MERS Part 2: Chain of Title Problems

In Part 1 I compared MERS to an iceberg. Now we go below the waterline. After 12 years of forensic mortgage investigation, I can tell you that what MERS actually is becomes clear only when you examine the records. MERS is a system of records. A MERS audit examines these records to identify tracking errors and missing assignments.

These records and milestone reports track the owner and servicers of eNotes. These eNotes were created electronically, transferred electronically, and stored electronically. Hence the name “the paperless mortgage.” This eMortgage is a copy of the tangible contract. It evidences an alternative means of collection when there is a presumption of deficiency on the intangible obligation, which is the promise to pay.

The Electronic World vs. The Tangible World

In the electronic world, MERS dominates the intangible transferable record world by claiming control of the transferable record. In the tangible world, they would need possession of the wet ink Tangible Promissory Note. This is the core problem I see in case after case. The two worlds do not connect the way the banks claim they do.

Electronic World	Tangible World
MERS claims Authoritative Copy of the eNote	They need the Original Tangible Promissory Note with wet ink signature
MERS claims Transfer of Control	They need an indorsement

MERS Has No Rights to the Note

MERS exists solely within the definitions of the Security Instrument. MERS is not a party to the Tangible Promissory Note and is conferred no rights. MERS has not funded any money. MERS is not entitled to receive any economic benefits pertaining to the collection of monies collected by the Servicer. While MERS can assign its interest of an eMortgage on which it is named, MERS has no rights to the Intangible Obligation of the Tangible Promissory Note.

MERS claims to have an agency relationship with the original lender. Fine. But upon bifurcation of the tangible promissory note and the intangible payment obligation, the agency relationship of subsequent parties does not exist. I have yet to see a single case where the banks adequately addressed this bifurcation problem.

The Assignment Problem

In every Assignment of Mortgage or Assignment of Deed of Trust I have examined, two questions are never asked but must be addressed:

1. What is the purpose of an Assignment?
2. Is that document eligible to be recorded?

The purpose of an Assignment of Mortgage or Deed of Trust is to memorialize the sale of the Tangible Promissory Note. But that is not what is actually happening. The Intangible Payment Obligation has been ripped out of the Tangible Promissory Note years prior to the purported Assignment. Usually, it was done shortly after the signing of the closing documents, within days or weeks.

MERS is being used in an attempt to bring the parts of the entire instrument together. Many times the verbiage on the document that purports to be an Assignment of Mortgage includes the words:

“Together with the note or notes therein described or referred to, the money due and to become due thereon with interest, and all rights accrued or to accrue under said Deed of Trust/Mortgage”

Fancy Word Crafting

What note is being talked about? Are they talking about the eNote? It is not clearly stated what is meant. Is the money due? How did they obtain the right to the money? Are all rights accrued or to accrue?

Their verbiage is designed to lure you into a false sense of understanding. I call it fancy word crafting. MERS operates in the realm of intangible records, not in the tangible world of written documents. They appear and disappear as if they never existed. In my investigations, I trace these appearances and disappearances through the county records. What I find, time and again, is that the paper trail does not match the electronic trail.

It All Leads Back to Title

Everything we have been discussing leads back to title. Title is the union of all elements constituting the “Legal Right” to control and dispose of property. It is not about ownership. It is about rights acquired. It is the “Legal Evidence” of a person’s ownership, or interest, in the property. A Chain of Title Analysis documents these rights and exposes where the chain was broken.

We will go over that in Part 3 of this series on MERS.

---

Joseph Esquivel, Mortgage Compliance Investigators. Copyrighted 2013.