This material mentions MERS in a cursory fashion. The main thrust is thefiduciary of the deed of trust trustee and how it isn't happening and the fact that you can do something about it.A deed of trust is a three party instrument by definition - the trustor, beneficiary, (by any other names), and the trustee. It is the trustee who may hold 1)legal (or 'bare naked') title, or 2) equitable title to the property which is the subject of the deed of trust. Some states are 'title theory' states and hold that the trustee holds legal title to the property for the benefit of the beneficiary with the borrower retaining equitable title.Other states, known as 'lien theory' states, hold that the borrower retains legal title with the trustee holding an interest for the benefit of the beneficiary. There are two forms of title: legal and equitable.The trustee's interest is limited to his duty to the terms of the deed of trust.There are no other rights conferred on the trustee. There is no provision in adeed of trust which allows the trustee to abrogate his duties. An agent may NOTforeclose statutorily, only trustees may.The beneficiary holds nothing in regard to title. So exactly to WHAT it is thatMERS alleges it holds title? (Those are the words MERS uses) The rights of the beneficiary created by the deed of trust? No, that can't be it. MERS has no rights in regard to the debt. No (independent) right is created without interest inthe note. For instance, an assignment of the deed of trust without a transfer ofthe note is a legal nullity. MERS attempts to create a third form of title which does not exist as a matter of law, and this was just re-enforced by Judge Grossman (In re Agard) in his scathing analysis of MERS. The debt-and-its-collateral are the province of the note owner.I don't know that a nominee of the beneficiary would be prohibited by the legislative intent in the formulation of the deed of trust as a collateral instrument,although I believe it would be. In any event, confusion as to the identity of the beneficiary in a deed of trust has been held to invalidate the instrument, but that's another story.It is the trustee and the trustee only who is statutorily empowered to garner the collateral in the event of default for the owner of the note. If a deed of trust alleges a beneficiary may foreclose, there is no such thing as a deed of trust. What there is is a mortgage, sans the judicial foreclosure mandates, with some minimal contingencies of notice of default to the borrower. This is entirelyinconsistant with the legislative intent in allowing a deed of trust as a collateral instrument. To find otherwise is to say that the legislators, when allowing the document to be used in the place of a mortgage, which requires judicial foreclosure, meant to deprive the borrower of all safeguards and all due process.If a beneficiary could foreclose, the trustee would not be a necessary party toa deed of trust, and no trust would have been created.This is the essence of how a deed of trust differs from a 'mortgage' (the doc prior to the implementation of the deed of trust and still used in some states), and with the deed of trust and hence the 'trustee', we saw the advent of the non-judicial foreclosure. Prior to the deed of trust, mortgages were the instruments used to secure a lender's interest in a property. They generally required judicial foreclosure and in some if not all states involved rights of redemption.Lenders found this 'cumbersome', so they lobbied for the deed of trust.Can a trustee act as an agent for the beneficiary? No, he can't. He's a trustee, not an agent.An agent is one who owes a ficuciary to at least one party. If the word or meani
ng of 'agent' had been intended, it would have been used. It's been around a long time. There must be a trustee for a trust, (not an agent). If there were NO trustee, there would be NO deed of 'trust'. To understand a deed of trust, it might be helpful to think of a line a foot long. The trustor (borrower) is at oneend and the beneficiary/lender is at the other. The trustee is in the middle.Where he ISN'T is at one end or the other with either of the other two parties.In addition to defining a deed of trust, the word 'trustee' gives creedence tothe dual fiduciary of the deed of trust trustee.According to case law, what makes a trustee also an agent is the amount of control the beneficiary has over the trustee. Perhaps any control makes the trustee an agent. But, importantly, this case law has only addressed 'regular' trustees and has not encompassed a deed of trust trustee, to my knowledge. A deed of trustis a special animal, and its trustee is also a special trustee.In fact, if a deed of trust trustee does not perform his obligations to the trust, he is acting as an agent and not a trustee. Agents may not foreclose, only duly appointed trustees may. At this point, I feelcompelled to warn you not to confuse the agent issue here with MERS' newly alleged agent status. .That's another matter, and is not relevant here, in a discussion regarding the deed of trust trustee..To whom does the trustee owe a fiduciary?The choice of words, i.e., 'trustee' over 'agent' in the deed of trust would make it clear, at least to this writer, it is dual, that is, a deed of trust trustee owes a fiduciary to both the lender and the borrower.Case law is scant on the fiduciary of the trustee. One court, in Lewis v JordanInvestment, Inc., 725 A.2d 4955 (1999), recognized the long-standing tenet thata trustee has a dual fiduciary:"A trustee of deeds has the fiduciary obligation to comply with the powers and duties of the trust instrument, as well as the applicable statute under the District of Columbia Code. Perry v. Virginia Mortgage & Inv. Co., 412 A.2d 1194, 1197(D.C. 1980) (citations omitted). THIS COURT HAS LONG RECOGNIZED THAT TRUSTEES OWE FIDUCIARY DUTIES TO BOTH THE NOTEHOLDER AND THE BORROWER. S&G Inv., Inc. v. Home Fed. Sav. & Loan Ass'n, 164U.S. App. D.C. 263, 270-71 n. 21, 505 F.2d 370, 377-78 n. 21 (1974)"Another circuit's case says the trustee's fiduciary is limited to the beneficiary, a proposition I find absurd for the reasons I have cited. The deed of trust replaced a a mortgage, which had significant protections in it for the borrower because it required judicial foreclosure. While the legislators allowed the deedof trust, to accomodate the lenders' complaints regarding the time and cost ofjudicial foreclosure, it is unimaginable that they intended the borrower to haveno safeguards, no due process whatsoever. And in that regard, today's trustees are in fact acting as the 'agent' of the beneficiary and not as true trustees. When, in short, a trustee acts at the instance of an alleged beneficiary with no real evidence that the alleged beneficiaryhas the right to command default / foreclosure, not only is that trustee breaching his fiduciary to the borrower, he is breaching his fiduciary to the true beneficiary by not ascertaining that he is acting at the behest of the proper party. A trustee cannot be said to be acting within or meeting his fiduciary when heis not demanding and being provided evidence of the instigator's authority to demand foreclosure.He is also violating the tenets of good faith and fair dealing. And even if a trustee's fiduciary is limited to the lender, (again I say this is absurd) the bor
rower is an INTENDED beneficiary of the terms of the trust. The borrower is a party to the trust. He has contractually allowed a trustee to retain an interest in his property to secure his performance for the benefit of a third party (the lender).How can this be said when the deed of trust identifies the lender as the beneficiary? Yes, the lender is the named beneficiary of the deed of trust, but the borrower has a protectable interest , as well, because in creating the trust (which is the trust in deed of trust ) by his autograph, the borrower is thus granting either equitable or legal title in his property to a third party, the trustee, and his remainingtitle, whether equitable or legal, creates a cognizable interest in the terms ofthe deed of trust.Any party who wrongfully induces a trustee to violate his trust position is guilty of third party breach of fiduciary. And, again, it cannot be said that a trustee is performing his fiduciary - to anyone - when he institutes foreclose proceedings with no evidence of the instigator's authority. And therein lies anotherstory - what documentation provides evidence of that authority to the trustee and what is / has been actually given to the trustee? I suggest the equivalent ofzero.It's my understanding that this is what happens:I'll use B of A for this example.B of A determines that a borrower is behind on his payments. B of A contacts alaw firm and sends to the law firm a copy of the note, a copy of the deed of trust, and some kind of accounting to demonstrate the alleged delinquency. (Sometimes the law firm is skipped and the order goes right to a title co. or sometimesthe title company is skipped - except for the title report - and the law firm 'takes it from there')The law firm then sends a referral to a company like Excel National Title, withcopies of the documents which were sent to the law firm from B of A. The titlecompany runs a title search and issues a report, sometimes called a title guarantee report. The title company (or law firm) then sends the borrower a notice of default, sometimes including all the statutory requirements and sometimes not.The title company ( or law firm) records the notice of default in the land records.The title company (or the law firm) then notifies the deed of trust trustee of the default and tells the trustee to mark his calendar to publish the notice of sale (or sometimes the title co. or law firm does that, too) and to sell the property on such and such date. Someone sends the notice of the sale date to the borrower.Now let's take a look at this, at what really happens.Bof A provides the law firm or the title company with a copy of the note from the original closing (payable say to ABC Mortgage) which does NOT have the endorsements on it which would properly evidence the chain of ownership of the note andwhich might demonstrate B of A's - or anyone's- interest in the note, other than the original payee, ABC mortgage. This note was found in the closing file, possibly at the servicer's location, not the custodial file which (allegedly) contains the live note if it hasn't been lost or destroyed.B of A does not provide a copy of the PSA loan schedule showing that the note belongs to the ABCO II, say, trust, for which B of A is allegedly the trustee, nor does B of A disclose its alleged trustee status for the trust. (Or often timesit is a loan servicer who has instigated and claimed a right to foreclosure.)B of A , who has not disclosed it is the alleged trustee, proceeds essentially as if it is the actual note owner, so of course then does not provide documentat
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Foreclosure and Breach of Fiduciary - How and Why
This material deals with the deed of trust trustee's fiduciary, breach of that fiduciary, and third party breach of fiduciary, which are actionable.
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