mers explained by aurora lawyers

8/4/2019 Mers Explained by Aurora Lawyers

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Case 2:08-cv-01733-LRH-RJJ Document 6-4 Filed 12/15/2008 Page 1 of 25


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the foreclosure or exercise ofpower of sale." See, Collins v. Union Federal Sav. & Loan Ass'n.,99 Nev. 284, 662 P.2d 610 (1983).7

Plaintiffs eighth claim is based essentially on the allegations that Mortgage ElectronicRegistration Systems, Inc. ("MERS") wrongfully acted as the loan beneficiary and the note anddocuments were not provided showing that Greenpoint Mortgage, MERS, or Aurora were thebeneficiary andlor entitled to payments. {CpIt. 41-42,45,49,51).8 Based on these cursoryallegations, Plaintiff concludes that the foreclosure completed through the duly appointedforeclosure trustee, Defendant Quality Loan Service ("QLS"), was wrongful because "they hadno right to foreclose." (CpIt. 4, 11,48). As established below, Plaintiffs allegations must bedisregarded as erroneous deductions of law or fact and contrary to the public record.

A. The Residential Mortgage Market and Function of MERSWhen a mortgage lender loans money to a home buyer, it obtains a promissory note in

the form of a negotiable instrument from the borrower, as well as a mortgage instrument in theform of a deed of trust which is recorded in the county official records. The lender often doesnot continue to hold the note. Instead, the lender sells the note into the secondary mortgage

7 Even if there is some minor discrepancy in the foreclosure notices, cases in Nevada and Californiauphold the foreclosure sale as proper unless the borrower can establish prejudice other than the loss ofthe property. See, Matter of Stanfield, 6 B.R. 265 (Bk.Ct. D.Nev. 1980); Knapp v. Doherty 20Cal.Rptr.3d 1, 13-19,2004 W.L. 209,2002 (Cal.App. 2004).8 Incidentally, Nevada law does not require a loan assignee or servicer to provide the original wetink note as proofof its standing as assignee or servicer prior to foreclosure. Indeed, it would befoolish for a holder to tum over the original negotiable instrument before it was satisfied. Courtsacross the country reject claims by plaintiffs asserting duties by an assignee lender or loanservicer to provide the original note under the U.C.c. to prove a holder in due course status. See The Frances Kenny Trust v. World Savings Bank FSB, Not Reported in F.Supp., 2005 WL106792 (Order, N.D.Cal. Jan. 19,2005); Alcorn v. Washington Mutual Bank, F.A., 111 S.W.3d264 (Tex.App. July 3,2003); U.S. Bank N.A. v. Phillips 366 Ill.App.3d 593, 852 N.E.2d 380(Ill.App.Ct. June 26,2006). In any event, copies of the Adjustable Rate Note and Deed ofTrustare sufficient evidence and are submitted herewith. N.R.S. 52.245 ("duplicate is admissible tothe same extent as an original). (RJN Exhs. 3, 4).

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market, most often to one of the government or government-sponsored entities created by statuteto purchase residential mortgage loans from banks and other lenders. See 12 U.S.C. 1451-59,1716-23 et seq. (creating the Government National Mortgage Association ("Ginnie Mae"),Federal National Mortgage Association ("Fannie Mae"), and Federal Home Loan MortgageCorporation ("Freddie Mac")). In turn, these entities re-sell the notes into a tertiary mortgage-backed securities market, usually as part of a bundle ofnotes held in trust for investors. As aresult, the notes are held for the benefit ofnumerous people simultaneously, whose identitieschange as these negotiable instruments are sold and resold in these markets, and as the investorssell and re-sell their shares in the mortgage-backed securities.

Because of the secondary and tertiary mortgage markets, the original lender is then able121314151617

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to make the funds from the first sale of the note available to additional home buyers. Theavailability of these funds is the specific and intended result of the statutes that created thegovernment and government sponsored entities - to increase funds for home ownership in theUnited States. See 12 U.S.C. 1451, 1716.

MERSCORP, Inc. and MERS were companies formed to play an integral part in thefederally established free-market system created to increase liquidity in the market for homeloans. In 1993, the Mortgage Bankers Association, Ginnie Mae, Fannie Mae, Freddie Mac andothers in the real estate finance industry created an electronic registration and tracking systemthat is similar to the process used with great success by the Depository Trust Company for thesecurities industry. MERSCORP, Inc. was formed to track both beneficial ownership interestsin, and servicing rights to, mortgage loans as they change hands throughout the life of the loan.This tracking assists the mortgage banking industry by reducing questions regarding thesecontractual interests as they are bundled into mortgage-backed securities. In this manner,

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MERSCORP, Inc. facilitates liquidity in the secondary mortgage markets. MERS serves as themortgagee or beneficiary for the MERS member lender.

Upon the purchase of a home, the borrower signs a loan contract that names MERS as thebeneficiary (as "nominee" for the lender and its successors and assigns as here). In the loancontract, the borrower assigns his or her right, title, and interest in the property to MERS. Theborrower contractually agrees that, in the event of default, MERS is a proper party to forecloseon the home. The mortgage or deed of trust with MERS as a named beneficiary is recorded.When the note is sold by the original lender to others, the sales of the notes are tracked on theMERS System. As long as the sale of the note involves a member ofMERS, MERS remains anamed mortgagee or beneficiary of record and continues to act as a nominee for the new holder.This relationship is memorialized in the original mortgage or deed of trust to which the borroweris a party. If a member is no longer involved upon sale, an assignment from MERS to the non-MERS member is made, executed and recorded in the county where the real estate is located, anthe loan is "de-activated" from the MERS System.

B. MERS Had the Right and Standing as the Nominee BeneficiaryCourts across the country affIrm the legal standing ofMERS as a nominee beneficiary

and to commence foreclosure in this capacity. Mortgage Electronic RegistrationSystems, Inc., v. Oscar Revoredo. 955 So.2d 33, 34 (Fl.App. 3 Dist. 2007) (MERS had standingto foreclose, "there is no reason why mere form should overcome the statutory substance ofpermitting the use of this commercially effective means of business); Mortgage ElectronicRegistration Systems, Inc., v. George Azize. 965 So.2d 151 (Fl.App. 2 Dist. 2007) (fact thatMERS lacked the beneficial interest in the note did not deprive it of standing); Mortgage

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