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MERS Deeds of Trust, Agency, And the Statute of Frauds

MERS Deeds of Trust, Agency, And the Statute of Frauds

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Published by johngaultwhoam
The statute of frauds says MERS is not an agent. MERS is
not the beneficiary; if it is, the note and deed of trust are bifurcated
The statute of frauds says MERS is not an agent. MERS is
not the beneficiary; if it is, the note and deed of trust are bifurcated

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Published by: johngaultwhoam on Oct 27, 2011
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01/03/2012

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The standard language in the MERS' deed of trust may not withstand scrutiny.The attorneys (presumably) who crafted the MERS' dot were apparently missingsome essential experience. With a background in real estate, agency, and thestatute of frauds, they might have recognized that the term "mortgagee" isinappropriate in a deed of trust. The term "mortgagee" is used to describea party in a two-party instrument who owns a note and a lien on real propertysecuring it, but has no application in a deed of trust.The deed of trust was originally formulated and legislated to do away withthe time and costs of judicial foreclosure required in the enforcement ofmortgages, including the borrower's lengthy right of redemption.Regardless of any recitations in a dot, there are only three parties, andnone of them is appropriately called a mortgagee. The three parties arethe trustor, the trustee, and the beneficiary and these are the only legitimatenames for these parties.It is today's deed of trust's, specifically MERS' deeds of trust, reference to"mortgagee" and "lender" which causes if not encourages confusion. While therehas been no head-on adjudication on the confusion in the MERS' deed of trust,courts have found similar confusion to render a contract unenforceble.MERS' - crafted deeds of trust might legitimately have stated that MERS was toact as the agent of the beneficiary. The agency might have been unambiguouslyexpressed and such expression would arguably have been ratified by the trustor,the borrower, except that, and this is a BIG 'except that' as discussed below, it was not the borrower who most urgently needed to expressly appoint Mers asagent - it was the beneficiary.Significantly, MERS chose not to call itself the agent of the beneficiary andthe "why not" question is unavoidable. The reason appears three-fold. 1) MERSdid not have a proper understanding itself of the parties to a deed of trust,2) MERS made a conscious decision to avoid "agency" for the liability whichcomes with it, and 3) the deed of trust would have required the signature ofMERS as well as the beneficiary. It may also be that MERS had no intent toallege the useful 'agency' when its dot was formulated. At any rate, MERSchose the restrictive word 'nominee' instead, a mighty distinction recognizedby a justice of the Massachusetts Supreme Court in recent oral argumentsbefore the court. For its failure to correctly understand and identify theparties in a dot, MERS asserted inappropriately-named (extra) parties inthe dot and then errantly gave itself more than one identity in the instrument.MERS' dot says MERS is both a nominee and the beneficiary itself, furtherevidencing MERS' misunderstanding of the deed of trust parties.If MERS had named itself as the agent of the beneficiary in the deed of trust,there would in this writer's opinion be no potentially fatal confusion aboutthe identity of the party with the beneficial interest in the deed of trust,for MERS does not hold a beneficial interest in any deeds of trust. AT firstblush, one might posit the deed of trust could recite "ABC is the beneficiaryof this deed of trust and MERS is the agent of ABC its successors and orassigns." (The successors and or assigns is another story, as usual). However,even had an agency relationship been otherwise appropriately stated, becauseof the statute of frauds, it still would not pass muster.Only the trustor, the borrower, signs the deed of trust. The lack of theother signatures on the instrument would and does vitiate any finding ofagency. And this, too, in my opinion is born of the unbelievably recklesscrafting of the MERS' deed of trust. 

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