I knows MERS is perfect and does no wrong (or so they have informed me) but one judge disagrees......

Merscorp Lacks Right to Transfer Mortgages, Judge Says

By Thom Weidlich - Feb 14, 2011 1:02 PM MT

 

Full article at … http://www.bloomberg.com/news/2011-02-14/merscorp-has-no-right-to-transfer-mortgages-u-s-judge-says.html

Grossman said Select Portfolio had to show that U.S. Bank owned both the note and the mortgage, and there was no evidence that it held the note. The judge disagreed with Select Portfolio’s argument that U.S. Bank held the note because the note “follows” the mortgage, which it said U.S. Bank owned.

“By MERS’s own account, the note in this case was transferred among its members, while the mortgage remained in MERS’s name,” Grossman wrote. “MERS admits that the very foundation of its business model as described herein requires that the note and mortgage travel on divergent paths.”

The judge said that the membership agreement wasn’t enough to assign the mortgage and that to do so the lender would have to give power of attorney or similar authority to MERS.

MERS’s membership rules don’t create “an agency or nominee relationship” and don’t clearly grant MERS authority to take any action with respect to mortgages, including transferring them, Grossman wrote. Because the interests at issue concern “real property” -- land and buildings -- under state law, any transfer has to be in writing, which isn’t done under the MERS system, he said.

‘Nominee’ Status

“Without more, this court finds that MERS’s ‘nominee’ status and the rights bestowed upon MERS within the mortgage itself, are insufficient to empower MERS to effectuate a valid assignment of mortgage,” the judge wrote. “MERS’s position that it can be both the mortgagee and an agent of the mortgagee is absurd, at best.”

Grossman said parties coming to him to seek to lift the automatic ban on legal claims in cases involving MERS will have to show they own both the mortgage and the note.

The case is In re Agard, 10-77338, U.S. Bankruptcy Court, Eastern District of New York Central Islip).

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THAT IS HILARIOUS.  I HAVE ARGUED EXACTLY THE SAME THING TO A BANKRUPTCY JUDGE IN CALIFORNIA FIGHTING A MOTION TO LIFT THE STAY.  THE JUDGE DIDN'T GET IT EVEN THOUGH IT IS FAIRLY OBVIOUS. IT IS SO TRUE WHAT THEY ARE SAYING.  AGAIN, NOTICE THAT IS IN A BANKRUPTCY COURT (AS OPPOSED TO CIVIL COURT SEEKING AN INJUNCTION).  IN A CIVIL COURT, THEY WILL ARGUE THAT THE "SECURITY FOLLOWS THE NOTE" AND SINCE THE LENDER (SECURITIZED TRUSTEE) HAS THE NOTE (SO THEY SAY) THEN THEY ALSO HAVE THE RIGHT TO FORECLOSE AND "PRODUCE THE NOTE" IS NOT A VALID THEORY.  SO GOES THE ARGUMENT.