MERS: An Illusion or Just Plain Trickery

An illusion is the condition of being deceived by a false perception or belief. Add an elaborate and deceitful scheme to that, and you have what I have seen on courthouse steps across this country. In 12 years of forensic mortgage investigation, I have watched the banks contrive scheme after scheme to take homes from homeowners who fell into a perceived pendency of default on their home loan.

The homeowners who find themselves in default are not deadbeats. They are people who, through circumstances often beyond their control, fell behind on payments. They deserve to be treated lawfully. They deserve to have the banks follow the same rules that everyone else must follow. Instead, what they get is an illusion. A trick. A scheme designed to take their home through deception rather than through proper legal process.

The Court Steps and the Credit Bid

This illusion takes place on the court steps. The trustee of the Security Instrument sells the property. Some of the participants go by the name of Fannie Mae or Freddie Mac. The trustee says that a credit bid has been made by Fannie Mae. The open bid for a particular property with a home on it is $250,689.00. You scratch your head because you have researched the houses in the area. The median sale price for a similar home with the same square footage is $115,000. No one will bid on the house because the bid is ridiculous.

Only the Beneficiary may make a credit bid in lieu of cash at an auction. Fannie Mae, or the Federal National Mortgage Association, has not been named into public record as the beneficiary. The trustee is selling property that it does not have a claim to. When it is stated that Fannie Mae just gave a credit bid and will be awarded the house, nobody yells STOP.

I have stood on those court steps. I have watched it happen. A party that is not named in the public record as the beneficiary is making a credit bid. That right is reserved exclusively for the beneficiary. The trustee accepts this bid and sells the property to a party that has no documented claim to it. This is not a technicality. This is a fundamental violation of the laws that govern real property transfers.

Fannie Mae Never Pays with Cash

There is no money exchanged. Fannie Mae did not pay value for it, which is required by state law. Fannie Mae, not being a proper beneficiary named into public record, needs to pay with cash or a certified check. Fannie Mae or Freddie Mac has never paid with cash for any property they have acquired at these sales. In my experience investigating these transactions, I have not found a single instance of compliance with state law on this point.

What Did Fannie Mae Actually Purchase?

Fannie Mae claims to be an investor on your loan. Ok, so they are an investor. They purchased an interest of a mortgage loan instrument. This is verified by the Fannie Mae website. The question becomes, what did Fannie Mae purchase? They purchased the intangible obligation, which is the Promise to Pay of the Tangible Promissory Note. That gave Fannie Mae the authority to collect future payments of the named party on the Tangible Promissory Note. That is all. No more and no less.

They did not acquire the entire mortgage loan instrument as required by statutory requirements of law pursuant to the Uniform Commercial Code or the particular state’s equivalence of the Uniform Commercial Code. Nor was this done in a timely fashion. With this not being done correctly, no rights have been acquired by anyone.

The Entire Instrument Was Never Acquired

The entire mortgage loan instrument consists of three parts: the Tangible Promissory Note, the Security Instrument, and the Intangible Payment Obligation. Fannie Mae purchased only the intangible obligation, the promise to pay. They did not acquire the Security Instrument, which is the Mortgage or Deed of Trust recorded in the county records. They did not acquire the tangible note, the physical document that the homeowner signed.

Under the Uniform Commercial Code, all three parts must be held by the same party for the security interest to be enforceable. When the intangible obligation is separated from the tangible note and the Security Instrument, the security interest becomes unsecured by operation of law. The party attempting to foreclose has no enforceable lien against the property. In Carpenter v. Longan, 83 U.S. 271 (1872), the Supreme Court established that the note and the mortgage are inseparable. The mortgage follows the note. When the note is separated from the mortgage, the mortgage becomes a nullity.

The Innocence of Consciousness

There is an innocence of consciousness in both the courts and the homeowners who fight this battle every day. What is presumed to be true and correct is actually the complete opposite. While we wallow in the muck and the murkiness of the many illegal foreclosure proceedings, more and more homes are being lost. The articles I write each week are intended as ropes to help pull you out of the hole of misinformation. Grab hold of the rope and hang on. This is a deep rabbit hole.

The illusion works because nobody questions it. The trustee does not question whether Fannie Mae is a proper beneficiary. The homeowners do not know to question the credit bid. The courts do not question the process. And so the homes are taken, one by one, through an illusion that depends on everyone’s silence.

It is time to stop being silent. It is time to understand what is actually happening on those court steps. It is time to demand that the law be followed. A MERS audit can reveal whether MERS was properly used in your loan’s chain of title. When the MERS records do not match the actual recorded assignments, a securitization audit can expose whether the trust rules were followed. The banks, Fannie Mae, Freddie Mac, and the trustees who conduct these sales are all counting on the fact that nobody will yell STOP. I am yelling STOP. I suggest you do the same.

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Joseph Esquivel, Mortgage Compliance Investigators. Copyrighted, all rights reserved.