California and Federal Courts have been battling with the Conundrum of who is MERS and what rights if any does MERS have to Foreclose on a Consumer's home.
The Mortgage Electronic Registration System, "MERS" was created in 1995. It is a private registry that tracks more than 65 million home mortgages nationwide. It is incorporated in Delaware, operates within a Reston Virginia shell corporation, lists its address as a post office box in Flint Michigan and has no employees.
MERS relies on its members to process documents and until recently to initiate foreclosures in its name.
Fannie Mae, Freddie Mac and other board members founder the MERS registry to bypass county recorder offices, thereby saving billions of dollars in fees and speeding the securitization process. Via the MERS system, transfers of beneficial interests in mortgages may occur many times, but they are not publicly recorded or even reported by Members.
County recorders were the first to rebel against the system. In 2001 the county clerk in Suffolk County New York simply refused to record and index MERS transactions.
After the housing crash, MERS began to face challenges in foreclosure proceedings from debtors demanding to know who owns the note. MERS both seeks to claim its position as "nominee" or "agent", but then also as mortgagee. It is axiomatic that a company cannot be both an agent and a principal with respect to the same right.
The California Court of Appeal for the Fourth Appellate district ruled in February of this year that MERS, as nominee has no obligation to disclose documents prior to initiating a non-judicial foreclosure. It held further that California statutes give homeowners no private right of action to determine the identity of the true note holder.
Recently rulings in Federal Bankruptcy Court went differently. The Bankruptcy Courts are saying "MERS is just an agent of the lender-show me the agreement that you have the authority to act as beneficiary and to assign the note". In a Los Angeles Bankruptcy case, Judge Samuel L. Bufford held that "MERS supports this relief from stay motion solely with evidence from a low level clerk whose only function is to compare the financial numbers on his evidentiary declaration with those on a computer screen." The court found that the clerk was not competent to testify, the MERS had presented no admissible evidence, and that the law firm filing the motion on behalf of MERS should be sanctioned.
Here in the Southern District, the Honorable Margaret Mann recently held "Circumventing the public recordation system, is in fact, the purpose for which the MERS system was created. Creation of a private system is not enforceable to the extent it departs from California Law.
The above shows that the Bankruptcy Courts have become the refuge for the mortgage boom abused consumers. Chapter 13 filings will allow a debtor to strip off a second mortgage and force their primary lender to the table to determine who is the true party in interest.