MERS Foreclosure Fraud how it began. Read and Understand you will not get foreclosed on through Knowledge and Informing yourself of the Fraud. Fight Any Foreclosure!

4/11/12 Update - Jesse is holding a Webinar today at 11 AM est (due to tech difficulties it is scheduled for 1 PM est, now) - you can register at this site for it.  He will discuss the FRAUD in mortgage papers.   
https://www4.gotomeeting.com/register/559767031

Jesse Scott from USmortgageauditors.com
has put together information about how MERS began and the fraud behind the Foreclosures that are happening. This information is immense. Please inform yourself and send this information along to everyone you know who may be in trouble with their mortgage.

FYI - I have made an arrangement with Jesse, for people to get a Free preliminary audit - to FIGHT a Fraudulent Foreclosure.   Call Jesse at 1-866-358-2738 and reference this blog *sherriequestioningall* for it.

Jesse, has put this article together with many more articles about MERS for this blog. Jesse is a mortgage auditor and has stopped many foreclosures from happening. He has proven fraud in the court rooms of the U.S. and has been helping homeowners by auditing their mortgages.

This article may seem overwhelming, but please read it, understand the FRAUD of Wall Street.  No agreement between the banks and the AGs of the states can stop people from suing the banks from Fraudulent Foreclosure.  

He has audited my mortgage. Also, it does not matter if you are in trouble with your mortgage or not. You should know what Fraud is in your mortgage! 

Here is the first of many articles that Jesse has put together for this blog.

In the late 1990’s and early 2000’s the dream to own a home was paramount to many Americans, particularly it was the agenda for the administration at the time to see to it that Americans of lower incomes achieve the American dream. That American dream has catapulted us into one of the worst nightmares that anyone with childhood ideology of the American dream would consider its worst nightmare.

The American Dream

So, the American dream, let’s talk about that…in the old days typically you borrowed money from a bank, but the bank understood the risk it took for someone to get that mortgage. Back then the mortgage could only be 25% - 30% of your income. That was the standard, and if you defaulted you would get a banker knocking on your door to find out what happened. That was our banking system, it was safe it was secure and it made sense. So you have it in the early 2000’s there were laws that were passed that allowed credit default swaps to be used in the open market, which is sort of a gaming system that allows you to bet on certain instruments. Keep in mind that this is nothing new, but something like a credit default swap is something that should have been governed and approved by the gaming commission. However the powers that be pushed it through under the ideas of the American dream and deregulation.

Deregulation and Credit Default Swaps

What did deregulation do? It allowed credit default swaps to bet against mortgage-backed securities   What is a credit default swap, and how does that relate to mortgage backed securities?  Wikipedia’s definition for credit default swap is an agreement that the seller of the CDS will compensate the buyer in the event of a loan default or other credit event. The buyer of the CDS makes a series of payments, the CDS fee (the spread to the seller) and a payoff if the loan defaults. Credit default swaps have existed since the 1990’s and increased by the end of the 2003. By the end of 2007 the outstanding CDS amount was 62.2 trillion falling to 26.3 trillion by midyear 2010, but reportedly 25.5 trillion in early 2012.  These entities include sovereigns like Greece, corporate financial institutions and banks.  If you look at this number in the early 1990’s to early 2003, there was a huge betting scheme against the system. Just to note this gives you an idea what is happening in Greece right now.

Securitization

To recap credit default swaps were used to bet against mortgage-backed securities. Mortgage-backed securities is where the securitization process took place. Mortgage-backed securities is an asset backed security that represents a claim on the cash flow from mortgaged loans through a process known as securitization. The process of securitization can be complicated, it is highly dependent on the jurisdiction where the process is conducted. #1 Mortgage loans (and notes) are purchased from banks and other lenders and assigned to a trust  #2 the trust assembles these loans into collections or pools. #3, the trust securitizes the pools by using mortgage backed securities. These securitization trusts include government-sponsored enterprises and private entities, which may offer credit enhancement features to mitigate the risk of prepayment and default associated with these mortgage. The most common securitization trusts are fannie mae and freddy mac government sponsored enterprises, ginnie mae a us government sponsored enterprise backed by the full faith and credit of the US government. Guarantees its investors receive timely payments, but buys limited numbers of mortgage notes. Some private institutions such as investment banks or real estate mortgage investment conduits (REMIC) and the real estate investment trusts also securitized mortgages known as private label mortgage securities. Issuances of private-label mortgage-back securities increased dramatically from 2001 to 2007,  and then ended abruptly in 2008 when real estate markets began to falter.

Ginnie Mae guaranteed the first passthrough security of an approved lender in 1968.  In 1971 Freddie Mack issured its first mortgage passthrough called participation certificate, composed primarily of private mortgages.  In 1981 Fannie Mae issued its first mortgage passthrough called mortgage-backed security.  In 1983 Freddie Mack issued the first collateralized mortgage obligation. In 1960 the government enacted the Real Estate Investment Trust Act of 1960 to allow the creationof the real estate investment trust ( REIT).  In 1977 Bank of America issued the first private lable passthrough,  and in 1984 the government passed through and in 1984 the government passed the Secondary Mortgage Market Enhancement Act (SMMEA to improve the marketability of such securities) .

The tax Reform act of 1986 allowed the creation of the tax-free Real Estate Mortgage Investment Conduit (REMIC) special purpose vehicle for the express purpose of issuing passthroughs .  The tax Reform Act significantly contributed the to savings and loan crises of the 1980s and 1990s that resulted in the Financial Insitutions Reform, Recovery and Enforcement Act of 1989 ( FIRREA), which dramatically changed the savings and loan industry and its federal regulation,  encouraging loan origination.

So now that you have the history lets open the door to HELL. So how did this all play out?

INSTITUTIONAL FRAUD

I am sure you heard the phrase , it take money to make money right? Your right? So how can you lend as much money as you can to meet the demand . Lets pretend open up a bank and lets pretend I lend out a certain percentage of what my depositors money. Well lets assume I have 100 depositors who deposited $1,000. And lets say that I have had 100 people borrow $500.00 so the bank has lent out $50,000 from depositors money and of course its FDIC insured . Now lets say everyone in town found out that your bank lending standards are lenient to borrows who have less than perfect credit. Now that bank lends out another $50,000 of their depositors money. So now what? You know have put the bank at risk a huge risk, however you have more and more people wanting to borrow money. So what do you do? This is where the bank starts marketing investors to take on their risk in exchange for their receivables, in the form of a bond . Each investor takes on certain risk, depending on there risk tolerance. So now the bank can continue lending money freely minimizing their risk. This is the risk that pension funds, corporations took due to the credit rating that was given by a credit agency. Keep in mind pension funds could only invest in triple A rating investments. This is where credit default swaps played a major role for the risky borrower. This process has happen over and over again, putting our country and financial system at a huge risk. This is why you would see companies like AIG get bailed out from the government due to the weight of the defaults was more surmountable than viewed before insuring. Investors and insurers are suing those who have put these instruments in place. And they are winning.

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS

It has been widely reported that MERS1 has broken or severely diluted2 the chain of title

for real property records, but what does this mean? To understand the importance of the chain of

title to a property and the complexities of land boundaries we need to look no further than the

advice given to practicing attorneys.

“To properly  evaluate a  case, counsel  and survey experts often must  examine chains  of 

title for all properties subject to the dispute.  In the case of a boundary dispute, it may be

necessary to search the chain of title back to a patent to determine paramount title or to

locate true boundaries.” 3

As is readily apparent, a broken chain of title will have adverse effects on adjoining

properties and in many instances the boundaries of properties within an entire neighborhood.

Attorneys are advised  to  “seriously consider not taking the case or withdrawing from it.”   If

attorneys  are  advised  to  “seriously  consider”  withdrawing,  how  will  the  common  victim  of

MERS (by proxy) get relief?

The   complexity  of   the   problem   is   obvious.   As   lenders   and   title  insurers   pass

responsibility back and forth, property owners who purchased a foreclosed property that had

been in the MERS system (and now have broken chains of title) and their neighbors will be

forced into expensive and complex litigation in order to determine their boundaries.

W ho  will  be  financially  responsible  for  the  litigation  to  quiet  title?

1 When referencing MERS in this report, the author refers to MERSCORP, Inc. and its 5000 plus members and the

Mortgage Electronic Registration Systems, Inc. (a subsidiary of MERSCORP, Inc.).

2 The terms broken and diluted are used interchangeably in this White Paper.  Chains of title are “diluted” when the 

historical indexing systems and proper public recordings are not utilized (along with back dating and forging of legal

documents , ie. robo-signing) making a chain of title impractical to recreate.

3

Continuing Education of the Bar (CEB), California  Easements and Boundaries, Law and Litigation (July 2010) §§

10,11, 10.32, pgs. 471-472, 489-490.  According to the  Checklist: Dos and Don’ts in Boundary  Location Dispute 

contained in this treatise, attorneys are advised to:

Ø   Remind  clients  that  boundary  location  disputes  are  usually  expensive  to  litigate  (a  client  will

sometimes fight to the last dollar).

Ø   Do not enter an appearance in any boundary litigation unless counsel is confident about handling

both the emotional and legal issues.

Ø   If there is continued doubt about the boundary location, research, read, and review again; usually

the answer is buried somewhere [in the chain of title].

Ø   If enormous doubt persists on location or validity of the boundary, seriously consider not taking

the case or withdrawing from it.

Thanks  to  the  Mortgage  Electronic  Registry  System’s  (“MERS”)  failure  to  accurately 

complete and/or publically record property conveyances in the frenzy of banks securitizing home

loans  and  in  subsequent  foreclosure  actions,1  neighbors  to  a  foreclosed  property  (with  a

sequential conveyance) as well as the foreclosed property itself will have unclear boundaries and

clouded/unmarketable titles making it difficult, if not impossible, for these homeowners to sell

their properties and for subsequent purchasers to obtain title insurance on that property.2  MERS

now keeps electronic records on about half of the home mortgages in the United States.3

Many problems with MERS and the home loan securitization process have been reported

in print media (countless articles), in movies (the Inside Job) and on television (most recently on

the April 3, 2011 edition of 60 Minutes).  Academic professors such as Christopher L. Peterson

of the University of Utah, S.J. Quincy College of Law, have written extensively on what is

wrong with MERS.4  Courts have ruled against MERS’ standing to foreclose and have criticized 

the MERS model as being flawed, wholly inaccurate and not allowing homeowners to fight

foreclosures because it shields the true owner of a mortgage in public records.5  States Attorneys’ 

General and federal bank regulators6 are investigating MERS practices including fraudulently

robo-signing  and  back  dating  missing  documents.    A  few  County  Registrars  of  Deeds  are

claiming  that  they  are  owed  millions  of  dollars  in  lost  revenue  from  mortgage  assignment

1 “For banks, the local government recorders weren’t speedy enough especially as the mortgage industry moved into 

the business of securitization, or bundling and selling mortgages.” Marian Wang, Backgrounder:  A  Closer  Look  at

MERS, the Industry’s Controversial Mortgage Clearinghouse, ProPublica (March 7, 2011).

2 As a preliminary matter, an  understanding of the terms attached  hereto  in  E xhibit J  are essential understanding

this White Paper.

3 Marian  Wang,  Backgrounder:  A  Closer  Look  at  MERS,  the  Industry’s  Controversial  Mortgage  Clearinghouse,

ProPublica (March 7, 2011).

4

System,  University  of  Cincinnati  Law  Review  (Summer  2010)  Vol.  78,  No.  4.    See  also  Written  Testimony  of

Christopher L. Peterson,  Foreclosed Justice:   Cause  and  Effects of  the  Foreclosure  Crisis, United States House of

Representatives Committee on the Judiciary (December 2, 2010).

5

As  an  example,  see  In  re  Agard  (United  States  Bankruptcy  Court,  Eastern  District  of  New  York,  February  10,

2011)  Case  No.  8-10-77338,  Doc.  41  where  the  court  held  that  MERS  lacked  the  legal  standing  to  transfer  the

ownership of mortgages on behalf of banks.  In his opinion Judge Robert E. Grossman stated “This court does not 

accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country,

that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.”  

6  Including  the   Office   of  the   Comptroller   of  Currency,   the   Federal   Reserve,   the   Federal   Deposit  Insurance

Corporation and the Federal Housing Finance Agency. Marian Wang,  Backgrounder:  A  Closer  Look  at  MERS, the

Industry’s Controversial Mortgage Clearinghouse, ProPublica (March 7, 2011).   See also Nick Timiraos,  Critical

Signs  in  Foreclosure  Talks,  The  Wall  Street  Journal  (April  12,  2011)  (giving  status  of  settlement  with  states’ 

attorneys’ general and federal regulators and lenders).

transfers that  were not  recorded  because MERS  was  listed as  the mortgagee in  public land

records. 7

What  none of the  “experts,” reporters, or courts are analyzing (in specific terms) is the

destructive effect that the MERS system will have on 400 years of recorded property rights in the

United States.  Most articles mention the lost chain of title but stop short of explaining what this

means, or how it will affect people that may not have a mortgage, much less a mortgage in the

MERS system. These  problems  deal  with  ramifications  “on  the  ground”  for  determining  (1) 

property boundaries (senior and junior property rights) and (2) proof of ownership in order to

obtain  title  insurance.    As  shown  below,  these  MERS  created  problems  will  affect  both

foreclosed properties and all of their neighboring properties amounting to much larger and more

costly problems than have been previously addressed by the media, lawmakers, courts or any

settlements with MERS.

Because  MERS  is  utilized  for  transferring  title  and  these  transfers  are  not  publicly

recorded, MERS does not comply with race/notice8 statutes and senior and junior property rights

cannot be determined when there is a discrepancy in property boundaries.   In fact, MERS has

undone hundreds of years of recorded property rights leaving property owners to litigate their

boundaries.    This  assertion  sounds  extreme;  however,  it  is  absolutely  true.  Consider  these

questions:

1.   What  happens  if  the  chain  of  title  cannot  be  determined

because there are no accurate and publicly recorded deeds/title

documents  showing  chain  of  title  to  determine  senior  and

junior rights designations for boundary determinations between

neighbors?

2.   What  happens  when  you  destroy  the  property  rights  and

records   of   homeowners   who   never   defaulted   on   their

mortgages and are now forced to litigate boundary disputes and

property rights?

3.   Why  did  the  title  insurance  companies  repeatedly  refuse  to

underwrite foreclosures if land title was stable?

7

See article by Austin Kilgore, Recorder  Wants to  Close  Account  at  Bank of  America  to Protest  MERS, National

Mortgage  News  (April  11,  2011)  Section:   NEWS,  pg.  8,  Vol.  35,  No. 28  regarding  Registrar  of  Deeds  in  South

Essex District of Massachusetts.

“MERS  saved  banks  time  and  money  by  providing  a  private,  electronic  alternative  to  the  public  system  used  by 

local government recorders.   By using the MERS registry, they largely avoided the recording fees.”  Marian Wang, 

Backgrounder: A Closer Look at MERS, the Industry’s Controversial Mortgage Clearinghouse, ProPublica (March

7, 2011).

8

For  the  purposes  of  this  article,  we  are  not  distinguishing  the  differences  between  race,  notice  and  race/notice.

Race/notice is meant to encompass all designations.

These are the exact problems that MERS has created – the bigger problems that no one

has explained – the elephant in the room.   In a rush to buy and sell mortgages as quickly as

possible, lenders have also destroyed and/or severely diluted over 400 years of land title records

dating back to the colonial United States (back to 1850 in California).  This destruction/dilution

means that litigation is the only way to resolve boundary disputes.   We will never be able to

determine senior (superior) and junior (inferior) property rights designations because no one will

know which parcels were conveyed first in time and to whom.   We are already seeing these

problems  with  the MERS  system  dealing with  widely publicized  mortgage foreclosures  and

lenders’ inability to show that they own title to property at the time of foreclosure.

The broken chain of title problem may have never been a problem if not for the millions

of foreclosed properties.  Because mortgage lenders, via MERS, have not followed title statutes

specific  to  their  respective  states,  they  have  also  negated  the  rights  created  by  race/notice

statutes.  Because these race/notice statutes were violated, a property owner (who may not even

be in the MERS mortgage system) may have lost his property rights.  Stated another way, if the

chain of title is lost for a given property, any property that shares a common property boundary

line, may have lost its superior rights and that owner will be required to litigate if the property’s 

boundary is questioned.   In essence,  “Zombie  Loans”  are  created  by MERS.   These Zombie

Loans never die (they keep coming back to life), they mutate and they multiply.

Furthermore, with clouded titles, subsequent purchasers of these properties will not be

able  to  obtain  title  insurance  without  providing  indemnification  via  a  warranty  deed  or

comparable document, and, without title insurance, these purchasers will not be able to obtain

                         financing on the properties.

T wo E xamples

1.               A neighbor’s property sale (with disclosure issues) created

duress for an 83 year old widower trying to settle his estate.  There

was confusion as to the property line location in the magnitude of

9’  feet.  It  also  cost  him  approximately  $10,000  (even  at  a

discounted rate) and 18 months of time.  In this case, the chain of

title was broken in 1968 in connection with (1) a foreclosure; (2) a

subsequent bankruptcy; and (3) a transfer to a now defunct savings

and loan. The title insurance company recognized the lost chain of

title problem when it issued a title insurance policy and wrote an

exception  to  coverage  for  that  problem.9  The  self-employed

architect  owner  (neighbor)  chose  not  to  sue  for  title  insurance

coverage  due  to  his  costs  in  attorneys’  fees  in  a  downturned 

economy.  See E xhibit A, detailed description of this case.

9 Title insurance companies only paid claims equivalent to 5% of premiums collected in loss and loss adjustments in

2005.  This 5% payout is contrasted to a 73% payout of premiums collected toward property/casualty claims during

this same timeframe.  United States Government Accountability Office, GAO-07-401 (April 2007), pg. 9.

2.                A land surveyor, presumably trained in title work, chose

not  to  examine a chain  of title  in  the course  of a survey.  This

litigation resulted in a 2010 settlement of approximately $500,000

(plus an additional several hundred thousand dollars in  attorneys’ 

fees)  wherein  Mr.  Woolley  served  as  an  expert  witness.  This

litigation resulted from not properly examining rights established

by reviewing available chain of title documents. A broken chain of

title removes the option of determining the rights and this case

demonstrates costs and ramifications.

The MERS system has created an environment in which tens of thousands of titles have

been lost or diluted in a sea of other MERS transactions and may take a hundred years to fix,

while forcing innocent homeowners to litigate in order to reclaim their property rights.    This

                        article will:

1.                Briefly  discuss  the  robo-signer  scandal,  the  problem  with  the  MERS

system and recent court cases involving MERS;

2.                Summarize  the  history  of  how  land  was  surveyed  and  divided  in  the

Western United States;

3.                Explain how junior and senior property rights are determined in the face of

a boundary dispute;

4.                Describe exactly how MERS has destroyed or severely diluted chains of

title  for  boundary  disputes  between  foreclosed  properties’  subsequent 

owners and all of their neighbors;

5.                Analyze the resulting difficulty these subsequent homeowners and their

neighbors will experience when attempting to sell their properties (with

clouded titles) when purchasers will not be able to obtain title insurance

                                                            (without seller indemnity) and financing.

I have another article Jesse put together on the Robosigning Fraud, which I will put on tomorrow.  This way there is time to digest the above information.   

Jesse is doing a Webinar - to help people understand the FRAUD of the Banks:  Contact him for the link to it.  

jlesuer@usmortgageauditors.com

MORTGAGE FRAUD INVESTIGATORS FOR WRONGFUL AND ILLEGAL FORECLOSURES

The purpose of this webinar is to educate Home Owners who need answers. There is a lot of talk out there, and we want to start the conversation here to help. And its FREE. USMORTGAGEAUDITORS.COM (MORTGAG FRAUD INVESTIGATORS )

Wed, Apr 25, 2012 11:00 AM - 12:00 PM EDT

Once registered you will receive an email confirming your registration

with information you need to join the Webinar.

System Requirements

PC-based attendees

Required: Windows® 7, Vista, XP or 2003 Server

Macintosh®-based attendees

Required: Mac OS® X 10.5 or newer