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Fannie Mae Policy Now Admits Loan Not Secured

LH | June 2, 2010


Editor's Note: Their intention was to get MERS and servicers out of the foreclosure business.
They now say that prior to foreclosure MERS must assign to the real party in interest.

Here's their problem: As numerous Judges have pointed out, MERS specifically disclaims any
interest in the obligation, note or mortgage. Even the language of the mortgage or Deed of Trust
says MERS is mentioned in name only and that the Lender is somebody else.

These Judges who have considered the issue have come up with one conclusion, an assignment
from a party with no right, title or interest has nothing to assign. The assignment may look good
on its face but there still is the problem that nothing was assigned.

Here's the other problem. If MERS was there in name only to permit transfers and other
transactions off-record (contrary to state law) and if the original party named as "Lender" is no
longer around, then what you have is a gap in the chain of custody and chain of title with respect
to the creditor's side of the loan. It is all off record which means, ipso facto that it is a question of
fact as to whose loan it is. That means, ipso facto, that the presence of MERS makes it a judicial
question which means that the non-judicial election is not available. They can't do it.

So when you put this all together, you end up with the following inescapable conclusions:

• The naming of MERS as mortgagee in a mortgage deed or as beneficiary in a deed of trust

is a nullity.
• MERS has no right, title or interest in any loan and even if it did, it disclaims any such
interest on its own website.
• The lender might be the REAL beneficiary, but that is a question of fact so the non-judicial
foreclosure option is not available.
• If the lender was not the creditor, it isn't the lender because it had no right title or interest
either, legally or equitably.
• Without a creditor named in the security instrument intended to secure the obligation, the
security was never perfected.
• Without a creditor named in the security instrument intended to secure the obligation, the
obligation is unsecured as to legal title.
• Since the only real creditor is the one who advanced the funds (the investor(s)), they can
enforce the obligation by proxy or directly. Whether the note is actually evidence of the
obligation and to what extent the terms of the note are enforceable is a question for the
court to determine.
• The creditor only has a claim if they would suffer loss as a result of the indirect
transaction with the borrower. If they or their agents have received payments from any
source, those payments must be allocated to the loan account. The extent and measure of
said allocation is a question of fact to be determined by the Court.
• Once established, the allocation will most likely be applied in the manner set forth in the
note, to wit: (a) against payments due (b) against fees and (c) against principal, in that
• Once applied against payments, due the default vanishes unless the allocation is less than
the amount due in payments.
• Once established, the allocation results in a fatal defect in the notice of default, the
statements sent to the borrower, and the representations made in court. Thus at the very
least they must vacate all foreclosure proceedings and start over again.
• If the allocation is less than the amount of payments due, then the investor(s) collectively
have a claim for acceleration and to enforce the note — but they have no claim on the
mortgage deed or deed of trust. By intentionally NOT naming parties who were known at
the time of the transaction the security was split from the obligation. The obligation
became unsecured.
• The investors MIGHT have a claim for equitable lien based upon the circumstances that
BOTH the borrower and the investor were the victims of fraud.