California Court Rules: MERS Can't Foreclose, Citibank Can't Collect

"Any
                                    attempt to transfer the beneficial interest of a trust deed
without ownership of the underlying note is VOID under California
Law."

If you read that sentence and thought… "MERS," then you're already
in the club.
                                    If you've never heard of MERS, and have no idea what
is meant by being "in the club," don't worry, this is
                                    a club that
just about every homeowner is invited to join. In fact, you may
already be a member and not even know
                                    it.

MERS is the acronym used to describe Mortgage Electronic Registration
Systems, Inc. Best I can tell, our
                                    friends in the mortgage banking
industry created MERS to make it easier for banks and servicers to
sell and transfer
                                    our mortgages at the speed of light during the
real estate bubble. According to the company's Website:

MERS
                                    was created by the mortgage banking industry to streamline the
mortgage process by using electronic commerce to eliminate
                                    paper. Our
mission is to register every mortgage loan in the United States on
the MERS® System.

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.

I have to tell you… I hate these guys already. Their attitude
alone bothers me. I looked
                                    at pictures of their three top executives
on their Website and thought to myself… "No way I'd be friends
with these guys." Probably not very fair of me, but as far as I'm
concerned, when it comes to anything that talks
                                    like that and was
created by the mortgage banking industry… "fair," is where you
go on Sunday to
                                    have popcorn and cotton candy. Just so we're clear.

MERS, which is a company that I hear doesn't even have employees,
has been about as controversial as you get ever since houses started
dropping like flies into foreclosure back in 2007-08.
                                    God forbid
you find yourself losing your home to foreclosure, you'll very
likely find a representative from MERS
                                    looking smug and acting
like the owner of your mortgage. But, MERS is not the owner of
your mortgage, of course,
                                    and now a bankruptcy court judge in the
Eastern District of California has officially said that he agrees.

MERS
                                    is a relatively new development in the mortgage world, and
as the foreclosure crisis began the courts pretty much let
                                    them
do whatever they wanted to do, as the party in interest in a
foreclosure action.

But, that was before
                                    the foreclosures became a full fledged
tsunami, and homeowners watched the bankers first get bailed out,
and then
                                    pay out billions in bonuses before treating every single
American homeowner/taxpayer who applied for a loan modification
like insignificant garbage.

In response, homeowners, having been trained for over 200 years in
the fine
                                    art of pushing back when shoved, went to their lawyers,
and those lawyers started asking questions, as they are prone
                                    to
do. Many started with questions like: "Who the heck is this MERS
guy and why does he think he has any right
                                    to be foreclosing on my
client's home?"

For almost two full years, it seemed to me that judges, who frankly
weren't used to foreclosures being challenged, basically yawned and
gave the house back to the bank. Then, starting
                                    about a year ago,
give or take, things started to change. Judges started to listen to
the points being raised as
                                    related to MERS showing up as the party
in interest ready to foreclose, and the more the judges learned,
the more
                                    they saw problems with what MERS was doing. As time went
on the tide seemed to shift a bit and several decisions weren't
falling as MERS would have liked for one reason or another.

According to the company's Website, MERS "is
                                    a proper party that
can lawfully foreclose as the mortgagee and note-holder of a
mortgage loan." Here's what
                                    it says on the MERS Website:

FORECLOSURES

("MERS") is In mortgage foreclosure cases, the plaintiff
                                    has standing
as the holder of the note and the mortgage. When MERS forecloses,
MERS is the mortgagee and it is the
                                    holder of the note because a
MERS officer will be in possession of the original note endorsed
in blank, which makes
                                    MERS a holder of the bearer paper.



But, in this latest decision, the bankruptcy judge in California
didn't agree, writing in his opinion:

"Since no evidence of MERS' ownership of the underlying note has
been offered, and other courts have concluded that MERS does not
own the underlying notes, this court is convinced
                                    that MERS had no
interest it could transfer to Citibank. Since MERS did not own the
underlying note, it could not
                                    transfer the beneficial interest of
the Deed of Trust to another. Any attempt to transfer the beneficial
interest
                                    of a trust deed without ownership of the underlying note
is void under California law."



Did
                                    you get that? Since MERS didn't own the underlying note,
it couldn't transfer the beneficial interest of the Deed of
                                    Trust
to Citibank.



According to several attorneys, this opinion should serve as legal
basis
                                    to challenge a foreclosure in California that has been based
on a MERS assignment. It could also be used when seeking
                                    to void
any MERS assignment of the Deed of Trust, or the note, to a third
party for purposes of foreclosure; and
                                    should be sufficient for a
borrower to obtain a TRO against a Trustee's Sale, and a Preliminary
Injunction preventing
                                    any sale, pending litigation filed by the
borrower that challenges a foreclosure based on a MERS assignment.

In this decision the court found that MERS was acting "only as a
nominee," under the Deed of Trust, and that
                                    there was no evidence of
the note being transferred. The judge's opinion in this case also
said that "several
                                    courts have acknowledged that MERS is not the
owner of the underlying note and therefore could not transfer the
note,
                                    the beneficial interest in the deed of trust, or foreclose on
the property secured by the deed", citing cases of:
                                    In Re Vargas,
California Bankruptcy Court; Landmark v. Kesler, Kansas decision
as to lack of authority of MERS;
                                    LaSalle Bank v. Lamy, a New York
case; and In Re Foreclosure Cases, the "Boyko" decision from Ohio
Federal
                                    Court.

And the court concluded by stating:

"Since the claimant, Citibank, has not established that
                                    it is the
owner of the promissory note secured by the trust deed, Citibank
is unable to assert a claim for payment
                                    in this case."



Oh my… well, that really is something. MERS can't foreclose and
Citibank
                                    can't collect? I believe you would have to say that MERS
and Citibank were already in a hard place when the judge inserted
a rock. MERS can't foreclose and Citi can't collect… I am
absolutely loving this, I have to say, but I suppose
                                    giddy would
be an inappropriate response, so I'll just say, "how interesting".

This decision means
                                    that if a foreclosing party in California, that
is not the original lender, claims that payment is due under the
note,
                                    and that they have the right to foreclose on the basis of a
MERS assignment, they're wrong… based on this opinion.
                                    The bottom
line is that MERS has no authority to transfer the note because it
never owned it, and that's a view
                                    that even seems to be supported
by MERS' own contract, which says that "MERS agrees not to assert
any rights
                                    to mortgage loans or properties mortgaged thereby".

What this may mean to California's homeowners in bankruptcy
                                    court…

It should serve as a legal basis to challenge any foreclosure in
California based on a MERS
                                    assignment. It should serve as the legal
basis for voiding a MERS assignment of the Deed of Trust, or the
note,
                                    to a third party for purposes of foreclosure. It should be an
adequate basis for obtaining a TRO against a Trustee's
                                    Sale It should
be the basis for a Preliminary Injunction barring any sale pending
litigation filed by the borrower
                                    that challenges a foreclosure
based on a MERS assignment. In addition, some lawyers believe that
this ruling is
                                    relevant to borrowers across the country as well,
because the court cited non-bankruptcy cases related to the lack of
authority of MERS, and because this opinion is consistent with prior
rulings in Idaho and Nevada Bankruptcy courts
                                    on the same issue.

I don't know about you, but I feel like watching a marching band.
76 trombones, baby, 76
                                    trombones.



Tagged with: assignment to the trust bank of america bankruptcy court
bankruptcy court
                                    judge California Bankruptcy Court citibank Deed of
Trust foreclosures Indymac bank jpmorgan chase Landmark v. Kesler
LaSalle Bank v. Lamy loan modifications MERS MERS Foreclosures
mortgage banking mortgage crisis Mortgage Electronic
                                    Registration
System one west Preliminary Injunction short sale strategic default
treasury trustee sale walker case
                                    wells fargo bank Comments

Robin says at Sat Jul 17, 2010 2:02 am The originating lender/broker
bears the responsibility
                                    of registering the loan with MERS, and
at its inception there were many who lacked the capability to do
so. It wasn't
                                    mandatory. It was - simply - complicated.

E-commerce rocks, and I wanted to see the mortgage industry get
there
                                    just like propery&casualty insurance did. While I think it
was a great idea to automate the myriad loan transfers
                                    that occur
post-origination so as to maintain a clear path of ownership for the
consumer's interest , MERS failed
                                    to do that and lost its luster
with the muddiness of "physical" ownership of Notes over which it
had no
                                    control.

As participation in MERS became more prevalent, the errors and
short-givings of the process began
                                    to manifest themselves,
but IMHO too late for the early-signers-on who were the big
originating/servicers. Something
                                    as simple as a modification to
correct a typo in the vesting on a Mortgage (and coordination with
the corresponding
                                    Note) was painful for a small originator. For the
big guys it was either excrutiatingly irritating or largely ignored.

Registrants with MERS (originating lenders) would initially go
through the normal procedure of having their own
                                    mortgage registered
upon closing, and that would subsequently be registered with MERS
when placed "on sale"
                                    to the secondary market who was then designated
as the "Nanny of Note" (not a legal term) thereafter. Problem
                                    here
(and it took the legal system years to figure this out) is that
the physical note was never passed to MERS,
                                    but merely "monitored"
by MERS as having being passed according to the reports of MERS
subscribers. They
                                    (MERS) had no control over the physical transfer
of these notes beyond a contractual "understanding" with their
subscribers, to whom they held no liability.

I have this piece of paper here. If I type and transmit to you --my
third party recordation service -- online what's on this paper,
do you agree to keep record of it for me? Great. Can
                                    I hold you
liable if I lose this piece of paper or fail to enforce it with the
original signers or guarantors of
                                    credit? Nope. If the folks I told
you I transferred the paper to do the same, are you responsible
for that? Nope.

Big can of worms, and they're all squirming.

charleswaynecox says at Sat Jul 17, 2010 3:00 am Please cite
                                    the
case you are referring to in your article re MERS and Citibank.

mandelman says at Sat Jul 17, 2010 7:02
                                    am Sorry about that,
I meant to post the case, but forgot:

Case Title: Rickie Walker Case no. 10-21656 - E
                                    - 11
Date: 5-20-10

And if you want me to email you the case minutes, just send me an
email and I'll forward
                                    you the PDF. Email me at mandelman@mac.com.

rjoseph says at Sat Jul 17, 2010 3:57 pm In response to Robin,
I
                                    hope you are not trying to defend MERS or a Rockin' E-commerce
way of allowing a recording entity as the entity to control
                                    whether
a family should get to stay in their home. In Michigan, we have a
few big collection firms, even the remaining
                                    "small town" banks
use them. They utterly refuse to talk to a homeowner during the
foreclosure process.

Trust me when I say this, because I have "worked" with them for over
22 years, defending homeowners.
                                    Enter MERS. Go ahead and try top
call them. The problem is that no body is actually accountable on
the Plaintiff.Mortgagee
                                    side during this process. The attorneys are
never available and you cannot call MERS. There are no settlement
discussions
                                    or proposals to try to stop the snowball from crashing
down on the FAMILIES.

Yes, the non-computerized, real
                                    live, actual people, who thought
they were dealing with people when they mortgaged their homes. They
thought this,
                                    because the brokers who sold them the great mortgage
led them to believe this. Or their neighbor, the small town banker,
told them this at their kids Little League game. Now, at the first
sign of trouble, the poor slob has to deal with
                                    a large law firm,
from another city, who only provides computerized messages. Or,
thank god, MERS!! As Martin might
                                    say, "Yippee!!!".

I have no problem if lenders want to record a mortgage in a far
away county using
                                    MERS. But if someone wants to take away a four
year old child's treehouse, they better have the D--n note and they
better have the authority to work out a settlement. Every contract
(note and/or mortgage) carries an implied covenant
                                    to act in good
faith. That doesn't mean there should never be a foreclosure. It
DOES mean there should never be
                                    a foreclosure without some type
of dialogue.

MERS, by its own corporate mandate eliminates that possibility,
without notice to the mortgagor (trust me on that, too, I know,
personally). The same with the automated law firms,
                                    which are the
next to go.

Martin, I am ready to ride my chair into court to to battle again. I
think
                                    I can remember how to tie a necktie and I know I can bang on
the table as loud as the next guy. First, we crush MERS,
                                    then we
force the bastards to actually deal, face to face, with the problem
they created.

Finally, this
                                    decision, because it is in a federal court, can be
used in all federal courts. While perhaps not binding on a Michigan
bankruptcy court or a state court, it is a precedent on a fairly
novel issue. Homeowners should copy the citation in
                                    you response,
above, and give it to their attorney in case he can't find it. Then
urge him to fight like the devil,
                                    because, despite even the best
intentions behind the creation of MERS (and I doubt there are any),
that is who you
                                    are fighting if you want to save your home. I know,
because I have been there personally.

mandelman says at
                                    Mon Jul 19, 2010 5:57 am If you're serious about
battling for the rights of homeowners again, there is no one I'd
rather help do just that. Call me and let's get a game plan going. I
can get you plugged into the best lawyer networks
                                    in the country
and they will share all of their pleadings and anything else you
need to short cut the learning curve.
                                    [/i]

ppulatie says at Mon Jul 19, 2010 2:29 pm Martin,

Unfortunately, the Walker case is not the norm.
                                    There are very few
bk judges that are willing to accept such arguments. The Northern
District of CA refuses to listen,
                                    among others.

There have been three good cases on MERS, coming out of the Eastern
District which was Walker,
                                    the Central District and Judge Buford
in Vargas, and a decision in the Southern District. For all the bk
cases files,
                                    this is not much.

Until there are Appellant Court rulings, these singular actions
don't mean much.

BTW, there is apparently a ruling in San Mateo County regarding
MERS. I have yet to receive it, but it was supposed
                                    to do a good
job regarding MERS. Of course, it will likely be appealed.


BTW, Walker was in May. It took
                                    a couple of months to get around.

rjoseph says at Mon Jul 19, 2010 5:53 pm One pretty interesting
thing: As
                                    I told folks earlier, I now have a permanent loan
modification from IndyMac/OneWest. I just received the permanent
docs. I will forward a copy to you. In the agreement is a specific
provision whereby my wife and I have to recognize
                                    and approve of
MERS. We have to agree that MERS can sue us and/or foreclose on
us. Don't tell me that this CA case
                                    isn't worrisome to MERS in
particular and the banksters in general. Dick

smoolynog says at Tue Jul 27, 2010
                                    10:02 pm I can't wait to see
other courts rules in line with in re walker.

Here are some cases that have similar
                                    issues...

CASE DECISIONS REGARDING PROOF OF CLAIM
Please see list below of hidden case law hidden from the
                                    public,
supporting our position that the banks operate in fraud.


CASE DECISIONS:
Patton v. Diemer,
                                    35 Ohio St. 3d 68; 518 N.E.2d 941; 1988). A
judgment rendered by a court lacking subject matter jurisdiction is
void
                                    abinitio. Consequently, the authority to vacate a void judgment
is not derived from Ohio R. Civ. P. 60(B), but rather
                                    constitutes
an inherent power possessed by Ohio courts. I see no evidence to
the contrary that this would apply
                                    to ALL courts.


"A party lacks standing to invoke the jurisdiction of a court unless
he has, in
                                    an individual or a representative capacity, some real
interest in the subject matter of the action. Lebanon Correctional
Institution v. Court of Common Pleas 35 Ohio St.2d 176 (1973).


"A party lacks standing to invoke the
                                    jurisdiction of a court unless
he has, in an individual or a representative capacity, some real
interest in the
                                    subject matter of an action." Wells Fargo Bank,
v. Byrd, 178 Ohio App.3d 285,2008-Ohio-4603,897 N.E.2d 722(2008).
                                    It
went on to hold, " If plaintiff has offered no evidence that it
owned the note and mortgage when the complaint
                                    was filed, it would
not be entitled to judgment as a matter of law"


(The following court case was
                                    unpublished and hidden from the public)
Wells Fargo, Litton Loan v. Farmer, 867 N.Y.S.2d 21 (2008). "Wells
Fargo
                                    does not own the mortgage loan… Therefore, the… matter
is dismissed with prejudice."


(The following court case was unpublished and hidden from the public)
Wells Fargo v. Reyes, 867 N.Y.S.2d 21 (2008).
                                    Dismissed with
prejudice, Fraud on Court & Sanctions. Wells Fargo never owned
the Mortgage.


(The
                                    following court case was unpublished and hidden from the public)
Deutsche Bank v. Peabody, 866 N.Y.S.2d 91 (2008). EquiFirst,
                                    when
making the loan, violated Regulation Z of the Federal Truth in
Lending Act15 USC §1601and the Fair Debt
                                    Collections Practices
Act 15 USC §1692; "intentionally created fraud in the factum"
and withheld
                                    from plaintiff… "vital information concerning said
debt and all of the matrix involved in making the loan".


(The following court case was unpublished and hidden from the public)
Indymac Bank v. Boyd, 880 N.Y.S.2d
                                    224 (2009). To establish a prima
facie case in an action to foreclose a mortgage, the plaintiff
must establish the
                                    existence of the mortgage and the mortgage
note. It is the law's policy to allow only an aggrieved person to
bring
                                    a lawsuit . . . A want of "standing to sue," in other words,
is just another way of saying that this particular
                                    plaintiff is not
involved in a genuine controversy, and a simple syllogism takes us
from there to a "jurisdictional"
                                    dismissal.


(The following court case was unpublished and hidden from the public)
Indymac Bank v. Bethley,
                                    880 N.Y.S.2d 873 (2009). The Court is
concerned that there may be fraud on the part of plaintiff or
at least malfeasance
                                    Plaintiff INDYMAC (Deutsche) and must have
"standing" to bring this action.


(The following
                                    court case was unpublished and hidden from the public)
Deutsche Bank National Trust Co v.Torres, NY Slip Op 51471U
(2009). That "the dead cannot be sued" is a well established
principle of the jurisprudence of this state
                                    plaintiff's second
cause of action for declaratory relief is denied. To be entitled
to a default judgment, the movant
                                    must establish, among other
things, the existence of facts which give rise to viable claims
against the defaulting
                                    defendants. "The doctrine of ultra vires is
a most powerful weapon to keep private corporations within their
legitimate spheres and punish them for violations of their corporate
charters, and it probably is not invoked too often…"
                                    Zinc Carbonate
Co. v. First National Bank,103 Wis. 125,79 NW 229(1899). Also see:
American Express Co. v. Citizens
                                    State Bank,
181 Wis. 172, 194 NW 427(1923).


(The following court case was unpublished and hidden from
                                    the public)
Wells Fargo v. Reyes, 867 N.Y.S.2d 21 (2008). Case dismissed with
prejudice, fraud on the Court and
                                    Sanctions because Wells Fargo
never owned the Mortgage. (The following court case was unpublished
and hidden from
                                    the public)


Wells Fargo, Litton Loan v. Farmer, 867 N.Y.S.2d 21 (2008). Wells
Fargo does not own the
                                    mortgage loan. "Indeed, no more than
(affidavits) is necessary to make the prima facie case." United
States
                                    v. Kis, 658 F.2d, 526 (7th Cir. 1981).


(The following court case was unpublished and hidden from the public)
Indymac Bank v. Bethley, 880 N.Y.S.2d 873 (2009). The Court is
concerned that there may be fraud on the part of plaintiff
                                    or
at least malfeasance Plaintiff INDYMAC (Deutsche) and must have
"standing" to bring this action. Lawyer
                                    responsible for false debt
collection claim Fair Debt Collection Practices Act,15 USCS §§
1692-1692o,
                                    Heintz v. Jenkins,514 U.S. 291; 115 S. Ct. 1489, 131
L. Ed. 2d 395 (1995). and FDCPA Title 15 U.S.C. sub section
1692.
                                    In determining whether the plaintiffs come before this Court
with clean hands, the primary factor to be considered is
                                    whether
the plaintiffs sought to mislead or deceive the other party, not
whether that party relied upon plaintiffs'
                                    misrepresentations.


Stachnik v. Winkel,394 Mich. 375, 387; 230 N.W.2d 529, 534
(1975). "Indeed,
                                    no more than (affidavits) is necessary to make
the prima facie case." United States v. Kis, 658 F.2d, 526 (7th
Cir. 1981). Cert Denied, 50 U.S. L.W. 2169; S. Ct. March 22,
(1982). "Silence can only be equated with fraud where
                                    there is a
legal or moral duty to speak or when an inquiry left unanswered
would be intentionally misleading."


U.S. v. Tweel,550 F.2d 297(1977). "If any part of the consideration
for a promise be illegal, or if
                                    there are several considerations
for an un-severable promise one of which is illegal, the promise,
whether written
                                    or oral, is wholly void, as it is impossible to say
what part or which one of the considerations induced the promise."


Menominee River Co. v.Augustus Spies L & C Co., 147 Wis. 559 at
p. 572;132 NW 1118(1912).Federal Rule
                                    of Civil Procedure 17(a)(1)
which requires that "[a]n action must be prosecuted in the name of
the real party
                                    in interest." See also, In re Jacobson, 402 B.R. 359,
365-66 (Bankr. W.D. Wash. 2009); In re Hwang, 396 B.R. 757,
766-67 (Bankr.C.D. Cal. 2008).


Mortgage Electronic Registration Systems, Inc. v. Chong, 824 N.Y.S.2d
764 (2006). MERS did not have standing as a real party in interest
under the Rules to file the motion… The declaration
                                    also failed
to assert that MERS, FMC Capital LLC or Homecomings Financial,
LLC held the Note.


Landmark
                                    National Bank v. Kesler, 289 Kan. 528,216 P.3d
158(2009). "Kan. Stat. Ann. § 60-260(b) allows relief from a
judgment based on mistake, inadvertence, surprise, or excusable
neglect; newly discovered evidence that could not have
                                    been timely
discovered with due diligence; fraud or misrepresentation; a void
judgment; a judgment that has been
                                    satisfied, released, discharged,
or is no longer equitable; or any other reason justifying relief from
the operation
                                    of the judgment. The relationship that the registry
had to the bank was more akin to that of a straw man than to a
party possessing all the rights given a buyer." Also In September
of 2008, A California Judge ruling against MERS
                                    concluded, "There
is no evidence before the court as to who is the present owner of
the Note. The holder of
                                    the Note must join in the motion."


LaSalle Bank v. Ahearn, 875 N.Y.S.2d 595 (2009). Dismissed with
prejudice. Lack of standing.

Novastar Mortgage, Inc v. Snyder 3:07CV480 (2008). Plaintiff has
the burden
                                    of establishing its standing. It has failed to do so. DLJ
Capital, Inc. v. Parsons, CASE NO. 07-MA-17 (2008).