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Ltr Opinion Memorandumtomr Arnold

Ltr Opinion Memorandumtomr Arnold

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Published by Matt Stoller

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Published by: Matt Stoller on Dec 08, 2011
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02/11/2014

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J
I
..
I·
727
I
EXHIBITW:LETTEROPINION,DATEDSEPTEMBER1,1997FROMCOVINGTON
&
~URLlNG,
IDENTIFIEDBYR.K,ARNOLDDURINGHISDEPOSITION[727
M
754]
,
..
e·,"..
.-
.
.-
-
..
--
......•
..
...~r.
I
COVINGTON
&
aU~LING
.SeptelJlber
1,
1997
PRIVILEGEDANDCONFIDENTIAL
}
MEMORANDUMTQ
MR.
ARNOLD
SUJ2plemental
M&RS
LegalIssues
J
Thismemorandum
sets
forthour
analysis
of
the
legal.
issueswhich.you
asked
ustoconsiderrelatingtoMERS
being
namedastheoriginalmortgagee)!
Our
analysis
is
baseduponour
understanding
that
MERS
will
benamedas
theoriginalmortgageeupontheclosingofaloanthaitheoriginatinglenderintends
to
)
register
in
the
MERSSystem..Themortgage
will
berecorded
in
theappropriateland
recordswithMERSnamedasthemortgageeofrecord.theoriginatinglender
will
be
the
payeeonthenoteandthenote
will
beheld
by
the
originatinglenderorasubsequentendorsee
of
thenote.typically
a
loanserv.i.cerforasecondarymortgagemarketinvestor.
In
its
capacityasmortgageeofrecord;
MER.S
will
act
onbehalfoftheholderofthe
,i;.
promissorynotesecured
by
themortgage.whichwouldbe
the
originatinglenderorasubsequentholder.
By
designating_~RS
astheoriglMlmortgageeofrecord,the
_____..__-•,_-.'.~_-H'.__,,_•,._."
holder(s)
willavoid
recordingassignmentsofthemort@e.MERSwillnothavea
..-....'..,..'......H·
beneficial
interest
in
the
loansnor
will
:MERS
service'theloansorholdthe
promissory
JJ
Forpurposesofthismemorandum,the
term
"mortgage"
is'
usedtorefertoamortgage,deed.of
'trust
orothersecurity
:instnu:nent
andthe
term
"mortgagee
11
isusedtorefer
to
amortgageeunderamortgageorabeneficiaryunderadeedof
trust
orothersecurityinstrument
M1?lJI
0.1,1"1
 
·1
.
!
.
.
:
<
@I1
.noteevidencingthedebtRather,MERSwilltakeinstructionsfromtbenoteholderor
COVINGTON
&
BURL.ING
fromtheloanservicer.2!
.Wjili
respect
to
foreclosures,MERS
contemplates
that
the
b.older
of
the
noteorloanservicer,asagentfartheholdet~will
institute
aforeclosureactionor,
if
the
"mortgage"
is
in
theform.ofadeedoftrust,directthe
trustee
to
doso.
If
necessary
tocomply
with
laworcustom
m
!heapplicable
jurisdiction.
anemployeeofthelenderor
loanservice!
will
actunderpowerof
a:ttomey
from:MERSasmortgagee,or
will
be
appointedasanofficer
of
MERS
to
direct
foreclo~esonbehalfofMERSasmortgagee.
There
will
benosubstantivechange
in
therelationsbipbetweenthenoteholderandloan
servicer,
Moreover,
other
than
minor
operationalprocedures,there
will
benochange
in
the
responsibili1iesoftheloanservicer,who
will.
bycontract
with
MERS,continueto
havethesameobligationsandliabilities
with
respecttoamortgageas
it
would
.havein
the
absenceof
the
MERS
System.
Youhaveaskedustoconsiderseveral
state
law
issuesoccasioned
by
the
proposalthat
MER.s
serveastheoriginal
mortgagee
ofrecord;these~uesare
addressed
/i
i
i
-
'
I
hmncdlaiely
be-low.Youalsohaveaskedustoconsidercertainrelatedissuesof
federal
law.w.bichareaddressed
in
the
final
sectionofthis
memorandum.
Y
MERS
will
actasagentforthepayee
underthepromissorynote,
and
to
the
extent
thenote
is
servicedbyaloanservicerother
than
thepayee,
:MERS
may'also
actonits
behalfandat
its
direction.
 
I
I
!
I
!
I
:.Ij
I
730
I
...-;
COVINGTON
Co
BURLING
-4-
Connecticutand
Pennsylvania
in
supportofitsholding.Recordedmortgages
with
a
nominee
as
themortgageelikewisehavebeenupheld
in
WashingtonState
in
AndersonBuickCompanyv.Cook,
7Wash.2d632,110P.2d
857.862
(1941)and
in
Louisiana
m
NationalA,cceptanceCompanyof.Ameriaa
v.
WalZace
l
194So.2d194~
199.
cert.
denied.
196So.2d
533.
534(1967).
Seegenerally
59C.J.S.
Mortgages
§.
80at116(mortgages
arevalideven
if
themortgageesofrecordarenomineesor
straw
persons).Evenwherenomortgagee
is
named.
if
fromreading
the
mortgageasawholeonecandiscernthatthemo-rtga!leistied
m
'With
the
notesecured
thereby.
acourt
will
upholdthevalidityofthemortgage.
SeeRichey
v.
Sinclair,
47N.B.364
(Ill.
1897)
(reference
in
mortgage
to
note
payable
totheorderofWilliamP.Turnerwhich
was
executed
at
the
same
time
as1bemortgagecuredanydefect
that
the
mortgage
was
mvalid
becausenograntee
was
notedtherein).
We
arenotawareofanycase
that
holdsthata
loanisunsecuredor
that
amortgage
is
unenforceablebecause
the
mortgagee
is
actingas
anomineefor
the
actual
noteholder.
Likewise,
in
states
where
adeedoftrust
is
customarily
used
tosecurea
debt,
it
is
generallyaccepted
that
theentityholdingorowningthenotecankeepthefact
)
ofitsownershipsecret.
See
Rebert~vitolandRaymond
J.
Werner.
ModernMortgage
Law
and
Practice.
§
3.03(a)(1)(1981);
see,
e.g;
Fried
"v.
Marbw-ger,
186S.W.2d584,
586
(Mo.
1945)(useof
straw
party
to
holdlegaltitledidnotinvalidate
deed
of1rust).
Moreover,undertheUniformCommercial
Code,
there
is
norequirement
that
thesecuredpartyidentified
in
the
securityinstrumentbeaprincipalratherthanan
)
agent
SeeIndustrialPackagingProductsCo.v.FortPittPackagingInternational,
Inc;

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