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Good Cases Notes Against Note Holder and Mers

Good Cases Notes Against Note Holder and Mers

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Published by: oissoc on May 22, 2010
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The latest insight on the foreclosure crisis – and help for those in need.Today is Saturday, May 22nd, 2010HomeThe ForumTrusted AttorneysListing Criteria
Foreclosure BasicsBeware of Foreclosure Scams
Example Hardship Letter
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Overview of Methods to Stop Foreclosure
About UsRSS
About the Author
Patrick Pulatie is the CEO forLoan Fraud Investigations(LFI). LFI is a Forensic/Predatory LendingAudit company in Antioch CA, and has been doing homeowner audits since Nov 07. LFI works dailywith Attorneys throughout California, assisting homeowners in the fight to save their homes. He andAttorneys are constantly developing new strategies to counter foreclosure efforts by lenders.See All Posts by This Author
The Trouble With MERS
September 24th, 2009 •RelatedFiled Under
 Attention attorneys/auditor and other industry persons – pleasedrop us a lineif you think  you can contribute to this blog. Be seen!
As a homeowner begins research into the lending and foreclosure crisis, there will be manyunfamiliar terms, names and companies that come to their attention. Chief among these will beMERS.
Page1 of12The Trouble With MERS : Foreclosure AssistanceForeclosure InformationFree Help5/22/2010http://iamfacingforeclosure.com/blog/2009/09/24/the-trouble-with-mers/ 
MERS is the acronym for Mortgage Electronic Registration Systems. It is a national electronicregistration and tracking system that tracks the beneficial ownership interests and servicing rights inmortgage loans. The MERS website says:“MERS is an innovative process that simplifies the way mortgage ownership and servicing rightsare originated, sold and tracked. Created by the real estate finance industry, MERS eliminates theneed to prepare and record assignments when trading residential and commercial mortgage loans.In simple language, MERS is an on-line computer software program for tracking ownership.MERS was conceived in the early 1990’s by numerous lenders and other entities. Chief among theentities were Bank of America, Countrywide, Fannie Mae, Freddie Mac, and a host of other suchentities. The stated purpose was that the creation of MERS would lead to “consumers paying less” formortgage loans. Obviously, that did not happen.This article will attempt to explain MERS in very general detail. It will cover a few issues related toMERS and foreclosure, in order to introduce the reader to the issues of MERS. It is not meant to be acomplete discussion of MERS, nor of the legal complexities regarding the arguments for and againstMERS. For a more in depth reading of MERS and findings coming out of courts, it is recommendedthat the reader look at
Hawkins, Case No. BK-S-07-13593-LBR (Bankr. Nev. 3/31/2009) (Bankr.Nev., 2009
) . It gives a good reading of the issues related to MERS, at least for that particular case.Though in Nevada, it is relevant for California.(Please note. I am not an attorney and am not giving legal advice. I am just reporting arguments beingmade against MERS, and also certain case law and applicable statutes in California.
The MERS Process
Traditionally, when a loan was executed, the beneficiary of the loan on the Deed of Trust was thelender. Once the loan was funded, the Deed of Trust and the Note would be recorded with the localCounty Recorder’s office. The recording of the Deed and the Note created a Public Record of thetransaction. All future Assignments of the Notes and Deed of Trust were expected to be recorded asownership changes occurred. The recording of the Assignments created a “Perfected Chain of Title”of ownership of the Note and the Deed of Trust. This allowed interested or affected parties to be ableto view the lien holders and if necessary, be able to contact the parties. The recording of the documentalso set the “priority” of the lien. The priority of the lien would be dependent upon the date that therecording took place. For example, a lien recorded on Jan 1, 2007 for $20,000 would be the firstmortgage, and a lien recorded on Jan 2, 2007, for $1,500,000 would be a second mortgage, eventhough it was a higher amount.Recordings of the document also determined who had the “beneficial interest” in the Note. Aninterested party simple looked at the Assignments, and knew who held the Note and who was thelegal party of beneficial interest.(For traditional lending prior to Securitization, the original Deed recording was usually the onlyrecorded document in the Chain of Title. That is because banks kept the loans, and did not sell theloan, hence, only the original recording being present in the banks name.The advent of Securitization, especially through “Private Investors” and not Fannie Mae or FreddieMac, involved an entirely new process in mortgage lending. With Securitization, the Notes and DeedsPage2 of12The Trouble With MERS : Foreclosure AssistanceForeclosure InformationFree Help5/22/2010http://iamfacingforeclosure.com/blog/2009/09/24/the-trouble-with-mers/ 
were sold once, twice, three times or more. Using the traditional model would involve recording newAssignments of the Deed and Note as each transfer of the Note or Deed of Trust occurred. Obviously,this required time and money for each recording.(The selling or transferring of the Note is not to be confused with the selling of Servicing Rights,which is simply the right to collect payments on the Note, and keep a small portion of the payment forServicing Fees. Usually, when a homeowner states that their loan was sold, they are referring toServicing Rights.)The creation of MERS changed the process. Instead of the lender being the Beneficiary on the Deedof Trust, MERS was now named as either the “Beneficiary” or the “Nominee for the Beneficiary” onthe Deed of Trust. The concept was that with MERS assuming this role, there would be no need forAssignments of the Deed of Trust, since MERS would be given the “power of sale” through the Deedof Trust.The naming of MERS as the Beneficiary meant that certain other procedures had to change. This wasa result of the Note actually being made out to the lender, and not to MERS. Before explaining thischange, it would be wise to explain the Securitization process.
Securitizing a Loan
Securitizing a loan is the process of selling a loan to Wall Street and private investors. It is a methodwith many issues to be considered, especially tax issues, which is beyond the purview of this article.The methodology of securitizing a loan generally followed these steps:A Wall Street firm would approach other entities about issuing a “Series of Bonds” for sell toinvestors and would come to an agreement. In other words, the Wall Street firm “pre-sold” thebonds.The Wall Street firm would approach a lender and usually offer them a Warehouse Line of Credit. This credit would be used to fund the loans. The Warehouse Line would include theinitial Pooling & Servicing Agreement Guidelines and the Mortgage Loan Purchase Agreement.These documents outlined the procedures for creation of the loans and the administering of theloans prior to, and after, the sale of the loans to Wall Street.The Lender, with the guidelines, essentially went out and found “buyers” for the loans, peoplewho fit the general characteristics of the Purchase Agreement,. (Guidelines were very generaland most people could qualify.” The Lender would execute the loan and fund it, collectingpayments until there were enough loans funded to sell to the Wall Street firm who could thenissue the bonds.Once the necessary loans were funded, the lender would then sell the loans to the “Sponsor”,usually the Wall Street firm. At this point, the loans are separated into “tranches” of loans,where they are then turned into bonds. Then, they went to the “Depositor”, usually either theWall Street firm or back to the lender through as separate entity, and then they would be sold tothe “Issuing Entity” which would be the created entity for the selling of the bonds. Finally, thebonds would be sold, with a Trustee appointed to ensure that the bondholders received theirmonthly payments.As can be seen, each Securitized Loan has had the ownership of the loan transferred two to threetimes minimum, and without Assignments executed for each transfer.(Note: This is a VERY simplified version of the process, but it gives the general idea. Dependingupon the lender, it could change to some degree, especially if Fannie Mae bought the loans. ThePage3 of12The Trouble With MERS : Foreclosure AssistanceForeclosure InformationFree Help5/22/2010http://iamfacingforeclosure.com/blog/2009/09/24/the-trouble-with-mers/ 

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