Five Problems With MERS


MERS operates on the Honor System. It is headquartered in Reston, Virgina. That’s the seat of a registry of over 60 million mortgages, together with its legal, corporate and business departments. But the thousands of members of MERS, who are spread across the country, are responsible for drafting mortgages, deeds of trust, and assignments. In addition, tens of thousands of certified officers execute assignments. The problem is that these instruments are executed without supervision by MERS. Become of the rampant confusion across the country as to the real interest components of MERS, many thousands of instruments are simply incorrect.

1) Poorly Drafted Mortgages: Here is an example of an absurdly drafted mortgage from the public records of Florida (Osceola County Official Records Book 3034, Page 1993):

At the end of the second line of paragraph (c) the following appears: “MERS is the beneficiary under this Security Instrument”. This is impossible. This instrument was executed and recorded in Florida which is a Lien-Theory State. (For an explanation of this term and the other terms used on this page, please see the Tutorial on the Hompage.) In a Lien-Theory State, MERS, together with the lender, is the “mortgagee”, not the “beneficiary” of the security instrument. There are multiple problems with this instrument: Did this instrument actually create a security interest to guarantee the underlying debt? Who then is the mortgagee? Is this instrument valid?

2) Poorly Drafted Assignments. There are thousands of assignments in the public records of the 50 states which declare that besides the mortgage, MERS is also assigning the note.

Click here to see a commonly worded assignment that incorrectly purports to assign “…the note and each and everyother obligation described in said mortgage and the money due….”

This is impossible since MERS never owns, or holds, or possesses the note. At best, these badly drafted assignments cause confusion. At worst, they cause economic damage. There are thousands of such poorly drafted assignments in Florida alone. Nationwide, there might be hundreds of thousands, or even millions of poorly drafted assignments.

Even worse, the standard verbiage declares that MERS is assigning the mortgage as “nominee” for the lender. This is clearly wrong. As explained in the tutorial (on the Home page) MERS has two hats in each mortgage (or deed-of-trust). First, MERS is the declared to be the “mortgagee”, meaning that it holds title to the security interest. Secondly, MERS is declared to be the “nominee” which is generally understood to mean “agent” for the purpose of initiating foreclosure (or substituting the Trustee in a deed-of-trust). So when MERS assigns the mortgage back to the original lender, or to a subsequent holder of the note, it does so as mortgagee, not as nominee. It can assign the mortgage because it holds title to the mortgage, not because it has been granted certain powers by agency. There are thousands of incorrect mortgages in Florida alone. Nationwide, there might be hundreds of thousands or millions. Or – and this is a nightmare scenario – the possibility exists that every assignment of mortgage out of MERS has been drafted incorrectly.


Here is an example of the mischief that is caused by a poorly drafted assignment.
The Missouri Court of Appeals, in Ocwen v. Bellistri ruled that Ocwen, the holder of the note, had no standing to pursue its foreclosure. The fatal flaw, according to the Court, was an assignment that purported to transfer the note (!) from MERS to Ocwen. The court recited the relevant language (which is identical to the mangled Florida assignment shown above!):

“… together with any and all notes and obligations therein described or referred to, the debt respectively secured thereby and all sums of money due and to become due.” (page 6).

Since the note was not transferred from MERS, the court ruled that Ocwen did not own the note and had no standing. The judge obviously did not understand that MERS never transfers the note since MERS never has the note. MERS is simply the mortgagee-in-title. Therefore, from the fact that MERS did not transfer the note – it cannot be inferred that Ocwen is not the owner of the note.

The attorney for MERS missed the boat twice in this case. First, he/she did not explain the mechanics of MERS to the court in an appropriate fashion. This is no surprise since MERS itself does not understand what it is doing from a title point of view. If it did, it would not call itself “mortgagee” or “beneficiary” but rather, “mortgagee-in-title” and “beneficiary-in-title”. Secondly, all the attorney had to do was to show that Ocwen was the current owner of the note; not because MERS transferred the note to Ocwen, but because the original lender transferred the note to Ocwen.

Each time a court refuses to allow MERS to be a plaintiff in a foreclosure action, the media, the blogs, and law commentators seize on the case as futher proof of the lack of standing of MERS. But there are many different reasons for such a judgment. When the court says that MERS cannot start a foreclosure action because the lender that it represents does not hold the note, that is very different than stating that MERS never has standing as a plaintiff in a foreclosure action. In the former case, the court is not telling us anything that we did not know for the last 400 years; and this situation occurs every time a lender starts foreclosure even though it has already sold the note to another institution. That is very different than declaring point blank that legally, MERS cannot be a plaintiff in a foreclosure action. This confusion occurs because MERS is not properly policing its members.

In a classic fiasco, like in the movie “Inception”, we have four layers of absurdity nestled one inside the other. First, an authorized agent for MERS drafts, executes and records an absurd instrument. Secondly, the Chief Judge of a state appeals court uses that defective instrument to draw an incorrect conclusion. Third, the attorney for MERS fails to set the record straight. And finally, the media misinterprets the meaning of the case; drawing incorrect national conclusions from the flaw of the specific situation.


1) The Transfer of Notes is Not Always Reported to MERS

According to the agreement between MERS and its members, a transfer of the note between one member and another must be reported to MERS immediately. But this rule has not always been obeyed. In many cases in different states, the courts have asked MERS to prove that the lender – in whose name an action has been started – actually has the note. On many occasions, the note had already moved on to another institution. This slopiness is inexcusable. MERS must enforce reporting, certainly if it is to be the plaintiff in a foreclosure act.

2) Sometimes, There Are Multiple Assignments out of MERS for the Same Note

Title examiners often find that more than one assignment of mortgage has been executed by MERS for the same note. As explained above, these assignments are drafted and executed at thousands of locations around the country, without any actual supervision by MERS. The result it that the chain of title for the security interest is mangled and unclear.

3) Sometimes, The Note is Assigned but Not the Mortgage!
There are cases in which a note was assigned by the original lender to a subsequent investor. But no one bothered to assign the mortgage. ). While Kansas courts (see Landmark v. Kesler) found that MERS, as holder of the security interest did not have to be included, California courts (see In re Salazar) found that in such a scenario, the foreclosure was invalid.

4) Sometimes, the Mortgage is Assigned to a Non-Member, before the Note!
Another mess up occurs when a mortgage is assigned by MERS to a non-member, before the note itself is transferred. This too is unacceptable in some jursidictions.

D. ROBO-SIGNING BY “vice-presidents” OF MERS

In 2010 the U.S. took notice that affidavits were being signed by lending institutions, and by their attorneys, in a slap-hazard fashion. It was reported in the press that some institutions were signing many thousands of affidavits at a time, and they were then being notarized by the thousand, withouat any acknowledgment by the signor. This is a violation of notary requirements and constituted fraud upon the court. Once this practice became public knowledge, many banks “froze” all of their foreclosure activity until the problem could be sorted and fixed.

As stated above, MERS appointed many thousands of people to be “vice-presidents” authorized to sign in the name of MERS. Some of them engaged in such robo-signing. A certain Linda Green purportedly signed many thousands of assignments, while the real Linda Green has denied signing them.

One would have hoped that the 2010 scandal would have ended the practice. But I have found that the practice continues. On June 28, 2011 there are eleven assignments signed by “Derrick White Vice President”, and witnessed by Ashley Braband and Debra Goyer. In all eleven assignments the signatures are identical, and in the identical position. They were clearly photocopied, thereby making the notarization fraudulent.

Clearly, MERS has no control over what is being done in its name.


One final problem, which is theoretical in nature. I find many satisfactions of mortgages in the public record executed by MERS. Since MERS does not hold the note, or receive money, or keep track of money, how can MERS execute the satisfaction? MERS simply holds title to the security interest, the mortgage. As such it could execute a Release of Mortgage, upon instruction of the lender. But it should not be executing satisfactions.

In sum, MERS is not policing the instruments executed in its name, nor is it enforcing the reporting requirements as to the transfer of notes, nor is it training its workforce as to what it is about. We saw in the accompanying Tutorial that the theoretical construct of MERS is legitimate, once the terms are clarified. But here we see that there is much to be desired in the way that MERS executes that model.