Case No.

: 86206-1

SUPREME COURT FOR THE STATE OF WASHINGTON KRISTIN BAIN

v.
METROPOLITAN MORTGAGE GROUP, INC. ET AL

AMICUS CURIAE BRIEF BY ORGANIZA nON UNITED FOR REFORM OUR - WASHINGTON

Shawn Timothy Newman, WSBA 14193 Attorney at Law, Inc. P.S. 2507 Crestline Dr., N.W. Olympia, W A 98502 PH: 360.866.2322 FAX: 1.866.800.9941 Attorney for Amicus Curiae Organization United for Reform OUR - Washington

' ..2 the note because it never held the note. 13. . .. . ...TABLE OF CONTENTS I... .3-30 1 RCW 62A. .... . . ii . 11 14 VI. ... . INTRODUCTION ISSUES I. V. MERS's common agency authority is limited to registering and tracking transfers in mortgage loans. transfer and securitize notes it never held . Did MERS violate the unity of the note and security necessary to have standing to foreclose? Is MERS the "person entitled to enforce"! under its limited agency authority and the fact it never held or possessed the note? Do changes in MERS's foreclosure rules confirm it lacks standing to foreclose? 4 . . 4 1 3 2.. . . .". SUMMARY ARGUMENT ARGUMENTS 1. 3. 4 MERS is not the "person entitled to enforce. IV. 5 Changes in MERS's foreclosure rules confirm it lacks standing to foreclose 2.. Sr. 3..3-30 1 ~See MERS Resp. CONCLUSION I 2 RCW 62A. II. MERS violated the unity of the note and security by purporting to negotiate.

271 (1873) 4..3d 158.3d 619.Y........24.....3-301 Ass'n v. Kesler.... CV-10-241-JL (D.S... 926 N.22...23...... E.3 62A. 10 10 10 5-7 iii .24 61... MERS.. 460 Mass...22. 61. Jan......H.S... 623 (Mo.. 10 In re Allman.S.. U..22.. Ocwen Loan Servicing.App..86 A. Longan. 762 (2011) 10 Landmark Nat'l Bank v..3-203(a) 62A. 284 S. 167 (2009). 27....TABLE OF AUTHORITIES FEDERAL CASES: Carpenter v..020(2) Ch. 12-13 Bellistri v..178 36. Ibanez....... 2010 WL 3366405.170 36....3d 274 (2011) .181 6.D.D. 14 5.2012) 8 OTHER STATE CASES: Bank of New York v. 62A...8 u. Silverberg.3-201(a) 62A.010 36. LLC..22. 528...18.22.. Rodriguez........ 8 Bevilacqua v.. 83 U.179 36....s. Bkptcy..005 (2) Ch.....2d 532.2009) 4. 8-9 Moore v. 637 (2011) 2 I I 1 1 1 1 3 14 10. Oregon (2010) .W.N..216 P. Ct. 458 Mass.. Bank National STATUTES: WASHINGTON: RCW RCW RCW RCW RCW RCW RCW RCW RCW RCW RCW RCW RCW 36. 289 Kan.....175 36.

2011-5 (March 23...3-418(d) 6 6 OTHER AUTHORITIES: About MERS http://www...... 37 Pepp... 28 Cardozo L.... Report of the Permanent Editorial Board/or the Uniform Commercial Code -Application of the Uniform Commercial Code to Selected Issues relating to Mortgage Notes (Nov..aspx 1 American Law Institute and the National Conference of Commissioners on Uniform State Laws. 86 Wash. 2185 (2007) 2..... New York Times (Feb. and What To Do About It..... Why all the roho-signing? Securitization and the shadow hanking system..439 (1998) Dave Krieger. . Prob.... 2009) Brady Dennis.... . 415..org/about/index...... provided as Appendix A-2 5-7 Black's Law Dictionary (9th ed. 2012) 1 2... Foreclosing Modifications: How Servicer Incentives Discourage Loan Modifications. How Negotiability Has Fouled Up the Secondary Mortgage Market..2011). L. Peterson. Rev.. MERS morass is hanging up negotiations onforeclosure settlement... & Tr. 14..mersinc... L..... 2012) 2 iv .. Predatory Structured Finance. A Mortgage Tornado Warning. J.... 24.. 8 Diane E. 10 Dale Whitman. Mortgage Drafting: Lessons/rom the Restatement of Mortgages. 2011)....... Washington Post (Aug.... 11 Gretchen Morgenson.......3-309 RCW 62A... 4........ 3 Freddie Mac Bulletin No..RCW 62A.. Rev.. Clouded Titles (Law Bulletin Publishing Co. 2011) Christopher L..... provided as Appendix A-3 ... 33 Real Prop. 755 (2011) 3 Ellen Brown.. Rev 738 (2010) .. 8 2 3 Dale Whitman. San Francisco Bay View National Black Newspaper .. Unheeded.. Thompson....

2010) www.720 9 Powell on Real Property: Michael Allan Wolf Desk Edition § 37.com!dictionary Ikafkaesq ue . Los Angeles Times (Oct. Inc. Inc. Angelo Mozilo. Scott Reckard. The Case Against Allowing Mortgage Electronic Registration Systems. 2012). The Oxford Dictionary of Nursery Rhymes (Oxford: Oxford University Press. otherformer Countrywide execs settle fraud charges. 14. 32 Cardozo Law Review 101.merriam-webster.l. 1951.2010) 1 Nolan Robinson. Opie. 26. Rules of Membership.3 v .27 [2] (LexisNexis Matthew Bender 2010) 4 Restatement (Third) of Property: Mortgages (1997) Walter Hamilton and E. 103 (2011) " 1. 1997) 12 MERS website http://www..8. p. 11-12 Michelle Conlin and Curt Anderson. Rule 8. provided as Appendix A-I I. 10 3 . 25 (Feb. (MERS) 10 Initiate Foreclosure Proceedings. Opie and P. 2nd ed. 11 OCR 86. Mortgage system sued over recording fees: Banks accused of cheating counties out of billions (Nov.2. 12 3 MERSCORP.mersinc MERS website for Mortgage Identification Number [MIN] 1.

Michelle Conlin and Curt Anderson.178)." 6 . $38 Homeless Prevention I & 2 (ReW 36. An assignment and a resignation/substitution does not pay the $48 housing surcharge so their price is $ I4 for the first page and $1 for every page thereafter (but since most are only I page. Real Prop. the lending industry already gets a $48 break from the State for every transaction that is an assignment or resignation/substitution. App. The $63 includes the following: $5 filing fee (RCW 36.22. A-I. $1 Commissioner's Preservation (RCW 36. App.Regional (ReW 36. Mortgage Drafting: Lessons from 'he Restatement of Mortgages.22.010). Rules of Membership.2010).22. 8. 25 (Feb. Inc.").170). $10 Affordable Housing (RCW 36.' or 'straw rnan'" or "limited agent. Whitman. see also Nolan Robinson. In reality. p. available at http://www. see also MERSCORP. (. Br.181). - --- -- ---- According to MERS's In so doing. 3 AbDUl MER"r:. provided as Appendix A. 170). 4 Referred to as the "secondary mortgage market" since the sellers and securitizers are not the loan originators.22.170). the most common price is $14 per doc).' 'straw. MERS acts as nominee in the county land records for the lender and servicer.. Rule 8.18. $2 State Archives .2012).22.org/aboutlindex. 439 (1998).175).com/news/20 I0/nov/14/mortgage-system-sued-over-recordingfees-recording (last visited Feb. The Case Against .2012). 2012). and $ I Mortgage Fraud (ReW 36.mersinc. http://www.. $2 State Archives Grants (RCW 36. & Cony. Br. See Dale A.lmoxnews. 33 Real Prop. J.I 2 See MERS Resp. 3 This claim helped to fuel the mortgage-backed securities (MBS) market4 by allowing "lenders to circumvent the process or recording assignments and paying recording fees' to the county clerk's office. INTRODUCTION MERS serves as the "nominee"! for the mortgagee in the land records for loans registered on the MERS system' website. 10..175).22. 5The "recording fee" in Washington State for a Deed of Trust is $63 for the first page and an additional $1 for every page thereafter.---------------------------------------_ I.aspx(last visited Feb.179). $2 State Centennial (RCW 36.22. Any loan registered on the MERS® System is inoculated against future assignments because MERS remains the mortgagee no matter how many times servicing is traded. Prob. 14. 415. $2 Auditors O&M (RCW 36. A-5 (Friedman on COIlt. & Tr.22.. Mortgage system sued over recording fees: Banks accused a/cheating counties out of billions (Nov. 1 See MERS Resp.5) ("sometimes called a 'dummy. § 6: 1.

103 (2011).2011). II. and to make new loans with the security proceeds ifit so chooses. 458 Mass. In Ibanez. 2012). an easement. (MERS) to Initiate Foreclosure Proceedings. 2009». allowing the issuing financial institution to remove assets from its books. 12 "The housing shell game was made possible because it was all concealed behind an electronic smokescreen called MERS (an acronym for Mortgage Electronic Registration Systems. see PI. available at http://www. and MERS would foreclose on behalf of the investors. Unheeded." Black's Law Dictionary 1475 (9th ed. Title would be recorded in the name ofMERS as a place holder for the investors. Ibanez.s. such as a lien. 10. ht m I (last vi sited Feb. Rev.hangi ng-upnegotiat ions-on." Black's Law Dictionary 291 (9th ed.com/bus iness/economyl mers-morass-is. 2012). Payments would be received by the mortgage servicer. New York Times (Feb. S Robinson. rapidly changing owners while circumventing local recording laws. MERS morass is hanging up negotiations on foreclosure settlement. Dave Krieger. 637 (20 II). 4. MERS allowed houses to be shuffled around among multiple." id 1 enti 10 The problem was ifie d years ago. the court held that a non-judicial foreclosure was void because the foreclosing party did not have a recorded interest in the mortgage. 72.2012). 32 Cardozo L. 101.nytimes. such as bonds. 7 A "cloud on title" refers to a "defect or potential defect in the owner's title to a piece of land arising from some claim or encumbrance. A Mortgage Tornado Warning. the "housing shell game"l2 continues. and thereby improve its capital ratio and liquidity. which was 2 . see also u.washingtonpost. See generally. Br.forec Iosure-settl emen t/20 I l108/24/gJ QAX 6j N cJ _story. 24. "for resale in the financial market. 2012) at 90. A Kafkaesque+' game that forces homeowners interested in challenging predatory lending Allowing Mortgage Electronic Registration Systems. 14. Bank National Ass 'n v.com/2012/02/05Ibusiness/mortgagetornado-warning-unheeded. Inc. Clouded Titles (Law Bulletin Publishing Co. or a court order. 9 Brady Dennis. "Securitization" refers to the process of converting assets into securities. supra at 114 n. 11 Yet. "Gretchen Morgenson. 10. supra at 102.' The problem is compounded by the facts that roughly 65 million mortgages have been registered on the MERS system 9 and "over ninetyfive percent of residential mortgages are securitized. Inc. 's Op.htm (last visited Feb.). available at http://www. 2009). 10 Robinson.MERS clouded the title 7 and identity of the real party in interest: the owner of the note. Washington Post (Aug.

orglsis/ 16 See Diane E. [S]ervicer income generally encourages servicers to perform short-term workout agreements.merriamwebster . 2012). . Br. District Court Judge Coughenour noted in his order.com/2012/why-all-the-robosigning (last visited Feb. Id. available at http://sfbayview. A Century's Milestones in Residential Lending Mortgage Banking (Jan..g. e. 86 Wash. Predatory Structured Finance. 14 or interested in avoiding foreclosure via direct negotiation with 15 W hose ose . II )]. See. Los Angeles Times (Oct. Did MERS violate the unity of the note and security necessary to have standing to foreclose? typically the bank that signed the mortgage with the homeowner. the securitization conduit attempts to use a faceless and seemingly innocent proxy with no knowledge of predatory origination or servicing behavior to do the dirty work of seizing the consumer's home. primarily through foreclosure.mers-servicerid. to d ea 1 WIt h servrcers b ene fici iciary. 26.g. not the beneficiary or owner. Rev." (Dkt. to pile on fees. "And the harm Plaintiff may have suffered because ofMERS's conduct may include expending resources to avert an unlawful foreclosure and preventing Plaintiff from identifying the real beneficiary and negotiating a new arrangement to avoid forec losure.S. or illogical quality.020(2) (borrower's right of redemption).. App. on the other hand. Compare with MERS Resp.corn/d ictionary Ikatkaesq ue 14 See.2266 (2007) ("[A]II across the country. Servicer expenditures. Foreclosing Modifications: How Servicer Incentives Discourage Loan Modifications. 2000)]. https:llwww. Angelo Mozilo.23. the lender. 15 MERS uses an 18-digit Mortgage Identification N umber (MIN) to identify servicers." Ellen Brown. A-7 [Angelo R. IJ "having a nightmarishly complex. Christopher L. 755 (2011). 2185. Peterson. 155 p. L. other former Countrywide execs settle fraud charges.practices. 3 . Why all the robo-signing? Securitization and the shadow banking system." www. mterests con fliret 16 WIt h t h e rea 1 ISSUES 1. 17 i . but in fact it is an amorphous group of investors. see also RCW 6. e. 28 Cardozo L. Thompson. and to delay (but not avoid altogether) foreclosures.. 2012). Rev. II. MERS now brings foreclosure proceedings in its own name . 25. at 14 [As U. In effect. encourage a quick resolution of default. 10. at 814 17 Plaintiffs Opening Sr. This is problematic because MERS is not prepared for or equipped to provide responses to consumers' discovery requests with respect to predatory lending claims and defenses. bizarre.20 I0).. Mozilo. Walter Hamilton and E. Scott Reckard. The homeowner usually thinks the servicer is the lender.. San Francisco Bay View National Black Newspaper (last modified Jan.").

21 L. E. 83 U. the transaction is a nullity and his "assignee. Much trouble has been caused by mortgagees attempting to transfer only one of these two interests.. held. SUMMARY ARGUMENT MERS is not "the person entitled to enforce the note"19 because it never received.S. Is MERS the "person entitled to enforce" IS under its limited agency authority and the fact it never held or possessed the note? Do changes in MERS's foreclosure rules confirm it lacks standing to foreclose? 3. 274." having received no interest in the underlying debt or obligation.App.301 20 Powell on Real Property: Michael Allan Wolf Desk Edition § 37.21 RCW 62A. This maxim was adopted by the U.30 1 RCW 62A. the primary interest is the personalty debt obligation. transfer and securitize notes it never held.2009): 18 19 4 . Where the mortgagee has "transferred" only the mortgage. ARGUMENTS: 1. Bellistri v.20 It must be remembered that the mortgagee has two interests: (l) the debt or obligation which is owned to him.S. See also..3. has a worthless piece of paper.27 (2] (LexisNexis Matthew Bender 2010). In fact. or possessed the note. III. LLC 284 S. 21 Carpenter v. Longan. MERS violated the unity of the note and security by purporting to negotiate. According to Powell on Real Property. and (2) the security interest in land represented by the mortgage . IV.3.. 623 (Mo.3d 619. 271.D. Ed. W. 313 (1873). Ocwen Loan Servicing. Supreme Court in 1873. The interest in land which is available in case security is necessary because of the debtor's default is considered as collateral interest.2.

22 RCW 62A. "including how to determine who may enforce the obligations and. rights. the same person holds both the note and the deed of trust. MERS is not the "person entitled to enforce.3-301 23 See MERS Resp. the note and the deed of trust are inseparable." (internal citations omitted). 2.. the former as essential. which secure payment on the note by giving the lender the ability to foreclose on the property.The note and mortgage are inseparable. 62A. thus. Typically.22 the note because it never held the note. provided as Appendix A-2 at 4 et seq.2011). 14. and when the promissory note is transferred. while an assignment of the latter alone is a nullity.. MERS's common agency authority is limited to registering and tracking transfers in mortgage loans.. usually a mortgage or a deed of trust. Thus. An assignment of the deed of trust separate from the note has no" force. Br. (hereinafter "ALI Report") 5 .25 According to the American Law Institute and the National Conference of Commissioners on Uniform State Laws Report of the Permanent Editorial Generally. to whom those obligations are owed. the latter as an incident.2J UCC Article 324 governs the obligations of parties on a negotiable mortgage note. a mortgage loan consists of a promissory note and security instrument. unity of interest between the note and the security is necessary for a party to have standing to foreclose. When the holder of the promissory note assigns or transfers the note. the deed of trust is also transferred. An assignment of the note carries the mortgage with it.3 RCW 25 American Law Institute and the National Conference of Commissioners on Uniform State Laws." Effectively. 24 Ch. 13. Report of the Permanent Editorial Boardfor the Uniform Commercial Code . it vests in the transferee" all the interest. powers and security conferred by the deed of trust upon the beneficiary therein and the payee in the notes.Application of the Uniform Commercial Code to Selected fssues relating to Mortgage Notes (Nov.

a nonholder in possession of the instrument who has the rights of a holder. (ii) (iii) Thus. the central concept for making that determination is identification of the "person entitled to enforce" the note. 2011)." vee 0) (ii) (iii) Section 3_30128 defines the Person entitled to enforce instrument as: the holder of the instrument. provided as Appendix A-2. RCW 62A. supra. or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to RCW 62A.3-309 or 62A. Most particularly: (i) the maker's obligation on the note is to pay the amount of the note to the person entitled to enforce the note. provided as Appendix A-2 [emphasis in original]. 14. A person may be a person entitled to enforce the instrument even 26 27 2& ALI Report. at 4. a person seeking to enforce rights based on the failure of the maker to pay a mortgage note must identify the person entitled to enforce the note and establish that that person has not been paid. and the maker's failure to pay. when due.26 In the context of mortgage notes that have been sold or used as collateral to secure an obligation. Several issues are resolved by that determination. the maker's payment to the person entitled to enforce the note results in discharge of the maker's obligation.3-30 1 6 . the amount of the note to the person entitled to enforce the note constitutes dishonor of the note. ALI Report. supra.3-418(d).Boardfor the Uniform Commercial Code =Application of the Uniform Commercial Code to Selected Issues relating to Mortgage Notes (Nov. at 4.

MERS is not the mortgagee." MERS does not originate 29 ALI Report. MERS operates as the common limited agent for its members. Unlike this example. Whether Agent may enforce the note or mortgage on behalf of Transferee depends in part on the law of ~Fency and. at 5-7. through its electronic registry. Each of these are defined and illustrated in the ALI Report. MERS "lent no money and received no payments from the borrower. supra." Illustration #430 explains how an agent in possession of the note can enforce it. supra.1 ALI Report. In the facts of Illustration 2.though the person is not the owner of the instrument or is in wrongful possession of the instrument. to whom actual physical possession of/he note is given hy Payee. MERS holds mortgage liens in a "nominee" capacity and. provided as Appendix A-2. supra. rather than Transferee. The beneficiary member appoints MERS to be its agent to hold the mortgage lien interest. MERS is not a party to the note underlying the security instrument. at 5-7. Transferee is a holder of the note and a person entitled to enforce it. Transferee is a person entitled to enforce the note. . provided as Appendix A-2. ALI Report. in the case of the mortgage. at 7. MERS never takes actual physical possession of the note. provided as Appendix A-2. tracks changes in the ownership of mortgage loans and servicing rights related thereto. J{J 7 . Agent is the agent of Transferee for purposes of possessing the note and (ii) it is Agent. not to hold any interest in the note itself. real property law. In the context of Illustration 3.

it has no standing to seek relief. 21 L. U. 275. Bankruptcy Court for Oregon summed this up recently in the case of In re Allman.. at *4 (" MERS is not an economic' beneficiary' under the Deed of Trust. 528. CV-1O-241-JL (D." MERS does not process. nor the deed of trust. at 5-7 (provided as Appendix A-2). 27. 271. Id. and therefore. Clouded Titles. Bkptcy. Bellistri v.or claim any independent ownership interest in the note or the mortgage.W.R. 167 (2009). 216 P.. 2009): MERS never held the promissory note.D. Krieger. Ocwen lacked a legally cognizable interest in the property.S. 271. See Vargas. own or sell of the note so is the mortgage loans. at 3. supra at 124. hold.V MERS has no rights to transfer. thus its assignment of the deed of trust to Ocwen separate from the note had no force. 83 U. 2009 WL 631355. Landmark Nat'l Bank v. See Sheridan. 289 Kan. Ct." ). See generally. See generally. 2012)." The court allowed fraud and other claims under both the Real Estate Settlement Procedures Act and the Fair Debt Collection Practices Act to proceed. 313 (1872)]).' the mortgage is only' an incident' to the note" [quoting Carpenter v. 396 B. MERS. Moore v. As Ocwen holds neither the promissory note. 36 The threshold question in that case was whether or not the title insurance company was required to give notice to Robinson. it does not have an enforceable right.35 The U. Ocwen Loan Servicing.S. 284 S.H.S. It is owed and will collect no money from Debtors under the Note. MERS never takes possession" never the holder. supra.Ed. the court held "defendants do not possess the note. nor will it realize the value ofthe Property through foreclosure of the Deed of Trust in the event the Note is not paid. Oregon (2010) 32 33 8 . assign or collect payments made by the debtor on such note. at 517 (" [w]hile the note is ' essential. App. without ownership of the mortgage instrument. Longan. 36 2010 WL 3366405. 16 Wall. supra at 67-98. service. IfMERS is only the mortgagee. 34 The idiom Possession is nine-tenths of the law is based on the fact that "possession raises a prima facie title or a presumption of the right of property in the thing processed. E. In that case." Black's Law Dictionary (9th ed. 3d 619 (Mo. 2009). 35 See. Neither Kesler nor anyone else involved in the case was required by statute or contract to pay money to MERS on the mortgage.N. ALI Report. Kesler. See also. Jan. and it is enforcement of the note which the Moore's seek to avoid. What stake in the outcome of an independent action for foreclosure could MERS have? It did not lend the money to Kesler or to anyone else involved in this case.3d 158.

705(1)..37 That statute requires that._-_. The trust deed "consistently limits MERS to acting 'solely' as the nominee of the lender. liability for failure to reconvey. Reconveyance upon performance.. Thus. MERS under ORS 86." ld. Kesler... the beneficiary of the trust deed. at 539-540.-----------------------------------_ . even though designated as beneficiary in the trust deed)." See Landmark Nat'l Bank v. promissory note) and become a holder. _." Id..W.. " [Emphasis added].720(3) [Emphasis added] 39 In Re Allman. 301 S.. 9 . if different.720(3). before a title insurance company releases a trust deed.. the title insurance company or insurance producer shall give notice of the intention to record a release of trust deed to the beneficiary a/record and. to collect payments.." notice. and to enforce the debt obligation._- . The notice shall: . 3R ORS 86. 528. 289 Kan.. Accord Southwest Homes of Ark. including rights to receive notice of litigation.g. supra [Emphasis added} 40 62A. here the trust deed "consistently refers only to rights of the lender. 539 (2009) (court considered relationship of MERS to parties to a secured real estate transaction). The relationship of MERS to CIT "is more akin to that of a straw man than to a party possessing all the rights given a buyer. 9 Under the UCC 40 The court concluded that MERS was not entitled to delivery is required to transfer possession of any negotiable instruments (e. It is not in any real sense of the word..41 ~7 "OCR 86.. As in Kesler.. (3) Prior to the issuance and recording of a release pursuant to this section. particularly as defined in ORS 86. It is apparent that the listing of MERS as beneficiary in the deed of trust is merely to facilitate its ownership tracking function. the party to whom the full satisfaction payment was made.. at 539..3d at 4 (MERS was not the beneficiary. release of trust deed .720. notice be given to the lender and the beneficiary. notice to CIT met the statutory re~uirement that notice be given to the beneficiary.3 (Negotiable instruments).

MERS failed to assign the mortgage to U. There the plaintiff argued that he had recorded title to the property by virtue ofa quitclaim deed granted to him by U. Longan. 44 See MERS Resp. even if it never holds the promissory note secured by the deed oftrust that it has legal interest in. Id. 762 (2011). 42 E. The Court held that the plaintiff holds no title to real properly and lacks standing to bring a quiet title action where the foreclosure sale was conducted by someone other than the actual mortgagee or its assigns. How Negotiability Has Fouled Up the Secondary Mortgage Market. Bank as a result of the foreclosure sale. RCW 62A.47 While delivery of the note might seem a simple matter of compliance.S. 83 U. 271 (1873). See discussion infra and Carpenter v. in many cases.. Id. deed of trust or security deed. at 22.46 Professor Dale Whitman addressed the "delivery" issue in his article. promissory notes were never delivered to secondary market investors or securitizers. except when the vee prevents that result (as it does with a negotiable note). Br. experience during the past several years has shown that. of an instrument by a person other than the issuer to a person who thereby becomes its holder. 5.005(2). 3 ("For the reasons set forth below. This is not correct. mortgage. cannot presently be located at all."). 43 "A transfer of the mortgage automatically transfers the obligation.4(a) and (b) (emphasis added).S. MERS respectfully requests that the Court hold that MERS is a lawful 'beneficiary' under the Act.S."Negotiation' means a transfer of possession. 45 RCW 61." Restatement (Third) of Property: Mortgages (1997) at sec. MERS cannot pass title to subsequent transferees. and What To Do About /(. probably in countless thousands of cases." it cannot claim to be the beneficiary under Washington law.. and. 460 Mass." Id. L.24. Bank prior to executing foreclosure. Rev 738.") (emphasis added).") MERS argues that it is "indisputably the 'holder' of the Deed of Trust.45 Therefore.3-203(a) ("An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. However. 47 37 Pepp. This presumes the Deed of Trust is a negotiable instrument and that the note follows the Deed. whether voluntary or involuntary. at 891. at 888. 43 Since MERS does not take delivery of the note.g. The issue is extremely RCW 62A.3-20 1(a) (. 757-758 (2010) 41 10 . 46 See Bevilacqua v. Rodriguez.Transfer of the securityf does not transfer the note.

provided as Appendix A-3. in many cases. In addition. Robinson. at 104 n. supra. 50 A-I. Until recently. Changes in MERS's foreclosure rules confirm it lacks standing to foreclose. 48 49 II ." 50 However. 51 A-I [Rule 8(d)]. Now MERS prohibits members from initiating foreclosure proceedings in the name of MERS and requires assignments for foreclosure and bankruptcy. rather than transfer.widespread.48 3. 201 1-5 (March 23. This policy is embedded in MERS' Rules of Membership which now require assignments of the security instrument from MERS to the "note owner or the note owner's servicer". or to such other party expressly and specifically designated by the note-owner before initiating foreclosure proceedings or A-I [Rule 8(a)]. Freddie Mac eliminated the option of servicers to foreclose in the name of MERS. and. 201 I). This policy creates fundamental problems with any foreclosure. the notes representing the loans they were selling. appears to have been the result of a conscious policy on the part of mortgage sellers to retain. one of the benefits ofMERS membership was "the legal right to foreclose on a defaulting homeowner in MERS's name rather than the name of the entity who actually owns the rnortgage.?" "since July 2011 MERS no longer acts as foreclosing entity. 5 I Those new rules mandate: The note owner or the note owner's servicer shall cause the Certifying Officer to execute the assignment of the Security Instrument from MERS to the note owner's servicer. 16. Freddie Mac Bulletin No.

(hereinafter MERSb. L Opie and P. 1997).D. Created by the real estate finance industry. 10..3d 274 (2011). The issue presented on this appeal is whether a party has standing to commence a foreclosure action when that party's assignor.'s Op. sold and tracked. 12 . 2012) (emphasis added). 3. Available at http://www.in this case. All the king's horses and all the king's men Couldn't put Humpty together again 54This contradicts how MERS markets itself on its website: MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated. reunite securitized loans with their corresponding security instruments) would be unnecessary if MERS was the note owner. a corporation formed to provide a national electronic registry to track the transfer of ownership interests and servicing rights in mortgage loans.. Opie. Silverbergi? the court addressed an issue similar to the certified question before this courr'": This matter involves the enforcement of the rules that govern real property and whether such rules should be bent to accommodate a system that has taken on a life of its own. Inc. and nominated by many lenders as mortgagee of record and beneficiary under deeds of trust. but was never the [Rule 8(e)(i)]. Mortgage Electronic Registration Systems.e.53 (i. 55926 N.mersinc. Humpty Dumpty had a great fall. 56 "Whether Mortgage Electronic Registration Systems. 86 A. The most common modem text is: Humpty Dumpty sat on a wall. 53 521d.was listed in the underlying mortgage instruments as a nominee and mortgagee for the purpose of recording. 2nd ed.filing Legal Proceedings and promptly send the assignment of the Security Instrument (in recordable form) for recording in the applicable public land records. Inc.S. may lawfully Serve as beneficiary under the Washington Deed of Trust Act. 54 In Bank of New York v. The Oxford Dictionary of Nursery Rhymes (Oxford: Oxford University Press.V. holder or assignee." PI. MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans. 52 This effort to "put Humpty together again.2d 532. Br. 1951.org (last visited Feb..

MERS? II May Have Swallowed Your Loan. This Court is mindful of the impact that this decision may have on the mortgage industry in New York. Banker. the corrected assignment of mortgage is a nullity. 13 . Nonetheless. Foreclosures Turn Up Heat on MERS. Am. 57 The Silverberg court concluded: In sum. 58 These same considerations are echoed by Judge Coughenour in his Order: A ruling favorable to Plaintiff in this case and others like it cannot and should not create a windfall for all homeowners to avoid upholding their end of the mortgage bargain paying for their homes. 's Op. and MERS was without authority to assign the power to foreclose to the plaintiff. 59 57 58 Silverberg. at 539-540 (emphasis added). 2011). because MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement. 59 PI. the plaintiff failed to show that it had standing to foreclose.actual holder or assignee of the underlying notes. March 5. at 533 (emphasis added). Br. at 1). But a homeowner's failure to make payments cannot grant lenders trustees and so-called beneficiaries like MERS license to ignore the law and foreclose using any means necessary. 2007. to secure the dependable transfer of property.. We answer this question in the negative. Kate Berry. supra. Id. and is involved in the origination of approximately 60% of all mortgage loans in the United States ( see Peterson at 1362. Consequently. MERS purportedly holds approximately 60 million mortgage loans ( see Michael Powell & Gretchen Morgenson. July 10. and perhaps the nation. and to assure the enforcement of the rules that govern real property. the law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership. New York Times. 14-15.

because MERS was never the lawful holder or assignee of the notes.005(2) ('" Beneficiary' means the holder of the instrument or document evidencing the obligations secured by the deed of trust. it is not the "beneficiary't'" under the Washington Deed of Trust Act61 and cannot initiate any foreclosures or appoint any trustee. CONCLUSION Therefore.V.24. excluding persons holding the same as security for a different obligation.") 61 61. Dated: 2113/12 Newman [#1 193 A omey for Amicus Curiae 60 RCW 61. 14 .24 RCW.

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