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.
I have a question that I keep asking and no one has yet answered.
ReplyDeleteDelaware has sued Merscorp. To my knowledge, it is the first time that merscorp/mers is the sole defendant in a legal action. Does Merscorp have the funds to pay for defense costs? Is it solvent if Delaware prevails? The board of directors of Merscorp is a roster of Banks Who's Who. Can they individually, personally and/or jointly and severally be held liable?
There is absolutely no information available on the state of Merscorp finances. Shutting down Mers is a good start but Delaware's legal action may very well end up being futile and counterproductive.
Let's see: 50 employees take care of 60% of all mortgages in the country and get paid through member fees assessed against those mortgages... I would say MERS has deep-deep-deep pockets, there should be enough money to go around for all states that file suits similar to Delaware.
ReplyDeleteThe pint of Biden's attempt is to try his best to hold people accountable, and hopefully that will deter others, shut down the culprits who are doing it NOW, and also, I predict, uncover further misdeeds and crime in the course of the investigation.I also wondered what humans would be held accountable and what thier penalty would be...and also...I wondered if people can have thier property returned, and, I don't know (?) maybe refinanced by a legal/moral mortgage company, if such a thing exixts, at an affordable rate. I hope theymarch back in to thier properties and squat there, or do business there if that;s the case for a business property, and say "F##K You! The foreclosure was illegal and therefore doesn't exist! If anyone knows about what's happening along those lines I would love to hear about it, and I bet it would be music to the ears of the 99%. If you prick them, do they not bleed?
ReplyDeleteAnother point not mentioned is that MERS claims its system is a savings to homeowners. How is that so? I paid for recording and the MERS registration fee (for a registration that may or may not happen).
ReplyDeleteMERS is paid an involuntary fee for registering the loan at closing. However, former CEO Arnold admitted at the congressional hearings that it is not mandatory for the member to register any loan in its system. The registration fees are small, mine less than $5 but others have reported paying almost $10. Considering 60 million loans have gone through the MERS system, that is a lot of money, yet, I have heard of no one getting a refund if their loan was not registered.
I've also read that MERS claims 30 million loans in its system, does that mean 30 million loans were not registered and those fees were taken for registrations that didn't happen?
While all of this debate has been going on, I'm sure MERS and its members have had time to move the money somewhere or somehow out of reach of lawsuits.