9 November 2011 by Bob Hurt
The following news stories explains the Florida Duval County Clerk lawsuit against MERS and MERSCORP.
The lawsuit complains:
“MERS has usurped the rights and privileges of the Florida Clerks of Court by establishing, maintaining and inducing lenders to use its private recording system, which unlawfully interferes and competes with the public recording system.”
The clerk alleged that both the note and mortgage must go on the county record. MERS attorney rebutted the complaint, claiming inaccuracy, and said MERS owns the mortgage and no law require the recording of a note.
I agree with MERS, but I also think the squabble could result in a beneficial change in the laws.
I consider this the core problem: Smart people will always seek ways to keep their wealth while taking the wealth of others, particularly the stupid. This case merely punctuates the problem.
Furthermore, Government operatives incessantly try to invade privacy rights of the people, and requiring the recordation of notes would reveal wealth in a way that would definitely invade privacy.
Most importantly, Florida law does not give the Clerk the authority to require recordation of notes. Florida statute 28.222 lists all the instruments the Clerk (County Clerk or Clerk of Courts) must record. Notes do not appear in the list. 28.2222 (3) (h) names “Any other instruments required or authorized by law to be recorded.”
Additionally, one’s possession of the note, or one’s name on the note or an allonge as beneficiary or assignee, proves one’s beneficial interest in the note, such as a stream of repayments. Any law requiring recordation of notes would impose an undue burden on commerce and unduly enrich the Clerk.
Imagine the insanity of filing every issuance of every Federal Reserve Note with a Clerk, and paying associated fees to the clerk. The Clerk has neither a right nor a privilege to record notes, nor a right to receive fees related to registration of the notes with MERS.
Society’s big problem with recordation of notes lies in the mess caused by promissory notes (“Notes), mortgage security instruments (“Mortgages”), securitization, and mortgage foreclosures.
The mortgage loan borrower signs a Mortgage when buying a house. The Mortgage contains language that protects the lender and abuses the borrower through rights-stripping. Borrowers almost never read it. If they did, and they thought about it, they might wonder why they need to convey the realty to the lender as part of the mortgage. That conveyance makes the lender the legal owner of the realty. It also implies that the “loan” consists of the realty, not the alleged money which the borrower allegedly borrowed and typically never sees. Instead, the closer hands the purchase check directly to the seller. In effect, the lender bought the realty and lent it to the borrower. This makes the typical closing into a scam that leaves the borrower owning nothing but a debt, equitable interest in the realty, and the obligation to maintain and insure it.
Neither the Note nor the Mortgage contain language requiring the lender or assignee to keep the note and mortgage united as one package of documents, nor to return the Note and Mortgage security instrument to the borrower upon satisfaction of the terms of the Note. The borrower typically relieves the lender of the obligation both to inform the borrower of every assignment of the note, and to comply with the UCC’s notice and demand cycle. Worst of all, no language in the Note actually conveys the Note to the lender, and yet lenders sell and securitize the note as though it constitutes their own chattel, depriving the borrower of all the fruits of such conversion.
Various rumors and facts surround the mystery of what happens to the physical Note after the borrower signs it at closing. These have caused confusion so great that the mishandling of notes confounds judges in the real estate trial courts across America. For decades, lenders or assignees held the notes securely in vaults and never brought them to court or the trustee in foreclosure matters. They merely provided proof of loan payments and a copy of the note to prove its existence. When challenged for the original, they claimed they had lost or accidentally destroyed the note, and maybe they did. In recent years when the foreclosures began to mount and defendants demanded to see the original note, plaintiffs magically found them. Companies like DOCX specialized in re-creating “original” loan documents, a crime for which no court has yet punished anyone.
Now, amidst all this confusion, county clerks have started suing MERS in an effort to stop MERS from registering note assignments, and to force the assignees to file the assignment along with any changes in the mortgage with the county clerk, and to pay corresponding recordation fees. This would of course bring a windfall of much-needed money into the court coffers. But, as I have explained, that would constitute malfeasance, invasion of privacy, and a ball and chain on the ankle of commerce.
The assignment-in-blank and bearer instruments like bonds and currency constitute an additional major fly in the ointment of the clerks’ nefarious scheme to record notes. If they get their way, people will, out of logical consistency, have to record every I.O.U., promissory note, bond purchase, and currency transaction, even when it does not relate to a mortgage. For further consistency, people might also have to record purchases and transfers of chattel, and pay a corresponding fee. This would amount to a tax on all commerce, on top of existing luxury tax, sales tax, and other excise taxes. The clerks would have a monumental, new outrage from the public to deal with, a brand new justification for a Boston Tea Party uprising.
In addition, the clerks don’t seem to grasp the significance of MERS and MERSCORP. The MERS concept started because lenders wanted it and funded it so they could keep track of notes and simplify foreclosures while reducing the cost of assigning notes. All major lenders own shares in MERSCORP for that reason. Thus, MERSCORP operates as their special-purpose alter-egos with perfect legitimacy.
For the foregoing reasons, I predict that the clerks will lose and lose badly in their effort to force note assignees to record the assignment and pay a fee for it. They will fail in their effort to shut down the legitimate operation of MERS.
However, MERS does cause a certain problem. When the holder of the note and the mortgagee sue under separate names to foreclose, they have no standing to force a foreclosure sale of the mortgaged realty. These points explain why.
- The holder named on the note or allonges has the right to foreclose the note, but because the mortgage bears the servicer’s name (MERS) as mortgagee, and not the holders, the holder has no authority to force a sale UNLESS the holder has made the mortgagee the holder’s agent for that purpose. That almost never happens.
- The mortgagee (MERS) has no standing to sue to force the foreclosure sale because the borrower’s failure to make timely mortgage payments injured only the holder, not the mortgagee. Only injured parties have the right to sue.
If these sticky issues become salient in the clerk’s lawsuit against MERS, maybe the legislature will take the hint and clarify the issue in statutes that prevent splitting the note from the mortgage. This would force the assignees of the note to file and pay a recording fee. I doubt that will happen, however. The lenders could combine the note and mortgage in a single document, but for a variety of sound reasons chose not to.
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