You can learn a lot about an issue by reading lawsuits that are filed.
A case in Kentucky spells out in detail the current problems being discovered with MERS and who is legally authorized to foreclose on a house.
I'm just a layman trying to understand this stuff. Karl Denninger has been writing about this issue for three years so his analysis is worth a read.
Here is the 124 page case that has been filed.
I'm just going to pick out the stuff that I find interesting. This way I can come back and refer to specifics. If you have time, read the whole document. It probably will teach you more than you ever wanted to know.
Start at page 13 where they spell out the main claim:
Defendant Merscorp, Inc., is a foreign corporation created in or about 1998 by conspirators from the largest banks in the United States in order to undermine and eventually eviscerate long-standing principles of real property law, such as the requirement that any person or entity who seeks to foreclose upon a parcel of real property:
1) be in possession of the original note,
2) Have a publicly recorded mortgage in the name of the party for whom the underlying debt is actually owed and who is the holder of the original Promissory Note with legally binding assignments, and
3) possess a written assignment giving he, she or it actual rights to the payments due from the borrower pursuant to both the mortgage and note...
LSR Processing was created in order to facilitate the conspiratorial acts of the Defendants in relation to the creation of fraudulent Promissory Notes, Note Assignments, Affidavits and Mortgage Assignments LSR Processing has a pattern and practice of drafting missing mortgage and loan documents and in turn, having them executed by their own employees.
Page 19 is where they go over why many of the entities who are bringing on the foreclosures lack the standing to do so.
In the case where a foreclosure has been filed, the entity filing the foreclosure has no pecuniary in the mortgage loan. The foreclosing entity is a third party. The entity lacks standing, and most times, the capacity to foreclose. The entity has no first hand knowledge of the loan, no authority to testify or file affidavits as to the validity of the loan documents or the existence of the loan.
The entity has no legal authority to draft mortgage assignments relating to the loan. The foreclosing entity and its agents regularly commit perjury in relation to their testimony.
40. The "lender," on the original Promissory Note was not the lender. The originators of the loan immediately and simultaneously securitized the note. The beneficial interest in the note was never in the lender. MERS, acting as the mortgagee or mortgage assignee, was never intended to be the lender nor did it represent the true lender of the funds for the mortgage. The Servicer, like GMAC Mortgage, or some party has or is about to declare the default, is not in privity with the lender. The true owner or beneficiary of the mortgage loan has not declared a default and usually no longer have an interest in the note. The Servicer is not in privity nor does it have the permission of the beneficial owners of the Note to file suit on their behalf.
41. The obligations reflected by the note allegedly secured by the MERS mortgage have been satisfied in whole or in part because the investors who furnished the funding for these loans have been paid to the degree that extinguishment of the debts has occurred with the result that there exists no obligations on which to base any foreclosure on the property owned by the Class Plaintiffs. Defendants have and will cloud the title and illegally collect payments and attempt to foreclose upon the property of the Plaintiffs when they do not have lawful rights to foreclose, are not holders in due course of the notes.
42. Any mortgage loan with a Mortgage recorded in the name of MERS, is at most, an unsecured debt. The only parties entitled to collect on the unsecured debt would be the holders in due and beneficial owners of the original Promissory Note.
Here's a new term to understand, REMIC, Real Estate Mortgage Investment Conduit. These are the investments trusts or mortgage backed securities. This throws another monkey wrench into the system. There are certain rules that REMICs have to follow in order to keep their tax advantages with the IRS. Page 24 explains:
REMICS were newly invented in 1987 as a tax avoidance measure by Investment Banks. To file as a REMIC, and in order to avoid one hundred percent (100%) taxation by the IRS and the Kentucky Revenue Cabinet, an MBS REMIC could not engage in any prohibited action. The "Trustee" can not own the assets of the REMIC. A REMIC Trustee could never claim it owned a mortgage loan. Hence, it can never be the owner of a mortgage loan.
The "Trust" engaged in a plethora of "prohibited activities" and sold the investors certificates and Bonds with phantom mortgage backed assets. There are now nationwide, numerous Class actions filed by the beneficiaries (the owners/investors) of the "Trusts" against the entities who sold the investments as REMICS based on a bogus prospectus
There's a catch-22 here. If the servicers actually try to create documents today in order to transfer the mortgages to these trusts, it would destroy the tax advantages and they would now owe millions in taxes. Page 26:
The transfer of mortgage loans into the trust after the "cut off date" (in the example 2006), destroys the trust's REMIC tax exempt status, and these "Trusts" (and potentially the financial entities who created them) would owe millions of dollars to the IRS and the Kentucky Revenue Cabinet as the income would be taxed at of one hundred percent (100%).
I guess the banks thought that MERS was a clever way to save money. They ignored the state laws about recording the mortgages. This way they avoided state transfer taxes and recording fees.
While attempting to circumvent Kentucky recording Statutes, the MBS Trust created for itself a situation wherein it had no legally recognizable interest in the loans for the benefit of the investors. The investors were invested in nothing.The MBS possessed nothing on the date the REMIC closed and perpetrated a fraud on the investors and the American taxpayer through its fraudulent qualification as a REMIC with the SEC...
No legal plan was in place for such a wide spread loss of the assets. No legal plan was ever in place to deal with the fact that the original Prospectus to the shareholder/investors was a myth. No legal plan was ever in place for the shareholder/investors to come to Court in an attempt to collect on the assets of the MBS they purchased.
On page 35 they describe how the lawyers tried to get around all of this. They just lied and created fraudulent documents. Isn't that a felony in a court of law? Maybe perjury?
MBS/Trustees and their lawyers discovered in the foreclosure process that the Note and Mortgage Assignments would never be located because they never existed. They also discovered that states did no allow blank Assignments or Assignments with retroactive effective dates. To solve the problem of the missing and non-existent Assignments, the MBS/Trustees, their attorneys and their Servicing Agents, decided to fabricate Assignments from thin air and then quietly record the fabricated Assignments.
If a Promissory Note Assignment is presented to the Court, it deliberately do not state the date the promissory Note was assigned. It was procured after the fact and is based in fraud and in violation of MBS Trusts' tax status requirements. The dateless Promissory Note Assignment or allonge is then affixed to a copy of the Promissory Note as the original Promissory Note simply does not exist. The fabricated Promissory Note Assignments are affixed to Motions for Default or Summary Judgment.
At page 44 they start to describe the alleged business model that lays the groundwork for the grand conspiracy.
In and about the years 1998 and 1999, with the final desecration of the Glass-Steagall Act, the mortgage industry introduced new "products" into the American marketplace in order to create massive amounts of mortgage loan "lists" to be listed as the assets of Mortgage Backed Securities, ("MBS".)
The borrowers taking out these loans were unaware of the fact that their loan was never a true negotiable instrument, but securitized and sold prior to them ever reaching the closing table. These products included "non-documentation loans" and adjustable rate mortgages, known as "ARMS."
Mortgage lenders, acting in coordination with one another, relaxed their standards for lending, which made an entirely new class of lower-income individuals eligible to receive loans. This, in turn, artificially drove up property "values." As part and parcel of this scheme, investment "banks" and other lenders accepted appraisals "documenting" the new, higher values, and approved hundreds of thousands of applications for financing, most of which would normally have been declined.
Look at who owns MERS. Page 50
With the oversight of Defendant Merscorp and its principals, the MERS artifice and enterprise evolved into an "ultra-fictitious" entity. To perpetuate the scheme, MERS was and is used in a way so that to the average consumer, or even legal professional, can never determine who or what was or is ultimately receiving the benefits of any mortgage payments. The conspirators set about to confuse everyone as to who owned what. They created a truly effective smokescreen which has left the public and most of the judiciary operating "in the dark" through the present time.
158. On its website, www.mersinc.org, Defendant Merscorp lists the shareholders of "MERS," which is defined on a separate page of the site as "Mortgage Electronic Registration Systems, Inc." Among the shareholders of MERS, according to the site, are the following institutions: Bank of America, Chase, CitiMortgage, Inc., Fannie Mae, Freddie Mac, HSBC, SunTrust, and Wells Fargo. These entities are co- conspirators in the MERS scheme herein described.
Why did the banks set up MERS? Page 51
The conspirators did not want there to be any documentation which could later potentially be used as evidence of their crimes. They did not want to pay the fees associated with recording mortgages, robbing the County clerks across the nation of billions of dollars in statutorily mandated Recording Fees.
They did not want to be bothered with the trouble of keeping track of the originals pf Promissory Notes as they have felt at all times that they are above the law. This is the significance of the word ‘Electronic' in Mortgage Electronic Registration Systems, Inc.
The conspirators, through this exceptionally sophisticated legerdemain, made over the American judicial system's long-honored requirements for mortgages and foreclosures to serve their interests and to minimize the possibilities of the victims obtaining any meaningful redress through the courts.
I'm still reading through the full lawsuit. What an education.
It will be very interesting to see the defendents' response and then the final ruling from the court.
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