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State by State Compendium of Recent MERS Related Litigation

State by State Compendium of Recent MERS Related Litigation

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Published by 83jjmack
THESE ARE CLEARLY IN FAVOR OF MERS, BUT ONE CAN LEARN FROM THESE KEY DECISIONS


This document is a compendium of cases that have addressed central questions critical to the viability of the MERS system.
THESE ARE CLEARLY IN FAVOR OF MERS, BUT ONE CAN LEARN FROM THESE KEY DECISIONS


This document is a compendium of cases that have addressed central questions critical to the viability of the MERS system.

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Published by: 83jjmack on Nov 20, 2011
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07/07/2013

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original

 
 
State
by
State
 
Compendium
 
of 
 
Recent
 
MERS
Related
 
Litigation
 
by John R. Chiles
1
 , Katrina D. Chisholm, and Zachary D. Miller 
I.
 
INTRODUCTION
 
Since
 
the
 
earliest
 
stages
 
of 
 
the
 
economic
 
meltdown
 
that
 
has
 
rocked
 
the
 
financial
 
system
 
both
 
in
 
the
 
United
 
States
 
and
 
abroad,
 
an
 
inordinate
 
amount
 
of 
 
time
 
has
 
been
 
spent
 
searching
 
for
 
someone,
 
or
 
something,
 
to
 
blame.
 
Charges
 
of 
 
impropriety
 
have
 
been
 
levied
 
against
 
Wall
 
Street
 
on
 
a
 
consistent
 
basis,
 
and
 
consumer
 
advocates
 
have
 
focused
 
great
 
amounts
 
of 
 
energy
 
on
 
the
 
area
 
of 
 
mortgage
backed
 
securities.
 
An
 
instrumental
 
cog
 
allowing
 
for
 
the
 
buying
 
and
 
selling
 
of 
 
mortgage
backed
 
promissory
 
notes
 
on
 
the
 
open
 
market
 
is
 
Mortgage
 
Electronic
 
Registration
 
Systems,
 
Inc.
 
("MERS"),
2
 
a
 
nationwide
 
database
 
that
 
allows
 
lenders
 
to
 
more
 
easily
 
transfer
 
the
 
rights
 
to
 
a
 
mortgage.
 
For
 
the
 
last
 
several
 
years,
 
these
 
allegations
 
of 
 
impropriety
 
have
 
spawned
 
federal
 
and
 
state
 
court
 
lawsuits.
 
The
 
arguments
 
asserted
 
by
 
borrowers,
 
either
 
offensively
 
or
 
defensively,
 
have
 
evolved;
 
however,
 
the
 
basic
 
charge
 
of 
 
these
 
lawsuits
 
remains
 
the
 
same:
 
the
 
MERS
 
system
 
is
 
fatally
 
flawed
 
and
 
does
 
not,
 
or
 
should
 
not,
 
give
 
transferees
 
of 
 
mortgages
 
through
 
the
 
MERS
 
system
 
the
 
authority
 
to
 
enforce
 
remedies
 
under
 
the
 
mortgages
 
they
 
have
 
obtained.
 
Finding
 
that
 
MERS
transfers
 
are
 
invalid
 
would
 
have
 
an
 
inconceivable
 
effect,
 
as
 
estimates
 
are
 
that
 
MERS
 
holds
 
mortgages
 
on
 
nearly
 
sixty
 
million
 
American
 
homes,
 
or
 
sixty
 
percent
 
of 
 
the
 
nation's
 
residential
 
mortgages.
3
 
This
 
document
 
is
 
a
 
compendium
 
of 
 
cases
 
that
 
have
 
addressed
 
central
 
questions
 
critical
 
to
 
the
 
viability
 
of 
 
the
 
MERS
 
system.
 
As
 
shown
 
below,
 
the
 
arguments
 
address
 
numerous
 
factors,
 
from
 
the
 
avoidance
 
of 
 
state
 
court
 
recording
 
fees
 
to
 
the
 
ability
 
of 
 
a
 
mortgage
 
nominee
 
to
 
transfer
 
beneficial
 
ownership
 
in
 
a
 
promissory
 
note.
 
As
 
no
 
single
 
method
 
of 
 
categorization
 
would
 
be
 
perfect,
 
we
 
have
 
chosen
 
a
 
state
by
state
 
analysis,
 
with
 
key
 
decisions
 
indicated
 
and
 
examined
 
more
 
thoroughly.
 
1
 
John
 
R.
 
Chiles
 
is
 
a
 
partner
 
in
 
the
 
Birmingham,
 
Alabama
 
office
 
of 
 
Burr
 
&
 
Forman,
 
LLP.
 
Katrina
 
D.
 
Chisholm
 
and
 
Zachary
 
D.
 
Miller
 
are
 
associates
 
in
 
Burr
 
&
 
Forman,
 
LLP's
 
Birmingham
 
office.
 
2
 
Additional
 
information
 
on
 
MERS
 
is
 
available
 
on
 
its
 
website,
 
found
 
at:
 
http://www.mersinc.org/.
 
3
 
McIntire,
 
Mike,
 
Tracking
 
Homes
 
Through
 
a
 
Firm
 
that 
 
Holds
 
Millions
,
 
T
HE
 
N
EW
 
Y
ORK
 
T
IMES
,
 
available
 
at
 
HTTP
://
WWW
.
NYTIMES
.
COM
/2009/04/24/
BUSINESS
/24
MERS
.
HTML
 
(Apr.
 
23,
 
2009);
 
see
 
also
 
Kate
 
Berry,
 
Foreclosures
 
Turn
 
Up
 
Heat 
 
on
 
MERS
,
 
A
M
.
 
B
ANKER
,
 
July
 
10,
 
2007,
 
at
 
1.
 
1
 
II.
 
OVERVIEW
 
OF
 
MERS
 
A.
 
History
 
of 
 
MERS
 
1.
 
Created
 
"in
 
order
 
to
 
streamline
 
the
 
mortgage
 
process
 
by
 
using
 
electronic
 
commerce
 
to
 
eliminate
 
paper."
4
 
2.
 
MERS'
 
principal
 
owners
 
are
 
the
 
Mortgage
 
Bankers
 
Association
 
("MBA"),
 
the
 
Federal
 
National
 
Mortgage
 
Association
 
("Fannie
 
Mae"),
 
the
 
Federal
 
Home
 
Loan
 
Mortgage
 
Corporation
 
("Freddie
 
Mac"),
 
Bank
 
of 
 
America,
 
Chase,
 
HSBC,
 
CitiMortgage,
 
GMAC,
 
American
 
Land
 
Title
 
Association,
 
and
 
Wells
 
Fargo.
5
 
3.
 
"MERS
 
acts
 
as
 
nominee
 
in
 
the
 
county
 
land
 
records
 
for
 
the
 
lender
 
and
 
servicer.
 
Any
 
loan
 
registered
 
on
 
the
 
MERS
 
System
 
is
 
inoculated
 
against
 
future
 
assignments
 
because
 
MERS
 
remains
 
the
 
nominal
 
mortgagee
 
no
 
matter
 
how
 
many
 
times
 
servicing
 
is
 
traded.
 
MERS
 
as
 
original
 
mortgagee
 
("MOM")
 
is
 
approved
 
by
 
Fannie
 
Mae,
 
Freddie
 
Mac,
 
Ginnie
 
Mae,
 
FHA
 
and
 
VA,
 
California
 
and
 
Utah
 
Housing
 
Finance
 
Agencies,
 
as
 
well
 
as
 
all
 
of 
 
the
 
major
 
Wall
 
Street
 
rating
 
agencies."
6
 
4.
 
Purpose
 
is
 
to
 
track
 
changes
 
in
 
servicing
 
rights
 
and
 
beneficial
 
ownership
 
interests
 
when
 
those
 
interests
 
are
 
sold
 
by
 
the
 
original
 
lender
 
into
 
the
 
secondary
 
and
 
tertiary
 
markets.
7
 
5.
 
MERS
 
System
 
was
 
created
 
to
 
reduce
 
the
 
costs,
 
errors
 
and
 
delays
 
associated
 
with
 
frequent
 
and
 
numerous
 
assignments
 
of 
 
mortgage
 
liens.
8
 
B.
 
Description
 
of 
 
MERS
 
1.
 
Comprised of MERSCORP, Inc. and its subsidiary, Mortgage ElectronicRegistration Systems, Inc.
9
 
2.
 
Operated as a membership organization.
 
3.
 
Almost all mortgage lenders (about 3,000) are members of MERS.
 
4
 
About
 
Us
Overview,
 
MERS,
 
available
 
at 
 
http://www.mersinc.org/about/
 
index.aspx
 
(last
 
visited
 
Mar.
 
7,
 
2011).
 
5
 
Testimony 
 
of 
 
R.K.
 
 Arnold,
 
President 
 
and 
 
CEO
 
of 
 
MERSCORP,
 
Inc.,
 
Before
 
the
 
Subcomm.
 
on
 
Housing
 
and 
 
Community 
 
Opportunity,
 
House
 
Financial 
 
Services
 
Comm.
,
 
111th
 
Cong.
 
5
 
(2010).
 
6
 
Id.
 
7
 
Id.
 
at
 
7
8.
 
8
 
See,
 
e.g.,
 
Eisen,
 
Laurence,
 
MERS
 
and 
 
the
 
Title
 
Industry 
,
 
6
 
T
ITLE
 
I
SSUES
 
‐‐
 
C
HICAGO
 
T
ITLE
 
I
NSURANCE
 
C
O
.
 
4
 
(July/Aug.
 
1997)
 
9
 
See
 
Arnold,
 
supra
 
note
 
5,
 
at
 
11.
 
10
 
Id.
 
at
 
5.
 
2
 
4.
 
Revenue
 
is
 
derived
 
solely
 
from
 
annual
 
membership
 
fees,
 
and
 
loan
 
registration
 
and
 
servicing
 
transfer
 
fees.
 
C.
 
Two
 
Main
 
Functions
 
of 
 
MERS
 
1.
 
MERS
 
maintains
 
a
 
database
 
of 
 
mortgage
 
loans
 
that
 
allows
 
servicing
 
rights
 
and
 
transfers
 
of 
 
ownership
 
interests
 
to
 
be
 
tracked,
 
and
 
2.
 
MERS
 
can
 
be
 
designated
 
by
 
its
 
members
 
to
 
serve
 
as
 
the
 
mortgagee
 
in
 
the
 
public
 
land
 
records.
 
D.
 
MERS’
 
Role
 
in
 
the
 
Lending
 
Process
 
1.
 
Does
 
not
 
make
 
any
 
decisions
 
about
 
whether
 
to
 
loan
 
money.
 
2.
 
Does
 
not
 
make
 
any
 
decisions
 
about
 
whether
 
to
 
securitize
 
a
 
mortgage
 
loan.
 
3.
 
Does
 
not
 
make
 
any
 
decisions
 
about
 
whether
 
to
 
foreclose.
 
4.
 
Does
 
not
 
serve
 
as
 
a
 
repository
 
for
 
mortgage
 
documents.
 
5.
 
Does
 
eliminate
 
the
 
expense
 
of 
 
recording
 
repeated
 
assignments.
 
6.
 
Does
 
serve
 
as
 
a
 
convenient
 
place
 
for
 
mortgagors
 
to
 
find
 
out
 
information
 
about
 
their
 
mortgages.
 
III.
 
MERS
 
AS
 
A
 
MORTGAGE
 
DATABASE
 
A.
 
Not
 
every
 
loan,
 
even
 
those
 
loans
 
made
 
by
 
members,
 
is
 
registered
 
with
 
MERS.
 
Members
 
tend
 
to
 
register
 
only
 
loans
 
they
 
intend
 
to
 
sell.
 
B.
 
Each
 
registered
 
mortgage
 
is
 
assigned
 
a
 
Mortgage
 
Identification
 
Number
 
(MIN)
 
at
 
origination.
 
C.
 
If 
 
servicers
 
change,
 
the
 
borrower
 
can
 
always
 
find
 
out
 
information
 
about
 
the
 
Mortgage
 
by
 
calling
 
MERS
 
or
 
accessing
 
MERS
 
website
 
and
 
referencing
 
the
 
Mortgage’s
 
unique
 
MIN.
 
D.
 
Through
 
MERS,
 
the
 
borrower
 
can
 
access
 
information
 
about
 
the
 
servicer
 
of 
 
the
 
Mortgage
 
and,
 
if 
 
the
 
owner
 
of 
 
the
 
note
 
consents,
 
the
 
identity
 
of 
 
the
 
note
owner.
 
11
 
Id.
 
12
 
Id.
 
at
 
5
6.
 
13
 
Id.
 
at
 
6.
 
14
 
Id.
 
15
 
Id.
 
at
 
9
10.
 
16
 
Id.
 
at
 
9.
 
17
 
MERS
 
Servicer
 
Identification
 
System,
 
MERS
 
Servicer
 
ID,
 
available
 
at 
 
https://www.mers
servicerid.org/sis/
 
(last
 
visited
 
Mar.
 
8,
 
2011).
 
3

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