oregon foreclosures - the mess that mers made

8/7/2019 Oregon Foreclosures - The Mess That MERS Made

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Oregon Foreclosures The Mess That MERS Made

By

Phillip C. Querin, QUERIN LAW, LLC

Contact Info:www.Q-Law.com

ChimeraA grotesque product of the imagination.

For the past several years in Oregon, foreclosures have been processed fraudulently and in violation of

Oregons trust deed law. Banks, servicers, title companies and licensed foreclosure trustees, were all

aware of the problem for years, but no one did anything about it. This was not a minor error or simple

oversight it was a patent disregard for the laws of Oregon and many other states.

Oregons Trust Deed Foreclosure Law.It is widely known that during the credit/housing boom, lenders

frequently sold their loans between one another. When the ownership of a loan is transferred, it is

necessary to execute, in recordable form, an Assignment of Trust Deed. ORS 86.735(1)governs what

must occur before a trust deed may be foreclosed in Oregon; all such assignments must be placed on

the public record. This is not a new law and it is not significantly different from the laws of many other

states. Oregons law has been on the books for decades.

ORS 86.735(1) is not complicated or confusing. It simply means that after the original lender makes a

loan and takes back a trust deed (which is immediately recorded), all subsequent assignments of that

loan must be recorded before the foreclosure is formally commenced. In this manner, one can see from

the public record, the chain of title of the loan, and thereby know with certainty, that the lender filing

the foreclosure actually acquired the right to do so through successive transfers from the original lender.This protects the consumer and assures the reliability of Oregon land titles.

The MERS Solution. In the 1990s, MERS came into existence. Its avowed purpose was to replacethe time honored system of public recordings for mortgage and trust deed transfers, with an electronic

registry which its members could voluntarily use when a loan was transferred. This registry is for use

only by MERS members, all of whom are in the lending industry. The immediate effect of MERS was

that lenders stopped publicly recording their mortgage and trust deed assignments. This deprived local

governments of millions of dollars in recording fees, and took the business of the sale of loans

underground. A more detailed discussion of MERS' business model is postedhere.

Although the numbers vary, it is believed that MERS comprises approximately 60% of the nationallending industry. Until recently, it had no employees. MERS was not born from any state statute or

national enabling legislation. It was the brainchild of its owners, the Mortgage Bankers Association,

Fannie Mae, Freddie Mac, Bank of America, Nationwide, HSBC, American Land Title Association, and

Wells Fargo, among others.

How MERS Has Contributed To Oregons Mortgage Mess.In an effort to give MERS the appearance

of authority, its rules clarify that it will act as a Nominee for each of its members doing only what its
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member instructs, but in its own name and not the name of the member. The Nominee appears to

be, as some Oregon federal judges have observed, nothing more than a strawman.

When the foreclosure crisis hit, lenders realized that they needed some way to get the trust deed into

current banks hands to initiate the foreclosure process. Since MERS existence was virtual, and with no

real employees, whenever it came time to assign a mortgage or trust deed, a MERS Assistant Vice

President or Assistant Secretary would execute the assignment on behalf ofMERS in their official

capacity. But since MERS has no such officers, it simply created mass Corporate Resolutions,

appointing one or more low level member bank employees to robo-sign thousands of bogus

assignments.

It is important to note that these MERS officers only made one assignment i.e. from the original

lender whose name first appeared on the public record, to the foreclosing lender. In Oregon, this means

that ORS 86.735(1) requiring the recording all of the intervening assignments, was intentionally

ignored. Hence, there was never a chain of title on the public record showing the genealogy of the

loan. As a result, in Oregon, no one - including the homeowner - knows for sure if the bank foreclosing

the loan has any legal right to do so.

And, there is reason to believe many of the banks did not have the legal right to foreclose. In every

Oregon foreclosure I have witnessed during the last twelve months, where the loan wassecuritizedinto

aREMIC,there is substantial doubt that the foreclosing bank, acting as the trustee of the securitized

loan pool, actually had any right to do so. This is due to the strict tax, accounting, and trust laws

governing the REMIC securitization process. The short explanation is that if the loan was actually

transferred into a loan pool between 2005 2008, there would be no need for an assignment to that

trustee today it would have already been in the pool and the trustee already had the right to

foreclose; but if the loan was not transferred into the pool back then, it cannot be legally assigned to

that trustee today. Although it is not always easy to locate, the Pooling and Servicing Agreement, or

"PSA,"governing the trustee's REMIC, will contain a "Cut-Off Date." That date is the deadline for the

sponsor of the REMIC to place all of the notes and trust deeds (or mortgages) into the trust. After thattime [subject to limited exceptions - which do not include the transfer of nonperforming loans into the

trust - PCQ], no new loans may be added into the pool. For example, if the REMIC was created in early

2006, the Cut-Off Date is likely to also be in 2006. This would mean that a bank, acting in the capacity of

a REMIC trustee that is foreclosing a homeowner today, would not have the legal right to do so, if the

trustee only recently received the trust deed assignment - since the REMIC had closed years earlier.

This is fraudulent. Yet the practice has been so widespread, that foreclosures routinely adopt this

"single assignment" (or A to B) model, and it became an assembly line business for MERS and its

member banks. The assignment documents were typically prepared in advance by foreclosure mill

attorneys and foreclosure trustee companies such as ReconTrust, uploaded them to a servicer or

foreclosure processing company link, to be signed, en masse, byrobo-signers. Then the assignments

were shipped over tonotaries, who never actually witnessed the MERS officer sign a document.

Once completed, the original assignment document was sent via overnight delivery to the foreclosure

trustee to record and thereafter begin the foreclosure. In many instances, the foreclosure trustee, (a)

acting as a MERS officer would sign the assignment document transferring ownership of the loan to a

lender, then (b) the same person would sign a document appointing their company as the Successor

Trustee, then (c) that same person would again sign the Notice of Default, which formally commenced

the foreclosure. It is this need for speed that epitomizes the MERS business model.
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The result has been predictable there is fraudulent paperwork on a massive scale. Forgeries are

rampant. Notarization laws are flaunted. Until recently, the banks and MERS have gotten away with

this scheme. The lending, servicing and title industries have simply taken a dont ask, dont tell

approach to foreclosures in Oregon and elsewhere.

However, in 2010, Oregon and several other states said enough. In Oregon for example, there were at

least three federal district court and bankruptcy court cases that struck down foreclosures due to the

use of the MERS strawman, and also based upon the flagrant violation of ORS 86.735(1). The most

notable of these cases is the published opinion of Hon. Frank R. Alley III, Oregons Chief Bankruptcy

Judge inDonald McCoy III v. BNC Mortgage, et al., Adversary No. 10-6224 - fra, Case No. 10-63814-fra-

13, February 7, 2011. Judge Alley held, in part, that:

the powers accorded toMERS by the Lender [whose name appears in the Trust Deed] with the

Borrowers consent cannot exceed the powers of the beneficiary. The beneficiarys right to require a

non-judicial sale is limited by ORS 86.735. A non-judicial sale may take place only if any assignment by

[the Lender whose name appears in the Trust Deed] has been recorded. [Parentheticals mine. PCQ]

Judge Alley concluded that a failure to follow the successive recording requirement of ORS 86.735(1)meant that the foreclosure was void. It is important to note that in McCoy, as in most rulings against

MERS lenders, the courts have not said the banks may not prosecute their foreclosures merely that

before doing so, they must record all intervening assignments.

MERS is now engaged, through surrogates and one or more lobbyists, to introduce a bill in the Oregon

legislature. It is a bold effort to legislatively overturn Judge Alleys ruling, as well as similar adverse

rulings by Oregon federal court judges,King,Hogan, andPerris.

MERS, its member banks, and the foreclosure industry, including its foreclosure mill attorneys, have

never provided any justification for ignoring Oregon's foreclosure law. Nor have they offered to do so.

Instead, they have threatened that if ORS 86.735(1), and other homeowner protections in ourforeclosure statutes, are not amended to (a) give MERS the right to continue acting as a strawman, and

(b) avoid recording all successive assignments, the Oregon housing and foreclosure crisis will continue

longer than necessary.

Metaphorically speaking, having been caught with their hand in the cookie jar, MERS now asks the

Oregon Legislature to legalize cookie theft.

Oregon Consumers Must Be Protected. The proposed MERS bill does nothing to protect homeowners.

Rather, it is aimed at legalizing patently fraudulent conduct, in the name of helping Oregon

homeowners get through the foreclosure crisis faster. The title and lending industry are concerned that

if a law is not immediately passed giving MERS its way, foreclosures will come to a halt. The bankshave even threatened to file judicial foreclosures against homeowners, to avoid the recording of

assignments requirement. This is a complete ruse. Here's why:

Lenders cannot avoid their paperwork problems in Oregon by going into court. As we have seenin Oregons federal court cases, the banks are still unwilling to produce the necessary

documents to establish their standing to foreclose. If a bank does not have the legal

documentation minimally necessary to establish its right to foreclose non-judicially, why would
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it go into court and shine a bright light on its own fraudulent paperwork? The outcome will be

the same.

Lenders will not go into court for fear of further alienating an already alienated public. The banks know that with the high filing fees and lawyers, it will be much more costly for them

to foreclose judicially in court.

In any event, there is little reason to fear judicial foreclosures clogging the court dockets. Withproper documentation, the process can be relatively fast (three months), since the cases could

be disposed of on summary judgment. If judicial foreclosure cases became too numerous, the

local courts can create expedited protocols and assign certain judges to speed them through.

Lastly, many foreclosures are already being filed judicially, especially on commercial properties.

To date, there has been no hue and cry that it is overwhelming the court systems.

The lenders complaints that foreclosures are slowing Oregons recovery are not necessarily verified by

the statistics. Oregons Regional Multiple Listing Service (RMLS) shows that January 2009 housing

inventory (i.e. dividing active listings by closed sales) was 19.2 months; January 2010 was 12.6 months;

January 2011 was 11.3 months. February 2009 was 16.6 months, February 2010 was 12.9 months; and

February 2011 was 10.9 months. March 2010 showed housing inventory at 7.8 months (down from 12.0

months in 2009), and there is no reason we cannot expect even better numbers when this month isover.

These numbers suggest that housing inventory is gradually being reduced year over year. Although it is

true that housing prices continue to decline, that is more likely the result of lenders fire-selling their own

REO inventory, than anything else. I say this because of many anecdotal reports of lenders refusing

short sales at prices higherthan they ultimately sold following foreclosure.

In an online article inMortgage News Daily, it was reported:

The cost of a foreclosure, it turns out, is pretty staggering and we wonder why lenders and the investors

they represent aren't jumping at a solution, any solution, that would allow them to avoid going toforeclosure whenever possible.***According the Joint Economic Committee of Congress, the average

foreclosure costs $77,935 while preventing a foreclosure runs $3,300.

All in all, foreclosure is a lose-lose proposition for all concerned - except perhaps the companies

servicing and foreclosing the loans. [Point of Interest: Bank of America ownsBAC

ServicingandReconTrust, and is making millions from the business of foreclosing the loans it made to its

own borrowers. A sterling example of vertical integration PCQ]

The only good solution is a non-foreclosure solution. Lenders already have ultimate control over the

outcome for every loan in default. In those cases in which modifications are viable, they should do so on

an expedited basis. Although it is doubtful that the industry can and will anytime soon - create a fastand fair process to reduce principal balances, that is certainly a fair solution. It is fair to the homeowner

in need and actually fair to the bank, since the cost of foreclosure, including taxes, insurance,

commissions, and other carrying costs, are significantly more than the short term pain of a write down.

Another, more likely and quicker solution, is to establish a fast-track short sale process. This should not

be complicated if the banks stopped losing paperwork and focused on turning short sales into 45 -day

closings, consistent with the timing for equity sales. It has been the lender delays that have stigmatized
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short sales, so only hungry investors and patient buyers, generally participate. This can change if banks

begin expediting their short sale processing.

With both the modification and short sale alternatives, lenders do not receive the property back into

their already bloated REO departments; and there is the added advantage that the banks do not have to

risk ajudicial slapdown, when using their fraudulently prepared Assignments of Trust Deed. In short, it

is a win-win solution for lender and borrower.

Conclusion. The MERS business model was based upon the concept that It is better to seek forgiveness

than permission.The problems they created were done with their eyes wide open. After having

created these problems, they are now seeking to legislatively overturn the rulings of several of Oregons

highly regarded federal judges. These decisions have affirmed the rule of law. To do otherwise, i.e.

sanctify MERS illegal conduct by eviscerating laws designed to protect homeowners, would be a

travesty. It would permit banks to conceal from homeowners whether the lender foreclosing them

actually has the standing to do so.

MERS, the banks, and the title industry own this problem, and they should own the solution. Whatever

the outcome, it should be fair and should not borne on the backs of consumers. 2011 QUERIN LAW, LLC
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oregon foreclosures - the mess that mers made

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