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Oregon Foreclosures - The Mess That MERS Made

Oregon Foreclosures - The Mess That MERS Made

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Published by Querp
ORS 86.735(1) requires that before foreclosing homeowners in Oregon, the bank must first record all successive assignments of the trust deed. MERS created the opportunity for banks to register their assignments electronically and ignore the public records. This decision has now come home to roost. Oregon courts are rejecting the MERS "strawman" model, and one Oregon bankruptcy court has held that foreclosures that fail to follow our successive recording law are void. Slapdown!
ORS 86.735(1) requires that before foreclosing homeowners in Oregon, the bank must first record all successive assignments of the trust deed. MERS created the opportunity for banks to register their assignments electronically and ignore the public records. This decision has now come home to roost. Oregon courts are rejecting the MERS "strawman" model, and one Oregon bankruptcy court has held that foreclosures that fail to follow our successive recording law are void. Slapdown!

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Published by: Querp on Mar 23, 2011
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Oregon Foreclosures
The Mess That MERS® Made
ByPhillip C. Querin, QUERIN LAW, LLCContact Info: www.Q-Law.com 
A grotesque product of the imagination.
 For the past several years in Oregon, foreclosures have been processed fraudulently and in violation of 
Oregon’s trust deed law.
Banks, servicers, title companies and licensed foreclosure trustees, were allaware of the problem for years, but no one did anything about it. This was not a minor error or simpleoversight
it was a patent disregard for the laws of Oregon and many other states.
Oregon’s Trust Deed Foreclosure Law.
It is widely known that during the credit/housing boom, lendersfrequently sold their loans between one another. When the ownership of a loan is transferred, it is
necessary to execute, in recordable form, an “Assignment of Trust Deed.”
 ORS 86.735(1) governs what must occur before a trust deed may be foreclosed in Oregon; all such assignments must be placed onthe public record. This is not a new law and it is not significantly different from the laws of many otherstates.
Oregon’s law has been on the books for decades.
 ORS 86.735(1) is not complicated or confusing. It simply means that after the original lender makes aloan and takes back a trust deed (which is immediately recorded), all subsequent assignments of thatloan must be recorded before the foreclosure is formally commenced. In this manner, one can see from
the public record, the “chain of title” of the loan, and thereby know with certainty, that the lender filing
the foreclosure actually acquired the right to do so through successive transfers from the original lender.This protects the consumer and assures the reliability of Oregon land titles.
In the 1990s, MERS®
came into existence. Its avowed purpose was to replacethe time honored system of public recordings for mortgage and trust deed transfers, with an electronicregistry which its members could voluntarily use when a loan was transferred. This registry is for useonly by MERS® members, all of whom are in the lending industry. The immediate effect of MERS® wasthat lenders stopped publicly recording their mortgage and trust deed assignments. This deprived localgovernments of millions of dollars in recording fees, and took the business of the sale of loans
“underground.” A
more detailed discussion of MERS®' business model is posted here.  Although the numbers vary, it is believed that MERS® comprises approximately 60% of the nationallending industry. Until recently, it had
no employees
. MERS® was not born from any state statute ornational enabling legislation. It was the brainchild of its owners, the Mortgage Bankers Association,Fannie Mae, Freddie Mac, Bank of America, Nationwide, HSBC, American Land Title Association, andWells Fargo, among others.
Has Contributed To Oregon’s Mortgage Mess.
In an effort to give MERS® the appearance
of authority, its rules clarify that it will act as a “Nominee” for each of its members –
doing only what its
 2member instructs, but in its own name and not the name of the member.
The “Nominee”
appears tobe
, as some Oregon federal judges have observed, nothing more than
 When the foreclosure crisis hit, lenders realized that they needed some way to get the trust deed into
current bank’s hands to initiate the
foreclosure process. Since MERS®
’ existence was virtual, and with no
real employees, whenever it came time to assign a mortgage or trust deed, a MERS®
“Assistant VicePresident” or “Assistant Secretary” would execute the assignment on behalf of 
in their “official”
capacity. But since MERS®
has no such officers, it simply created mass “Corporate Resolutions”,
appointing one or mor
e low level member bank employees to
thousands of bogus
assignments.It is important to note that these MERS®
“officers” only made
one assignment
i.e. from the originallender whose name first appeared on the public record, to the foreclosing lender. In Oregon, this meansthat ORS 86.735(1) requiring the recording all of the intervening assignments, was intentionallyignored.
Hence, there was never a “chain of title” on the public record show
ing the
of theloan. As a result, in Oregon, no one - including the homeowner -
knows for sure if the bank foreclosingthe loan has any legal right to do so.
 And, there
reason to believe many of the banks did not have the legal right to foreclose. In everyOregon foreclosure I have witnessed during the last twelve months, where the loan was securitized into a REMIC, 
there is substantial doubt that the foreclosing bank, acting as the “trustee” of the securitized
loan pool, actually had any right to do so. This is due to the strict tax, accounting, and trust lawsgoverning the REMIC securitization process. The short explanation is that if the loan was actuallytransferred into a loan pool between 2005
2008, there would be no need for an assignment to thattrustee today
it would have already been in the pool and the trustee already had the right toforeclose; but if the loan was not transferred into the pool back then, it cannot be legally assigned tothat trustee today. Although it is not always easy to locate, thePooling and Servicing Agreement, or"PSA," governing the trustee's REMIC, will contain a "Cut-Off Date." That date is the deadline for thesponsor of the REMIC to place all of the notes and trust deeds (or mortgages) into the trust. After thattime
[subject to limited exceptions - which do not include the transfer of nonperforming loans into thetrust - PCQ]
, no new loans may be added into the pool. For example, if the REMIC was created in early2006, the Cut-Off Date is likely to also be in 2006. This would mean that a bank, acting in the capacity of a REMIC trustee that is foreclosing a homeowner today, would not have the legal right to do so, if thetrustee only recently received the trust deed assignment -
since the REMIC had closed years earlier 
.This is fraudulent. Yet the practice has been so widespread, that foreclosures routinely adopt this"single assignment"
(or “A to B”)
model, and it became an assembly line business for MERS® and itsmember banks. The assignment documents were typically prepared in advance by foreclosure millattorneys and foreclosure trustee companies such as ReconTrust, uploaded them to a servicer orforeclosure processing company link, to be signed,
en masse
, by robo-signers. Then the assignments were shipped over to notaries,who never actually witnessed the MERS®
“officer” sign a document.
 Once completed, the original assignment document was sent via overnight delivery to the foreclosuretrustee to record and thereafter begin the foreclosure. In many instances, the foreclosure trustee, (a)acting as a MERS®
“officer” would sign the assignment document transferring ownership of the loan to a
lender, then (b) the same person would sign a document appointing their company as the SuccessorTrustee, then (c) that same person would again sign the Notice of Default, which formally commencedthe foreclosure.
It is this “
need for speed 
” that epitomizes the
MERS® business model.
 3The result has been predictable
there is fraudulent paperwork on a massive scale. Forgeries arerampant. Notarization laws are flaunted. Until recently, the banks and MERS® have gotten away withthis scheme.
The lending, servicing and title industries have simply taken a “don’t ask, don’t tell”
approach to foreclosures in Oregon and elsewhere.
However, in 2010, Oregon and several other states said “enough.”
In Oregon for example, there were atleast three federal district court and bankruptcy court cases that struck down foreclosures due to theuse of the MERS® strawman, and also based upon the flagrant violation of ORS 86.735(1). The most
notable of these cases is the published opinion of Hon. Frank R. Alley III, Oregon’s Chief Bankruptcy
Judge in Donald McCoy III v. BNC Mortgage, et al., Adversary No. 10-6224 - fra, Case No. 10-63814-fra- 13, February 7, 2011. Judge Alley held, in part, that:
“…the powers accorded to
 MERS®by the Lender [whose name appears in the Trust Deed]
with the
Borrower’s consent – 
cannot exceed the powers of the beneficiary.
The beneficiary’s right to require a
non-judicial sale is limited by ORS 86.735. A non-judicial sale may take place only if any assignment by 
[the Lender whose name appears in the Trust Deed] has been recorded.” [Parentheticals mine.
 Judge Alley concluded that a failure to follow the successive recording requirement of ORS 86.735(1)meant that the foreclosure was
. It is important to note that in McCoy, as in most rulings againstMERS® lenders, the courts have not said the banks may not prosecute their foreclosures
merely thatbefore doing so, they must record all intervening assignments
 MERS® is now engaged, through surrogates and one or more lobbyists, to introduce a bill in the Oregonlegislature.
It is a bold effort to legislatively overturn Judge Alley’s ruling, as well as similar adverse
rulings by Oregon federal court judges, King, Hogan,and Perris.  MERS®, its member banks, and the foreclosure industry, including its foreclosure mill attorneys, havenever provided any justification for ignoring Oregon's foreclosure law. Nor have they offered to do so.Instead, they have threatened that if ORS 86.735(1), and other homeowner protections in ourforeclosure statutes, are not amended to (a) give MERS® the right to continue acting as a strawman, and(b) avoid recording all successive assignments, the Oregon housing and foreclosure crisis will continuelonger than necessary.Metaphorically speaking, having been caught with their hand in the cookie jar, MERS® now asks theOregon Legislature to legalize cookie theft.
Oregon Consumers Must Be Protected 
The proposed MERS® bill does nothing to protect homeowners.
Rather, it is aimed at legalizing patently fraudulent conduct, in the name of “helping” Oregon
homeowners get through the foreclosure crisis faster. The title and lending industry are concerned thatif a law is not immediately passed giving MERS® its way, foreclosures will come to a halt. The bankshave even threatened to file judicial foreclosures against homeowners, to avoid the recording of assignments requirement. This is a complete ruse. Here's why:
Lenders cannot avoid their paperwork problems in Oregon by going
court. As we have seen
in Oregon’s federal court cases, the banks are still unwilling to produce the necessary
documents to establish their standing to foreclose. If a bank does not have the legaldocumentation minimally necessary to establish its right to foreclose non-judicially, why would

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