Friday, January 28, 2011

Judge Teilborg rules against homeowners in the Multi-District litigation case in Arizona/Nevada

In Re Mortgage Electronic Registration Systems (MERS) Litigation, No. 09-2119-JAT (D. Ariz., Jan. 25, 2011).

So much for the split-note theory.  I have been hammering over and over that it is not enough to claim that the note and the deed of trust (DOT) have been split because MERS' name appears on the DOT. You have to state with specificity what particular transfer or conveyance resulted in a split.

Since MERS was designated in the DOT as a limited agent of the loan's originator (the note's payee), the note and DOT were not split at inception.  This is true even if you have evidence that the note's payee did not ever authorize MERS as its agent, per Kesler and Southwest Homes. Afterwards, if it is only the note that is transferred, there will be no split because the DOT will automatically follow the note (especially in Virginia and unless you are in Massachusetts).

One important principle that is overlooked by plaintiffs' attorneys in cases such as In re MERS Litigation above is that, if you analyze the note and the deed of trust closely, MERS' interest in the DOT (and therefore the property) derives solely from its alleged agency relationship with the note's payee (Originator).

For the split to happen in a MERS case, the entity holding the DOT as the principal must convey (and not just attempt to convey), , whether through its agent or otherwise, the DOT (without the note) to another, who is not a principal of MERS.  Can you point to such a conveyance in your case?

Food for thought...  And to be continued...


  1. So, if Freddie Mac owns a loan, and MERS assigns the DOT to Servicer in order to foreclose, all the while Freddie retains ownership of Note, then is that what you would consider a splitting of the Deed and Note?


  2. Well, it depends on whether MERS can actually assign the DOT in this case and thus create a "split." The devil is in the details, and, depending on the particular state, MERS likely does not have authority to do the assignment, so it is ineffective (no split). At the same time, MERS' assignee here would not get anything by virtue of the bogus assignment, so you can then challenge the assignee on those grounds.