Courtesy of Karl Denninger, The Market Ticker
The United States Bankruptcy Court for the Eastern District of California has issued a ruling dated May 20, 2010 in the matter of In Re: Walker, Case No. 10-21656-E-11 which found that MERS could not, as a matter of law, have transferred the note to Citibank from the original lender, Bayrock Mortgage Corp. The Court’s opinion is headlined stating that MERS and Citibank are not the real parties in interest.
The court found that MERS acted “only as a nominee” for Bayrock under the Trust Deed and there was no evidence that the note was transferred. The opinion also provides 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 the well-known cases of In Re Vargas (California Bankruptcy Court), Landmark v. Kesler (Kansas decision as to lack of authority of MERS), LaSalle Bank v. Lamy (New York), and In Re Foreclosure Cases (the “Boyko” decision from Ohio Federal Court).
I have noted this repeatedly – that MERS own web site claims that it is exists for the purpose of circumventing assignments and documenting ownership!
MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.
Sorry, but "creating a real estate finance industry device" does not obviate state law, no matter how much you might wish it did.
From the opinion cited:
The opinion states: “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.”
Looks pretty basic to me: You can't transfer what you don't have, and creating a database for tracking purposes does not create an ownership interest.
As I noted in "And The Housing Fraud Continues" on May 31st there are plenty of reasons to doubt whether or not any of these notes are recoverable.
But whether something is difficult to unwind and put right legally doesn't have a thing to do with whether or not a note is legally enforceable. It either is or it is not.
When will we see Attorney General Holder open a criminal investigation into this matter? Is there not sufficient question as to whether or not the very existence of these so-called "transfer systems" evidences an enterprise between multiple parties formed for the very purpose of circumventing state law, and that such systems, inherently being formed and operated in interstate commerce, are certainly within the realm of Federal Government jurisdiction.
There are many who will argue that this is "just" a civil matter. I disagree. The intentional creation of these devices as an enabler to alleged value where none exists is not a civil matter. Nor is creating securities where one represents that a particular interest exists for the purchaser, when in fact it does not.
Wake up America – and if the United States AG will not act, then the State Attorneys General must.
In the meantime if you are facing a foreclosure and MERS was involved in some fashion, either in assignment of the paper just before the suit was filed or worse, in bringing the suit itself, you need competent legal advice right now.
You may be able to stop the foreclosure dead in its tracks.
Picture credit: Jr. Deputy Accountant