TITLE COMPANIES “NOT OUT OF THE WOODS” YET ON COVERAGE
By Dave Krieger (Op-Ed) – September 10, 2012
When I was lecturing at the V. G. Young Institute’s annual Texas Clerks School in January, an interesting question was posed to me by one of the clerks (after having delivered a scathing presentation entitled MERS 101) regarding title insurance coverage.
“How is it that title companies can issue insurance policies when there are suspect issues with MERS and clouds on title?” she asked.
A great question, surprisingly. More surprisingly was my answer: “The title companies are merely ‘writing around’ the defects in the chain of title.”
I could see jaws dropping around the room. I continued with my answer:
“In virtually every title commitment issued there exists a ‘Schedule B: Exclusions’; under most every set of exclusions (generally under the 2nd or 3rd sentence), a title company can refuse coverage if the issue creating the problem isn’t recorded in the public records.”
More jaws dropped. They had put two and two together and things didn’t add up.
With the advent of the Bain v. MERS ruling (August 16, 2012) by the Washington Supreme Court, the landscape surrounding MERS’ ability to participate in non-judicial foreclosures has been vastly curtailed if not nullified with the ruling that MERS is not a valid beneficiary under the Washington Deed of Trust Act. The ramifications surrounding the yet-to-be-appealed decision are numerous and Stewart Title has now taken the liberty to introduce us to some of them … from a title company viewpoint as to insurability of title. Click here to download the .pdf version of that memo!
The “end game” for title companies appears to be on shaky ground and Stewart Title can now elect NOT to issue a commitment letter on REO (real estate owned) property that has been foreclosed on or is facing default, especially if MERS, Fannie Mae or Freddie Mac is involved!
That scenario in of itself creates a huge problem for the Washington real estate market, inevitably putting many REO and short sale transactions on hold. The Oregon Supreme Court may also uphold an appellate ruling that sticks it to MERS in much the same fashion as its neighbor to the north has. The Oregon real estate market is already feeling the ripple effect of that ruling. The shocking truth is however, is that if and when the litigation starts (and it will) regarding the fine points of this memo (regarding the legality of MERS to do anything and its subsequent involvement in any kind of improper foreclosure activity) Stewart Title and other major title companies that assisted in respective title searches and processing for these foreclosures on behalf of the major banks and their “trustees” could end up as defendants in costly and protracted litigation. Based on the inside track, Stewart and many of the other major title insurers have much to worry about.
The bigger problem is that despite the Washington Supremes’ ruling, MERS and its certifying officers are STILL FILING DOCUMENTS in the land records in Washington counties! Until the suits start flying and injunctions against this continued behavior start getting issued by the courts, things with MERS and the substitute trustees instituting these foreclosures will be status quo.
One can simply assume that the damages will be easy to prove; but robosigning, even though it still continues to this day despite the AG settlement, is not in of itself a crime. It’s what’s in the underlying meaning behind the act that is the real problem. Insurability of title is a real problem. It has been ever since MERS’ business model permeated the nation’s land records.
The title companies appear to be “in bed” (generally) with MERS. After all, the American Land Title Association was one of its founding members. Total irony, I know … a land title non-profit trying to tell MERS members and America’s rank and file clerks and recorders that their current system of records maintenance is too slow for securitization.
Couple the foregoing scenario with hordes of ignorant recorders, clerks, auditors and registers of deeds and you’ve got a recipe for disaster within the national land recording system on a massive scale!
It will take a century to clean up the mess that MERS and its minions created in 13 short years. No act of Congress can solve this problem. Give it 24 months … this issue will be in front of the U.S. Supreme Court. Once and for all I can say with a certainly, “Is that your final answer?”
This is an issue the courts largely choose to ignore … for now.
MERS BUSINESS MODEL UNRAVELED BY THE WASHINGTON STATE SUPREME COURT
It was a glorious day for homeowners in the State of Washington. The entire court reviewed the Bain v. MERS and Selkowitz v. MERS cases in the questions put before them, as follows:
The legal consequences of this ruling (download it here in pdf format) have yet to be felt … but I can foresee the possibilities. One would wonder whether the arrogant PR Department inside 1818 Library Street is going to huff and puff and take this ruling to the United States Supreme Court to see whether the U.S. Supremes will even hear this case. The way the Justice Department is behaving regarding its refusal to prosecute any of the evildoers in the banking and securities industry may not equal the power of the nation’s highest court and what it could do (nationally) to Mortgage Electronic Registration Systems, Inc.
This reporter figures that the Oregon Supreme Court is going to follow Washington’s lead and thump MERS a good one when it issues its ruling. Remember the old saying about letting a sleeping dog lie? Ah, the arrogance of MERS! Perhaps it may wish to rethink which counsel is going to go to DC and tell the U.S. Supremes that borrowers don’t need to know who owns their note too! Talk about fallacies! That’s the arrogance I was talking about!
Now let’s talk about condition of title … something MERS and the banks DIDN’T get a legal opinion from Covington & Burling specifically about. It will take a century to clean up the mess made by MERS in a little over 13 years.
The chain of title assessment (COTA) is going to become a household word because the mainstream media is going to start discussing how 70-million potential homes in America can’t be sold because the average reasonable and prudent buyer wouldn’t spend a plugged nickel on a real-estate-owned (REO) property knowing the possibility its title could be clouded, not to mention the fact there’s probably an indemnification agreement attached in that contract holding the alleged lender harmless from all liability connected with the sale of the REO.
The legal effects of MERS not being able to “assign” anything or “appoint” anything … in of itself … shocks the conscience! Open up any land record of any home affected by a MERS mortgage or deed of trust and imagine the litigation it will take to clear title to all those affected properties … all because MERS thought we’d be resorting to a national land title system. Geez! More arrogance!
Realtors who ignore this ruling are asking to be named as Defendants in a lawsuit involving tainted titles. Brokers are complaining to me that they can’t afford a legal challenge to their involvement in a lawsuit of this nature. They may be held NOT to be liable somehow, but the legal costs of getting out of a suit like that could drive real estate agencies into bankruptcy! Imagine the potential liability pitted against your real estate brokerage’s financial condition if all you sold was REO’s and short sales and “the hens came home to roost” because of this latest ruling?
This isn’t over yet my friends.
This is just getting started.
TO: Real Estate Agents, Paralegals, Legal Assistants, Homeowners and Title Agents
(AUSTIN) – DK Consultants LLC is sponsoring a series of workshops to teach interested persons on how to effectively conduct and prepare Chain of Title Assessments (COTAs), which are used by attorneys in foreclosure defense in determining case issues for potential use in the development of quiet title actions. This is a non-CLE course, open to all that have any kind of legal or real estate acumen or even to homeowners that have conducted previous substantive research.
(more…)
DON’T BE FOOLED BY THE CHAMELEON CHANGING ITS COLORS AGAIN
By Dave Krieger, Investigative Journalist and Author of “Clouded Titles” (03/07/2012)
(AUSTIN) – It may be reflective of the current state of litigation for Mortgage Electronic Registration Systems, Inc. (“MERS”) and its parent “companies”, but don’t let the merger fool tactics you!
On September 22, 2011, the Board of Directors for MERSCORP, Inc. (MERS’s parent corporation … the entity with all the money) formed MERSCORP HOLDINGS, INC. and said corporation was registered with the Delaware Secretary of State as File #5034916. At the time of filing, its Registered Agent was listed as RL&F Service Corporation, with an address for service of process listed at 920 N. King Street, 2nd Floor, Wilmington, DE 19801.
The process then ended up in a merger with MERSCORP, Inc., which is listed with the Delaware Secretary of State’s office as having been filed on February 27, 2012 and the File #2915165 was listed with a Registered Agent address as The Corporation Trust Company (CTC) at Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801.
According to a clerk at the Delaware Secretary of State’s office, the MERSCORP, Inc. named disappeared and the new name of MERSCORP HOLDINGS, INC. was retained, showing an incorporation date of June 30, 1998, which should somewhat clarify items gleaned during the depositions of then-former CEO R. K. Arnold and then-Secretary William Hultman. The current file number of #2915165 and CTC remain as what is shown in the Secretary of State’s records as the correct listing for MERSCORP HOLDINGS, INC. and its registered agent, CTC.
Coincidentally, the merger occurred while the Dallas County v. MERS suit was hung up in “MDL HELL” … being reviewed for incorporation into the multi-district litigation action in Phoenix, Arizona. Such was not to be the case, as the MDL panel rejected MERSCORP’s (and MERS’s) removal and sent it back to Dallas.
Upon receipt of the case, Harris (Houston) and Brazoria Counties (Texas) filed motions for leave to intervene and became part of the class action. Bexar County (San Antonio) filed its own action against MERS and MERSCORP, and tagged JPC Financial Resources, Inc. as its in-state defendant to keep its case from being removed to federal court based on diversity, something which MERS and its parents are famous for. That suit seeks unspecified damages, while Harris County seeks $10-Billion … with a “B” from MERS et al. The case is Dallas County, Texas v. Merscorp, Inc.; 3:11-cv-02733; U.S. District Court (1100L), Northern District of Texas (Dallas).
It’s now anyone’s guess as to how the new entity will affect the litigation. The author surmises it’ll get dragged in by its chameleon’s tail at some point via service of process; which brings to mind the old saying, “You can run but you can’t hide!”
The new entity is listed at the bottom of the MERS website under Copyright 2012, MERSCORP HOLDINGS, INC. It will be interesting as the investigation ramps up in the copyright office to see who re-registered the MERS name and proprietary gobbledygook on its website.
CLOUDED TITLES AUTHOR GUEST LECTURES AT COUNTY AND DISTRICT CLERKS CONFERENCE, COLLEGE STATION, TEXAS:
By Dave Krieger
“MERS 101”
The event was sponsored by the V. G. Young Institute School for County and District Clerks in conjunction with the AgriLife Extension division of the Texas A & M System and the V G. Young Institute of County Government. Two separate lectures were given by the author at 3:00 and 4:10 p.m. to county and district clerks from across the State of Texas.
My mental database of knowledge on this subject matter had to be condensed into an information-packed hour, which included video deposition testimony of a robosignor and a piece done by MSNBC that featured Essex County, Massachusetts Register of Deeds John O’Brien, (salemdeeds.com), who refers to his land records as a “crime scene”, discussing the issues involving the bank’s taking shortcuts through third-party service providers and committing fraud on the land records with documents that have been deliberately manufactured without the knowledge of the facts attested to by the person signing and the allegations that the notaries that witness the signatures of those executing the documents are often not present at the signings.
Out of 254 Texas counties, nearly two-thirds of the clerks representing the land recordation systems in the State of Texas showed up for the lectures and at certain points in the lecture, jaws literally dropped at the information presented (especially that of the robosignor who admitted he had no idea what an “Assignment of Mortgage” was, after admitting he signed hundreds of them an hour).
I was surprised (especially in the second session) at the number of clerks (elected officials) who had no idea who MERS was. The first session however, was just the opposite. Very few district court clerks attended the sessions; however, those who did came to the understanding that they may have to bone up on Order of Publication with the upcoming wave of quiet title actions expected to be filed in the next decade, along with slews of §51.903 motions.
My lecture, which also included interactive Q&A, produced many legitimate questions about the sources of the recordations; to quiet title; to the liability of title companies; to the fraud on the documents found in land records all across America. I encouraged all of the clerks to direct their legal questions to their county and district attorneys, as I cannot (as a paralegal) render legal advice. (Much of the information shared with the clerks was taken directly from the new, updated version of Clouded Titles, soon to be released.)
Afterwards, some county clerks came up to me and thanked me profusely for the information; one clerk showed me a letter he dug out of his files that was directed to a legislator from the clerk concerning the legitimacy of the MERS recordation system. Another clerk came up to me asking me for the styling of a quiet title action filed in her county so she could look it up. I told her that she may want to check on the records as to conformation to the Texas Property Code (as some of the documents in that particular case were suspect for robosigning issues). I got to see many new faces in addition to some familiar ones (who I’ve previously been working with).
My take on MERS’s continued existence in the State of Texas is that there is a huge groundswell of support to repeal legislation that gives MERS any authority to record its deeds of trust in this State. The legislation that gave MERS the right as a “nominee” to record in this “permissive recording” state was enacted in 2003 and took effect January 1, 2004 and was authored by outgoing State Representative Burt Solomons. Many clerks were quite surprised that this legislation (merely by adding a definition) made it “under their radar” and many were visibly upset.
The lawsuit filed by Dallas County District Attorney Craig Watkins against MERS and MERSCORP was removed to federal court (there are no federal questions in the complaint according to lead attorney Steve Malouf) and we can expect to see it tied up in multi-district litigation, a typical ploy of MERS to further stall the cases filed against it. All of the county clerks were made aware that this class-action-style suit involves all 254 counties and they were told to bring the matter to their county attorneys for follow-up (filing a motion for leave to intervene, according to the way Steve Malouf put it, to make the county part of the representative class). Several counties in Texas have already vowed suit against the private electronic database.
All in all, I was quite pleased at the turnout. It leaves open the door for more interaction with the clerks, both in legislative sessions and in private consultations about their specific land records. One thing is for sure, those clerks who are aware of MERS don’t like it and don’t want it around anymore.
Las Vegas TV reporter finds out he doesn’t legally own the foreclosed home
Las Vegas TV reporter finds out he doesn’t legally own the foreclosed home he bought 3 years ago!
A FEW POLICY CHANGES WON’T CHANGE THE GAME
By Dave Krieger
As of this post, two states Attorneys’ General have now decided to investigate Mortgage Electronic Registration Systems, Inc. (hereinafter “MERS” … which decided over a decade ago with the help of Fannie Mae, Freddie Mac, the American Land Title Association, the Mortgage Bankers Association and a host of major banking institutions), which injected itself into the electronic data recording business for securitized mortgages and insodoing, toyed with the chains of titles to over 70,000,000 pieces of American real estate.
As expected, MERS spin folk put out a press release welcoming Beau Biden (DE) and Martha Coakley (MA) investigations, saying they look for quick resolve, while wiping the sweat off their brows that the other 48 attorneys general are just willing to roll over as long as the State they’re in gets some damage money from the banks to put into their respective general funds. That extra budget money doesn’t solve the general crisis however, it just gives the AG’s that won’t investigate thoroughly the mess MERS and its member-subscribers made a campaign platform touting toughness the likes of the tobacco settlements, when in fact, the settlements against the banks just rub salt in an already-gaping wound that are indeed miniscule to the money big tobacco paid.
On July 21, 2011 MERS issued a policy change (2011-5) claiming that members were no longer allowed to foreclose in the name of MERS … like that’s going to change the equation?
If MERS is involved in your title, so are unknown intervening assignees … assignees who didn’t record their interest in the notes they bought and sold on Wall Street and electronically recorded in MERS database. The end result hasn’t changed. MERS new policy dictates that their 20,000+ robo-officers signoff on assignments, transferring the mortgages and deeds of trust into the names of the real owners, many of which are New York trusts that have in almost all of the cases, violated the terms of their own Pooling and Servicing Agreements in claiming ownership of some 30-million claimed current MERS mortgage database holdings and 40-million past.
Many think MERS started out well-intentioned and grew into a monster of catastrophic proportions. My take is that MERS only goal was to show its members how to save billions of dollars by paying it a cheap data entry fee and circumvent the land records, changing the character and status of the promissory notes which they split from the deeds and mortgages, instead of properly sticking to the tried and true (and sometimes slow) process of following state property recordation laws. Judges who look the other way at this mess (in my opinion) haven’t been economically affected enough to wake up yet. When the states and counties can’t afford to keep paying their law clerks (take Florida for example) and judges have to do their own research, the system is going to bottleneck even worse than it already is. Foreclosures in Florida are estimated to take over 600 days from start to finish according to one estimate I’ve read.
Despite all of the claims that MERS is trying to straighten out their preconceived “mess”, the conditions of title have not changed for every single piece of American real estate it has “touched”. The marketability of any MERS-related/mortgaged property hangs in the balance.
Two important elements remain a constant here: (1) the damage to the chain of title is on-going and any recordation past the MERS recordations further convolutes the title to the point of uninsurability; and (2) just because MERS claims they’ve changed their strategies doesn’t put the “toothpaste back in the tube”. Titles to property are still slandered and clouded and MERS and its parent MERSCORP, Inc. are culpable and negligent to that end.
MERS demands to be informed every time one if its members get sued? Why does MERS make itself so hard to serve process on? If you’re an attorney trying to litigate against MERS and MERSCORP in a quiet title action, service of process against these entities is as obfuscated as the loans they preserve on their databases. Any service of this kind that claims it’s got nothing to hide shouldn’t be behaving badly (the latest address of service against both entities is in New Castle, Delaware through CTC). At least with Bank of America, you know it’s in Charlotte, North Carolina. Depending on the MERS mortgages, deeds of trust and assignments, its agents can be anywhere. Finding and deposing these agents drives up the costs of litigation, discouraging homeowners from pursuing methodologies to restore their titles to marketable condition. Having judges out there that think it’s okay for MERS to do what it’s doing further complicates the final resolution to the bigger problem that even Gretchen Morgensen from the New York Times understands. It’s sad that the paper won’t let her out of her cage to really unleash this issue. Everyone would be suing the banks and MERS trying to quiet title to their properties, jamming up the court with millions of lawsuits … and by golly, we can’t have that now, can we? Whether any newspaper reporter, judge or banker smirks at that proposition, there are many who see the groundswell of disgruntled homeowners, foreclosed on or otherwise, chant my new mantra: “If I can’t convey … neither can they!”
I brushed the dust off my old deed of trust (hey, that rhymes too!) recently to find the same thing stated that I’ve seen on dozens of others I’ve audited, the phrase that says, “Borrower Covenants that Borrower is lawfully seised of the estate and has the right to convey” … hmmm? If you as a homeowner are left scratching your head on that one, trying scratching someplace else when you realize that you weren’t the one who caused your title to become clouded (well, actually, you did when you signed a MERS mortgage or deed of trust). You didn’t know at the time you signed the paperwork and moved into your new home that your problems with conveying clear title had just begun. This is why rumors abound that one-third of Kansas City’s properties with mortgages issued between 2003 and 2008 are uninsurable. That means the value of your home is worth ZERO because you can’t sell it … because you can’t convey clear title.
Title companies are going to start feeling the brunt of these legal actions unless they start refusing to insure based on phony or improper assignments and substitutions of trustee. How can a short sale really work if the MERS system has convoluted and obfuscated true ownership of the borrower’s loan? We can only hope that the issue of MERS legitimacy will be squashed like a cockroach before the Supreme Court of the United States at some point in the near future and will be turned into roadside fauna along with the 30-year mortgage loan. MERS policy changes? They look good on paper but it’s just another smokescreen on the part of those who would continue to make the other side think MERS is complying with the April 13, 2011 Consent Order. In my book, there is no indemnification for MERS or MERSCORP, Inc.
Dave Krieger is Managing Member of DK Consultants LLC, a title consulting firm based in San Antonio, Texas.
ALEXANDRIA, VIRGINIA JURY CONVICTS FARKAS ON 14 COUNTS & WE STILL CAN’T SEE THE LIGHT AT THE END OF THE TUNNEL!
By Dave Krieger
A follow-up that is anything but finite …
An Associated Press report issued yesterday might have made for cause célèbre, in light of the anniversaries of Waco and Oklahoma City (and what some might make light of as a satanic holiday), however the end result is anything but complete.
Lee B. Farkas of Ocala, Florida, who this author had written about in his book CLOUDED TITLES, was convicted on all 14 counts in what amounted to nearly a $3-billion fraud scheme which helped, in part, take down Alabama-based Colonial Bank. Six of Farkas’s cohorts at Colonial and Taylor, Bean & Whitaker turned government witnesses in exchange for lesser sentences, all turned on the former chairman of the now-defunct and widely-publicized firm now in bankruptcy. At the time of this writing, Farkas is awaiting sentencing.
While it was discovered that there were “sweeping” practices (covering overdrafts on a daily basis to keep the accounts solvent) going on, evidence also came to light on the multiple pledging of residential and commercial mortgage loans in the securities markets. U.S. prosecutors alleged that over a billion dollars of these loans ended up at Colonial, who maintained they were legitimate assets on their books when they were anything but.
You may remember that during discovery in the TBW bankruptcy, Freddie Mac and Bank of America got into the proverbial “pissing contest” over who would get access to the discovery … at that time it was claimed that multiple pledging of mortgage loans was commonplace. This, my friends, is where this story stops and another begins.
Multiple pledging … Multiple investors … Multiple claimants …
Now we come to the part of this simple scenario that I hardly find amusing.
When you take the same promissory note, whether it be residential or commercial … and you use that note to entice investors to put a “stake” in it via their “retirement” or “investment” funds, knowing that someone else already put up money against that very note, you get multiple claimants. The claimants however, don’t know that each other has invested in the same note because each of the prospectuses offered to each individual claimant doesn’t quite spell out all of the assets that each investor was going to expect a return on and who’s comparing notes anyway?
While I’m not going to dawdle about what went on inside Wall Street brokerage houses, I do wish to point out that each one of these claimants represents what I consider a potential “intervening assignee” in a quiet title action, something that homeowners and their attorneys may wish to think about when putting together their pleadings. What I do find amusing is the way the banks’ attorneys occasionally poke fun at a given plaintiff’s allegations that there are “John Does 1-1000” that may be involved as unknown investors, when this whole time, the banks knew that this scenario was not only probable, it was more than likely true according to what the Farkas case shows us.
You see the things we learn … a note is a lien against the title to the property. If you hold the warranty deed, doesn’t that give you superior title to the property? After all, a lien is a lien, except when several lien holders come forward and all claim they have an interest. This has happened before (in Florida) where two lenders came forward and foreclosed on the same house. What do you think that does to title? Clouds it? Maybe?
If these interests were never recorded in the county land records … and MERS and LPS were involved in any known recorded assignments … doesn’t that bring in a whole host of new issues that one could seek to quiet title on? The Farkas case just cracked the lid on another whole host of properties that now face claimant issues that may only be resolved by quieting title.
And the banks? What we’re seeing now is a scramble by trustees to attempt to get out of these suits. They want no part of any allegations of breach of fiduciary duty (to the borrower and the real creditor) and negligence (for failing to exercise due diligence to determine whether the lender involved in the non-judicial foreclosure was really the party in interest). We’re also seeing banks removing these quiet title actions to federal court, where the jurisdictional issues of a federal court quieting title to property situated in state lands as the banks “hide” their real objectives, to stall as long as possible so they can keep bad case law off the books while they wait for their buddies inside the beltway to step in and “do something”. This certainly is something to watch for and protest against.
The calamity of wanton jurisdiction …
For the federal courts to think they can quiet title is at best, absurd. Every state has a statute and/or has given every homeowner the right to quiet title on their property, if in fact they can prove their title is superior to that of their known and unknown claimants, as well as defeating those challenges to claimed liens wherein the right to enforce does not exist. But for a federal court to step in and claim it has the right to quiet title on state property? 10th Amendment?
Mark Aspey, a federal district court judge in Arizona “gets it”. In the Forde case, he remanded what he stated were clearly state-sanctioned issues back to Maricopa County Superior Court. Other cases however, haven’t been as lucky. At least one other Maricopa County quiet title action that the author is aware of has been removed to federal court, where another judge asked the attorney why she listed the property as a Defendant in her quiet title action. Excuse me?
My answer to that … and this ain’t legal advice folks, just my researched opinion … is that you have indispensible parties and necessary parties. The Plaintiff in a quiet title action (or one who claims to own the property in title superior) is an indispensible party. The subject property is situated in the county and state that collect taxes from it. If the property owner doesn’t pay his property taxes, then the County becomes an indispensible party because of its claim by right of jurisdiction to seize and sell the property to someone who WILL pay the ad valorem property taxes. All equity flows from the subject property. Without the property and the Plaintiff, you wouldn’t have indispensible parties. Necessary parties are all known parties to the contracts and liens that come against the subject property. Mortgages and deeds of trust represent security interests against the indispensible subject property. When these “liens” are pledged multiple times, you have a real serious problem. Now you can point a finger at MERS and Wall Street.
If you have unknown investors, because from what we’ve seen, there are many ways to hide the chain of custody of the note (this becomes necessary for a judge to decide through declaratory judgment the rights and interests of the parties involved). Discovery may or may NOT uncover these glitches. This is why I do chain of title assessments for the attorneys who retain me.
The argument for chain of title assessments …
Chain of title assessments are kind of like an x-ray to a doctor. Generally, you see them order an x-ray right before surgery so they can see what they’re dealing with before they cut. A chain of title assessment kind of works the same way for an attorney. It tells him when and where gaps in the chain of title are suspect. It suggests possible strategies to defeat motions to dismiss wherein the lenders all claim the chain of title is clear up until the time they got ownership of the note.
It gives the attorney more information for the purposes of formulating discovery, something else I do as a paralegal. I can’t litigate it, but I sure can play “Devil’s Advocate” with counsel when it comes to ferreting out possible challenges from the other side. This is part of my consult work. The attorney has to argue what he feels best about arguing before the judge. That’s not my call. The attorney will go with what works in court … what a judge can get his head around.
There are very few paralegals (to my knowledge) that have grasped the entire concept of comparison of chain of title to chain of note custody; but it’s there … and so are the agency arguments to go with it. In time, many will have been trained into this procedure. This generally takes a couple of days and several sample sets of documents to grasp the concept in its entirety.
Your attorney can order a chain of title assessment for your case by emailing me directly at cloudedtitles@gmail.com. Assessments start at $750 and go up depending on the number of documents analyzed. There are NOT enough paralegals to handle the prospective number of upcoming quiet title actions, so it becomes necessary to effectuate seminars to accomplish that task. As a result, I have formed an LLC to take on that task.
I recommend you read CLOUDED TITLES first because I do not have the time to educate you over the phone and via email. You get up to speed first, then you fight.
Securitization and quiet title …
What does Wall Street have to do with your title to property, you ask? Multiple pledging of your loan to several investors? There’s a new quiet title action that was just filed in Lewis County, Washington that actually names two of the known investors (much to their chagrin) as Defendants.
“This is probably one of the most complex cases I’ve ever done,” says Seattle attorney Matthew Hale, who represents clients in quiet title and foreclosure defense actions in the Pacific Northwest. Mr. Hale can be reached through his website at www.sentinellawgrouppllc.com.
Armed with a declination letter and a very irate title company executive, Hale believes that the service of process could be a problem, “because we don’t know where all of these investors are”.
Still more problematic is the fact that it’s common knowledge that all of these investors, which run the gamut from 401(k) and retirement accounts for schoolteachers’ unions all the way to private source investors seeking to make a fair return, purchased non-recourse bonds. What the end result of this has caused is lawsuits brought against banks and brokerage houses and the trusts they represent in the Southern District of New York for fraud and misrepresentation, mostly on the prospectuses issued by these brokerage houses to entice investors to purchase these collateralized debt obligations.
The trust that is foreclosing on Hale’s client is one of those trusts being sued by investment groups. It will be interesting to see how the judge will react when these investors come to court and tell the court why they are suing this particular trust and the title company executive tells the court why Hale’s client’s property is uninsurable. This is sure to raise potential issues for summary judgment, something the lender doesn’t want to hear and will certainly have trouble arguing against.
Even though the investors in many cases have no direct claim to the Plaintiff’s property (because after all, they bought and held non-recourse bonds), if these investors were told that they suffered a loss because the trust was written down or written off as a loss, then any agency relationship tying the trust to any loan it attempts to foreclose on may be at issue because the trust as a party would then lack standing to pursue an action; an issue of course which will have to be determined by a court.
Still, the agency arguments may be defeated simply by the information contained in the front of the pooling and servicing agreement (“PSA”). Sorry, but I just don’t see the need for a full accounting of a trust that may have NOT gotten the promissory note tied to your mortgage or deed of trust. Who knows … it could have been bifurcated by MERS or some other entity with no known pecuniary interest. Agency relationships and contract law pretty much dictate the chain of custody of the note. Securitization is only the process by which the note was resold multiple times to different investors (or so we think). When you talk about securitization to a judge, they don’t get it. That’s what we’re seeing (“we’re” meaning my group of attorneys I work for) in the courts now.
The question still remains … if the investors bought non-recourse bonds, what makes them necessary parties to a quiet title action? They don’t hold an agency relationship with the table-funded lender, even though they may have contributed the funds that constituted your loan.
We still have clouds on title …
I spoke with Jeff Thigpen, the Register of Deeds for Guilford County, North Carolina, who quickly informed me of the search he’d done of all of his records after the 60 Minutes piece aired on LPS’s Linda Green.
“I found 1300 documents, mostly assignments, with Linda Green’s name on them,” he said. The issue then becomes HOW to deal with this problem. Can you imagine 1300 separate quiet title lawsuits being filed out of Guilford County, North Carolina alone against multiple parties, including MERS and Lender Processing Services, Inc.?
THE WHO’S WHO PUTS OUT A WHAT’S WHAT ON MERS AND MERSCORP
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!
IS THE MERS “HOUSE OF CARDS” STARTING TO TUMBLE?
By Dave Krieger (OpEd)
A lot of events have come into play lately that makes me wonder that very thing …
FIRST GLANCE:
I was invited to Gwen Caranchini’s federal settlement conference last week (02/18) in Kansas City. Wow! I hadn’t seen the new federal courthouse in the Western District of Missouri in years (since it was built); such architecture. One would wonder what exactly was supposed to happen in such a conference. I was soon to find out: nothing.
Of significance however, was my introduction to MERS’s representative and their attorney. Within a minute, they had discovered I was the one in the same person that posts pieces on this website and wrote a book on the proverbial mess I claim (as well as others in the legal profession) they made in the chains of titles to now over 66-million pieces of real property in the United States of America. It’s amazing how much of a mess that really is when you look at it in detail. One would have to ask just exactly what these title companies are supposed to insure and … how much new risk are they placing themselves in?
When we got into the federal magistrate’s courtroom and the introductions of the key players were finished, MERS’s attorney stood up with raised voice and proclaimed that he and his client didn’t feel I needed to be there and thus voiced his objection. Moi? I rattled their cage? L’il ‘ole me? Gwen found it hilarious. So what if I run a blog site? I’m not going to tell you what went on behind closed doors … because I told the judge I wouldn’t … and nothing happened anyway. The question is … why did my presence get their panties in a bunch? They acted like I snuck up behind them and gave them a proverbial wedgie; and all I did was say “hello”. Clearly, I didn’t make their day. The judge was very cordial … and told MERS I was staying.
TAKE TWO:
On the way up to Kansas City, I had over an hour to re-read and mark up key points in the Ferrel Agard case that had just recently come out of the Eastern District of New York in Central Islip. Judge Robert Grossman had handed MERS a ruling they weren’t anticipating and as a result (I personally believe) William Hultman is no longer the Secretary-Treasurer of MERS (he’s now a Senior VP and corporate manager); Sharon Horstkamp, who previously served as MERS’s General Counsel, has taken over those duties.
One would think that if a state judge ruled that a homeowner failed to plead his foreclosure case and was further found to be in default (by not showing up), then why the need to file bankruptcy? Why the need for MERS to stick its nose in to the “cage of a pit bull” only to get it “bit off”? What did MERS hope to accomplish by defending its position as a “nominee” in a case that was already moot due to res judicata and further due to applications of the Rooker-Feldman Doctrine? Judge Grossman handed MERS its proverbial walking papers as far as agency is concerned. It will be interesting to see how MERS’s counsel pooh-poohs that ruling.
In this case, MERS can’t be sore about the ruling because as Grossman cited Kesler (Kansas) … I would have to ask which part of the elephant did MERS (acting as the blind man in the Indian legend that described the parts of an elephant he touched) actually touch and exactly who in that organization is now going to clean up the mess left behind in touching the elephant’s tail?
THIRD TIME’S A CHARM:
No sooner did the ink dry on the Agard decision … MERS put out a press release (Number 2011-01) indicating it was revamping its membership rules. Coincidence? You be the judge.
What I have a big problem with is those pesky signing agreements that MERS seems to think legally hold water. If you want to establish an agent-principal relationship (in this case, it’s with over 20,000 alleged “signors” all claiming to be either a “Vice President” or an “Assistant Secretary”) with someone that may have no real, actual knowledge of what they’re signing (robosignor), how in the heck can you indemnify the principal that gave you as a robosignor that authority in the first place? Hey MERS! How’s your errors and omissions insurance? If I were an insurance carrier, I’d dump you like a hot potato! That’s just my opinion!
Just because you have a “new and improved” Corporate Resolution Management System (acronym: CRMS) in the works … doesn’t make you any less of a principal and thus expose your liability when your so-called “signors” claim to indemnify you in their signing agreements. What most attorneys I think will start doing (is that the little bird out there talking to me again?) is challenging your signing agreements as being worthless. Really … can you delegate authority to a signor through a corporate resolution, allowing them to sign as “virtual subagents” of MERS, using MERS rubber stamps to give the examiner some semblance of authority for what your agents did … and if it’s discovered that your agents acted recklessly and with wanton disregard in signing and electronically filing these documents in courthouses all over America (wire fraud?) thus proven to be fraudulent … how is it you’re not liable for giving them that authority by corporate resolution? Law of Agency 101
DON’T PISS OFF AN IRISHMAN!
I can tell you with a certainty that the temper of the Irish is something not to be messed with …
I knew it was only a matter of time before someone in a position of power, namely, one John O’Brien, the Registrar of Deeds for Southern Essex District for the Commonwealth of Massachusetts, would declare he’s ready to enter the ring with MERS. In the wake of numerous qui tam actions taken around the country, word has it that Christopher L. Peterson, noted Professor of Law at S. J. Quinney School of Law at the University of Utah, who is assisting the qui tams in California and Nevada is a hopeful candidate in some capacity by Mass-AG Martha Coakley’s office coming after the electronic database for over $200,000,000 in unpaid assignment fees that should have been recorded in the state’s real property registers, but weren’t.
If I’m not mistaken, didn’t some corporate entity named MERS, tell its subscribers in “The Building Blocks of MERS” (a computer-generated slide show extolling the virtues of itself) that they MUST record their notices and assignments in the county recorders’ offices?
O’Brien has stated that the lost recording fees owed to county recorders nationwide could run into the billions of dollars. (On the phone, John sounds like a pissed-off JFK … and he’s mad!)
“The fact that they deliberately chose to create a for-profit private cyber Registry of Deeds whose only purpose was to avoid paying the same fees as everyone else and keeping the public in the dark as to who was the rightful owner of the mortgage clearly demonstrates to me that this was a scheme of epic proportions”, according to O’Brien.
According to O’Brien’s Assistant, Kevin Harvey, who I spoke with shortly before writing this piece, says Peterson is a familiar face in this state with this help on other cases. Time to put the gloves on … Geez, those Irishmen can fight, can’t they? Keep your eyes on Massachusetts!
THE LAST STRAW:
• For every anti-MERS ruling that the foreclosure defense consortium tosses at MERS, MERS PR Department retorts with its own claims of victorious rulings that give it impetus to do what it’s doing. One thing is clear here … there is an entire chain of case law out there (across the entire U.S.) that is totally inconsistent as to what MERS’s real authority is; thus further adding to the confusion (perhaps by design?). My take on this is that before this is over, SCOTUS is going to have this mess dumped into its lap.
• The citizenry is already up in arms about the attempted passage of legislation being defeated in the Commonwealth of Virginia thanks to MERS and the Virginia Bankers Association. Come to find out, when banker-legislators hold key positions of power, how do you expect the tide to turn in favor of the homeowner?
• In Arizona, legislation reforming the Deed of Trust Act has moved from the Senate to the House, despite an appearance from Hultman and the state banking interests … the Senate committee vote: 4 Yeas, 0 Nays, 2 Abstentions.
• A major rally is planned up in Seattle this weekend, along with testimony that is on-going in Olympia in an effort to make significant changes to its Deed of Trust Act, pitting disgruntled homeowners against legislators. The outcome is questionable?
• Last week, several more documents that were purported to have been signed by MERS agents were turned over to the DOJ in Central Florida by attorneys in Arizona and Washington State, as the feds continue their investigation into LPS/DOCX and robosigning frauds. Linda Green? Are you out there?
Go to www.thepowerhour.com and download the archives of my last three shows. Seattle Attorney Matt Hale was on the last program with me discussing the failure of loan modifications; which by the way … the Federal Trade Commission has now ruled that attorneys cannot take advance fees from homeowners for doing loan modifications (especially ones that won’t or don’t work … they rarely do) with a lender. It’s an $11,000 fine for each day spent and $11,000 fine for signing and taking advance fees. This author feels the likelihood of loan mods in the wake of the MERS debacle are at a futile end. Most homeowners may find solace in quiet title litigation.