In my prior posts on MERS here, here, and here, I likened the MERS system to the Multiple Listing Service (MLS) used by brokers in the real estate industry. In MLS, each realtor uploads certain data about individual properties into the MLS system, and the system can then be accessed by others to gain information about the properties. Similarly, MERS allows each of its members (through such members' employees) to access itself and upload into its database information regarding the transfer and current beneficial ownership a of a given loan. I noted in the past that because it is the MERS members themselves that are performing all the acts, you have a situation where principals are acting on behalf of other principals or principals are acting on behalf of the purported agent (MERS), etc. The tail is wagging the dog.
Reading the complaint of the State of Delaware against MERS not only vindicated to me the above analogy between the MLS and the MERS system, but also made me think that most homeowners, county recorders, attorneys general, and others may be missing an angle of attack applicable to MERS.
Here is what I mean. Let's say a bunch of gangsters conspire to use a programmable manikin, robot, etc. to rob an establishment by remotely controlling the manikin and causing it to enter the establishment, fire some bullets, and pick up the loot. Would you then go after the manikin or the gangsters that remotely controlled it? Obviously, you would go after the gangsters and regard the manikin as a mere tool and a front to conceal the identity of the true perpetrators.
Similarly, with MERS, it makes sense in many situations to go after the gang..., I mean, banksters who (through their employees) are actually performing the bogus loan transfers and other actions using MERS as a mere tool/front. One useful theory to do this appears to be the concept of "alter ego."
A corporation is considered the alter ego of its stockholders when it is used merely for the transaction of the stockholders' personal business for which they want to shield themselves from personal liability. Importantly, a parent corporation is the alter ego of a subsidiary corporation if the parent controls and directs the subsidiary's activities so that it will have limited liability for its wrongful acts.
The same is true of MERS and its members. MERS is ultimately a subsidiary of its members. Hence, where a MERS member assigns a mortgage and note to itself using MERS as a front, such an assignment should be seen for what it is: an assignment of a loan by a MERS member to itself. The MERS entity in such a case should be simply disregarded, so that the self-serving (and often fraudulent) nature of the assignment becomes inescapable.
In other words, in many situations, we don't care that a particular action was ostensibly done by MERS. For example, we may know that someone at, say, Aurora, OneWest, or some other interposer assigned a loan belonging to a defunct entity to itself and used MERS as a front to conceal their identity on both sides of the transaction, as well as to impede the homeowner in raising defenses to foreclosure. Such a situation appears to be a solid case for invoking the doctrine of "alter ego" and piercing the corporate veil, so that MERS is considered the alter ego of the acting servicer and is therefore disregarded for purposes of determining the legality of the transaction.
This situation is far from unique. Dummy entities are disregarded all the time by the law. Aside from the "alter ego," the most notable example that comes to mind is when the IRS disregards a single-member LLC for federal tax purposes.
People should start challenging the status and function of MERS as a "dummy" entity that obscures the true parties in interest and prevents borrowers and other parties from negotiating with the true parties-in-interest and from raising legitimate defenses to foreclosure and other actions performed by those using MERS as a front.