

At this point legislatures from the states to Congress need to confront the deep reality of what MERS truly is. MERS must be legislated out of existence, and the costs for its existence to date—including the costs of accurately updating our land records nationwide–must be borne by all the players that benefited from MERS. Despite the broad claims of the MERS website, the beneficiaries are generally two groups: mortgage securitizers (yes that includes all the big Wall Street players and TBTF banks) and mortgage servicers (who again include the TBTF banks.)

In replacing MERS, legislatures should consider modernizing and standardizing land records.  The mortgage industry’s frustration with the pre-MERS era is legitimate. But what is not legitimate was the industry’s unilateral decision to create a self-serving system that was indifferent to law and the public’s interest.

Think all that sounds over the top and extreme? Let’s recap what we know about MERS.

MERS is a company whose product is a massive electronic database called Mortgage Electronic Registration Systems. MERS Inc. has no employees, but some 20,000 “Certifying officers”. Certifying officers have included employees of mortgage servicers, law firms, and subcontractors. At least, people signing in MERS’s name have included such people. Whether any of them is really an officer of MERS with any authority is very doubtful. Doubtful because there’ssolid evidence that Bill Hultman, who designated all these people as signing officers, lacked authority to do so.

Signatures but Apparently No Authority to Sign

In short, the appointments appear to be invalid two and sometimes three reasons. First they’re apparently forbidden by MERS’s bylaws. Second, the resolution Hultman cites as giving him authority was adopted by an earlier incarnation of the company and doesn’t appear to have been ratified by this one. Third, even if good, the resolution only allows MERS members’ employees to be officers. On what grounds did Hultman designate attorneys at foreclosure mills and “signers” at contractors? A few months ago a Texas court found the authority issue serious enough to allow discovery on the point to go forward.

The authority issue is serious enough for MERS to take action. MERS kicked off 2011 by announcing a new authorization procedure was being adopted, that everyone would have to be reauthorized, but that in the meantime, people could keep signing as if nothing had changed. I wonder how that’s been worked out. Did MERS mark documents signed under the new authority in any way, so people can tell? How is someone to know? Seems to me like MERS is just begging for some long, nasty discovery battles. And it’s just one sign of how ad hoc and careless the MERS project has been.

(Note, in the nine months since I wrote the article at the “solid evidence” link I’ve been persuaded by other attorneys that the doctrine of apparent authority may not solve the problem but it’s a discussion too in the weeds for here.)

MERS Is Inaccurate

We know MERS was designed to track mortgage servicing rights and tracking ownership of the loan was incidental, only done if the investor volunteered the information. (see text at fn 16). We know MERS itself does not update the database or do quality control of any kind. All data entry is done by MERS member companies for their own loans. Limited empirical evidence suggests the database is not accurate.

Lisa Epstein of ForeclosureHamlet.org shared some of her results of searching the MERS database with me, and the results are discouraging. While working on one project, she discovered bad MERS numbers listed in SEC filings for a number of loans, and that Wells Fargo originated loans weren’t showing up at all. Another discovery she made was that MERS had 10 loans listed as active after the properties had been foreclosed and sold or sold short. She found them simply by examining the 45 loans in one securitized trust that were located in her county; that is, she hadn’t tried to select for inaccurate MERS data.

Despite the fact that no one is managing this database as a cohesive whole and apparently quality control is, ahem, uneven, for roughly half of all mortgages, MERS’s records are the only ones. The public has nothing else to turn to. For the life of a MERS loan the only record of who owns the loan and who services it is the MERS system. That’s the point, as MERS explains on its website.

MERS Hides Self-Dealing; OR, The Papers Are Meaningless

When the time comes to take MERS’s name off a loan, the MERS officer assigning the mortgage out of the database works on behalf the loan’s claimed current owner, whether as an employee of the servicer or as an employee of a contractor of the servicer. That is, the party getting the mortgage via the assignment is the party saying the assignment is happening. Using MERS’s name covers what seems otherwise obvious self-dealing.

 [CONTINUE READING]