By Dave Krieger
The following op-ed piece is being issued following my review of Consent Order #2011-044, issued yesterday (04.13.2011) by the “Band of 5”. You can decide for yourself what this Consent Order really stipulates. The one thing I find it does NOT stipulate, is how nearly 70 million titles to real property in America (between MERS and LPS) have clouds on them, which by most standards, would render these properties unmarketable as to clear title! This Consent Order says NOTHING about the mess already made and who bears the responsibility for cleaning it up! (My analysis is in italics, not legal advice … just my analysis.)
This Order is one of 10 Consent Orders issued by the OCC. These agreements cover unsound and unsafe banking and foreclosure procedures of Bank of America, Citibank, HSBC Bank, JPMorgan Chase Bank, LPS/DOCX, MetLife Bank, MERSCORP/MERS, PNC Bank, US Bank NA and Wells Fargo Bank, NA (and remember Wells Fargo heavily stated, “We didn’t do that!”)
The Order (which if you want to read all 31 pages of it you can download the .pdf here) was issued jointly by the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System (the “Fed”), the Federal Deposit Insurance Corporation (“FDIC”), the Office of Thrift Supervision (“OTS”) and the Federal Housing Finance Agency (“FHFA”, which now oversees Fannie Mae and Freddie Mac as its conservator). The release of this Order on Page 2 refers to this Order “as part of an interagency horizontal review” (which the author surmises here is nothing more than an interagency horizontal mambo to cover someone’s butt).
As a side note … Lender Processing Services, Inc. and its now-defunct subsidiary DOCX are still being scrutinized by the USDOJ for possible criminal action. The recent release of the 60 Minutes episode which featured Florida attorney and fraud investigator Lynn Szymoniak and its specific coverage of one “Linda Green” also surely set off warning bells with many uninformed borrowers. Yes, Linda Green actually exists … as BOTH a man … a woman … and many other unknown John and Jane Does who can write her name!
This Consent Order basically states what we’ve already known in the hinterland … that MERSCORP and MERS’s blind authority has wreaked havoc on the chains of titles of millions of pieces of property, something the United States Government has done NOTHING to correct. Basically, because quiet title actions are “states’ rights” actions, it would seem the 10th Amendment to the U.S. Constitution forbids the U.S. Government from sticking its nose in such affairs; not that we don’t expect it will try to at some point.
The Order also states that MERS and MERSCORP “have begun implementing procedures to remediate the practices addressed in this Order”. By mutual consent, stated within this Order, “MERS and MERSCORP have committed to take all necessary and appropriate steps to remedy the deficiencies and unsafe or unsound practices identified by the Band of 5”
Hence, we move onto “ARTICLE I – JURISDICTION”. Did you not see that one coming?
First, this Order defines (and you have to look at definitions) MERS and MERSCORP being providers to “Examined Members” (such as Fannie and Freddie) under the meaning of the Bank Service Company Act. This is the statute that the Band of 5 claims they can “examine” the behaviors of MERS and MERSCORP (the way I read it).
Second, this Order also says that MERS acts as an “agent for lenders with respect to serving as mortgagee in a nominee capacity for the lender” (it does NOT define what a “nominee” is) and goes on to state that the examination was conducted because the Band of 5 says they have the authority to do it.
Third, the Band of 5 also claims it has the authority to enter into this Consent Order. This makes the “interagency horizontal mambo” a little more palatable, doesn’t it?
Then we move onto “ARTICLE II – AGENCIES’ FINDINGS (it took them three pages just to get to this point).
And the very first sentence is: “The Agencies find, and MERS and MERSCORP neither admit nor deny, the following:” (well … what did you expect from a stipulated consent order anyway?)
(1) They just officially announced that MERS is a wholly-owned subsidiary of MERSCORP. They just NOW figured this out? Then they announce that MERSCORP’s shareholders include Fannie and Freddie and a host of other federally-regulated financial institutions, not to mention servicers and all of other “other secondary entities” covered under the term “participants”.
(2) They formally define that MERSCORP operates a national electronic registry. Remember this as part of their policies and procedures! They further identify 31-million active residential mortgage loans on the current MERS system. The author would surmise here that these are most likely the bifurcated notes that homeowners continue to pay not, despite the fact that “legally”, within their respective chain of titles, which is problematic anyway.
(3) This set of findings admits that MERS has infiltrated the local land records on behalf of its membership. This Order states that MERS “takes action as mortgagee through documents executed by “certifying officers” … you know, those robosignors you’ve heard about that really have no personal knowledge of anything they sign, usually borne out in depositions past.
This section (Page 4) goes onto say that MERS’s designations of these “certifying officers” as able to execute “legal documents” in the name of MERS, such as mortgage assignments and lien releases.” Well … these are the subject of the legal challenges to date that are going to topple the ‘house of cards’!
Up to this point in my analysis, it appears that this official “Consent Order” makes the “findings” agreed to by MERS and MERSCORP … including their fundamental screw-ups which could affect your very own chain of title to your real property!
When you move onto Page 5 of this Order, you find that MERS and MERSCORP screwed up the processes by failing to monitor what their underlings (who number some 40 people internally) were doing … not to mention the some-20,000 robo-officers out there that claim they know what’s going on with your loan!
When you get to Paragraph 5 of the Order (remember this is an “agreed-to” Order folks, without admitting or denying anything, the findings indicate that “MERS and MERSCORP engaged in unsafe or unsound practices that expose them and their ‘examined members’ to unacceptable operational, compliance, legal, and reputational risks.”
So now we move onto “Article III – Compliance Committee” … which is what all Cease and Desist Orders stipulate, right? Not here. By the end of April, 2011 (or thereabouts), the Boards of Directors of MERS and MERSCORP (which now don’t officially include R. K. Arnold and a major contributing factor of William Hultman, who was replaced by Sharon Horstkamp (not to be confused with ‘Mein Kampf’), get to form and maintain a committee to comply with the terms of this Order, including written progress reports (‘I will not cloud title.’ ‘I will not cloud title.’ ‘I will not cloud title.’) Geez, another committee? Go figure.
Every set of findings has to include an “Action Plan”, right? Well … this one does!
“ARTICLE IV – ACTION PLAN” … the Order gives MERS and MERSCORP ninety (90) days to develop an “action plan” for submission to the Band of 5. Once approved, MERS and MERSCORP can’t deviate from it. Sorry folks, the chain of title is already affected … what action plan other than quieting it is going to fix it? How about the major banks start up their own title companies to white-wash over the clouds, eh? Watch for this development!
Maybe you should read Page 8 … it gets dicey here … especially the part about involving MERS and MERSCORP’s decision-making policies for the need for “additional capital”, “control of funding and liquidity risk”, plans to “reduce discretionary expenses and improve and sustain earnings” … albeit this inures to the benefits of its “members”!
Then we present … “TA-DAH!” … “development and implementation of a comprehensive litigation strategy to effectively manage lawsuits and legal challenges involving MERS and MERSCORP, regardless of whether either is a named party, including early identification and tracking of such lawsuits and challenges;”
I would surmise that this “tracking” would include every single residential mortgage loan, numbering nearly 70-million strong, in which the borrower would one day ‘wake up’ from his sound sleep and analyze his chain of title only to find ‘issues’ with it … not to mention the backlash from a MERS foreclosure wherein judges are going to rely more on Carpenter v. Longan than they ever have in American history!
The Order also makes reference to MERS’s informing its members NOT to foreclose in the name of MERS anymore. (Announcement 2011-01; 02/16/2011).
By the time you get to Page 10, your head is spinning with directives.
By the time you get to “ARTICLE V – BOARD AND MANAGEMENT SUPERVISION”, you finally come to realize that the U.S. Government, through the Band of 5, has not only intervened in MERS and MERSCORP operations, it’s telling them that they’re going to monitor their progress in helping them to “circle the wagons”. If you read between the lines, you will recognize that the Band of 5 knows that an onslaught of litigation is going to be commenced within the next two years and they have to help MERS and MERSCORP gear up for by making sure that its “house is in order”!
By the foregoing statement, I refer to Page 10, Paragraph (1), subsection (iii), which in essence, beefs up the parts of the MERS process dealing with assignments and/or foreclosure services; which also requires that “certifying officers” complete a “certification process”. Geez, is this going to make robo-signing more ‘official’ than before?
Does this appear that now the Band of 5 is going to actually ‘condone’ MERS’s past behaviors?
Page 11, subparagraph (d) is pretty clear about HOW a certifying officer for MERS gets to become “more qualified” to sign affidavits so that these MERS mortgages can be more easily foreclosed upon … and this is the more scathing epitome of wagon-circling.
ARTICLE VI – COMMUNICATIONS RELATING TO LEGAL PROCEEDINGS … this looks to be nothing more than issuing reports containing a summarization of court cases for and against MERS and its members; and to develop a tracking process for all of the lawsuits where MERS or MERSCORP is involved.
And just what the heck does “analysis and recommendations concerning litigation contingency reserves” have to do with the price of beans? If 100,000 people file separate quiet title actions against MERS, MERSCORP and its members per year; multiply that number times a minimum of $200,000 in legal fees (because outside foreclosure mills are going to read this as ‘billable hours’) for each year each party maintains its position in each suit [that’s $20-billion a year, minimum]; multiply 70,000,000 potentially-clouded titles times the potential number of those who can afford to bring a quiet title action … and you have legal costs on one side of the coin in defense of over as many potential clouds on title of better than one-tenth of the nation’s total gross domestic product! And Florida wants to eliminate 2,800 clerical positions in its court systems in an effort to cut costs? Great time to be in the legal profession, huh? Definition of “insanity”: Doing the same thing you’ve been doing for the last 12 years expecting different results. (The last 12 years is from the time MERS-3 was ‘conceived’ and put into operation.)
I pity the errors and omissions carriers for the title companies and all of the “trustees” out there that have to have E&O coverage. How many lawsuits will be effectuated before the E&O carriers refuse to insure? How many title companies will need to be sued before they “get the message”?
This author predicts that the United States Supreme Court will declare MERS’s practices as contributory in the systemic clouding of millions of titles to American property … and it will come via a writ of certiorari out of a quiet title action; even in light of this Order!
By the time I got to “ARTICLE VIII – QUALITY ASSURANCE AND DATA INTEGRITY”, it became clear to me that the Band of 5 is trying to protect MERS and MERSCORP; however, there is no guaranteed quality when: (1) consumers do not know who owns their loan; (2) MERS posts a disclaimer on its website stating it’s not responsible for the accuracy of the content therein, especially when this Order asks for a plan of elimination of certain elements of date currently reported by Members of MERS and MERSCORP that are not related to the two of them; and (3) when this electronic database is allowed to continue to operate AND allowed to continue to circumvent county recordation fees and to insure proper assignments to chain of title.
By the time I got to “ARTICLE IX – eREGISTRY”, I was freaking out. You gotta be kidding?
MERSCORP has to get an independent, external review of and recommendations regarding the electronic registration of notes? What is this? The next step in making every state judicial system eCOMPLIANT? Wouldn’t that work counterproductive to the established registry we’ve come to know and love as our state property recordation system?
“I’m mad as hell and I’m not going to take it anymore!” [Peter Finch, in the movie Network]
“ARTICLE X – COMMUNICATIONS PLAN” purports to beef up the lines of communications between MERSCORP and its members of issues involving litigation with MERS, MERSCORP and its membership collectively, whether it be offensive or defensive.
“ARTICLE XI – APPROVAL, IMPLEMENTATION AND REPORTS” pretty much describes how the Deputy Comptroller (of the OCC) shall oversee implementation of the Action Plan.
“ARTICLE IXX – COMPLIANCE AND EXTENSIONS OF TIME” gives MERS and MERSCORP the right to whine at the Deputy Comptroller if it can’t meet and of the deadlines on this deal. Well … what did you expect from a mutual consent order?
“ARTICLE XIII – OTHER PROVISIONS” looks to be more of the same monitoring provisions until you get to Paragraph (3), any of the Band of 5 can exit this Order if they think they’ve met their goals in helping MERS and MERSCORP maintain its system of ‘status quo’. Paragraph 6 however doesn’t make this a ‘binding contract’ between the Band of 5 and MERS/MERSCORP. Paragraph 9 of this section makes the Order binding on MERS and MERSCORP. Paragraph 10 insists they consented to the Order WITHOUT a formal proceeding being filed.
The last of this document is for the actual Order of Stipulation and for signatures of the parties, because, after all, we have to make this look ‘official’, don’t we? Now what do you think all of this accomplished? Is MERS and MERSCORP shut down? Hardly. In fact, the U.S. government, by and through its agents, is sticking its nose into MERS and MERSCORP’s business, in essence helping it to circle the wagons to defend future litigation. And we all know what happens when you have government involvement … more paperwork … more procedures … more studies … more committees … more expense … more litigation … more employees …
This Order did NOTHING for the consumer/homeowner/borrower/taxpayer. It did everything to perpetuate the MERS system. If you signed a MERS mortgage, it’s your problem! Conveying clear title to property? That’s your problem too!