The Company No One Knows is at the Heart of the Mortgage Disaster.

Over 100,000 were foreclosed on during the month of September, a record number by any measure.  There were also over 350 homes where foreclosure procedures, including eviction, were conducted where the homes weren’t even mortgaged!!  WHAT!??  Yes, that is correct.  In most cases these involved homes that were either recently auctioned or short sold.  The titles cleared fine, but the folks in the banks didn’t tell MERS that and foreclosure procedures were actually and will continue to be initiated on unwary home owners.

This is where the biggest little company you never heard of comes into play.  In fact, it was supposedly created to deal with just such situations to insure they didn’t happen.  You’ve heard the name Mortgage Electronic Registration Systems or “MERS” mentioned in relation to the foreclosure problems in the residential real estate market. This is especially true if you have been a victim.  But what is MERS?

According to an article in Washington’s Blog it is the company created and owned by all of the big banks to process title to property in the U.S.  Approximately 60% of the nation’s residential mortgages are recorded in the name of MERS.  That’s right they own the paper, or ah someone inside MERS has all the documentation.  The fact of the matter is no one has the paper. These mortgages were sold and resold so many times in most cases that the now OWNER or mortgage holder has NO paper work at all. MERS is no exception.

So if MERS owns 60% of all mortgages, it must have thousands of employees and hundreds of offices across the country.  Well, not exactly.  In fact sit down for this one. MERS is a shell corporation with no employees, but thousands of officers.

As the treasurer and secretary of MERS admitted in a deposition:

Q Does MERS have any salaried employees?
A No.
Q Does MERS have any employees?
A Did they ever have any? I couldn’t hear you.
Q Does MERS have any employees currently?
A No.
Q In the last five years has MERS had any
A No.
Q To whom do the officers of MERS report?
A The Board of Directors.

Q How many assistant secretaries have you
appointed pursuant to the April 9, 1998 resolution; how
many assistant secretaries of MERS have you appointed?
A I don’t know that number.
Q Approximately?
A I wouldn’t even begin to be able to tell you right now.
Q Is it in the thousands?
A Yes.
Q Have you been doing this all around the
country in every state in the country?
A Yes.
Q And all these officers I understand are unpaid
officers of MERS
A Yes.
Q And there’s no live person who is an employee
of MERS that they report to, is that correct, who is an
A There are no employees of MERS.

In another deposition, a legal assistant at a law firm initiating 4000 to 7000 foreclosures per month in Florida held herself out as “vice president” and “assistant secretary” of MERS. She testified:

Q: The question was you have no job duties as an assistant secretary of MERS, correct?
A: I do not have any job duties other than signing the assignments and mortgage. Does that help?
Q: Yes. Here, I’ll try to rephrase this. Do you attend any board meetings at MERS?
A: No, sir.
Q: Do you attend any meetings at all at MERS?
A: No, sir.
Q: Do you report to the secretary of MERS?
A: No, sir.
Q: Who is the secretary of MERS?
A: I have no idea.
Q: Where are the MERS offices located?
A: I can’t remember.
Q: How many offices do they have?
A: I have no idea.
Q: Do you know where their headquarters are?
A: Nope.
Q: Have you ever been there?
A: No.
Q: How many employees do they have?
A: I have no idea.

She further testified that her signatures on “these assignments,” which from all indications were and are at least several thousand in number, were in no way attestations that the statements contained therein were accurate or truthful. She further testified that she was the person with the most knowledge about the subject assignment.

For example, she testified:

Q: It says, ‘but effective as of the 19th day of February, 2008.” Do you see that?
A: Yes.
Q: Where did you get that date from?
A: I did not pick that date. That date was put in by the processor that prepared the
Q: And who was that?
A: Off the top-of-my-head, I do not know who actually typed this assignment.
Q: Okay. But you are signing on behalf of MERS, and you are stating here that it is effective as of the 19th day of February, 2008, correct?
A: Correct.
Q: At the time you signed this, what reason did you have, as agent for MERS, to make it
effective as of the 19th day of February, 2008?
A: I did not pick that date. And I do not recall this document.
Q: Sitting here today, you have no idea why it is that it says, “effective as of the 19th day of February, 2008.” Is that correct?
A: Looking at this one particular piece of paper, I do not recall or know the answer to that question, no.
Q: Is there some general practice, of which you are aware, that would give us information as to why this particular date was inserted?
A: That information was determined by the people that review the file prior to me.
Q: And what would they base that on, as a general practice?
A: I do not know.
Q: You don’t know? Were, to your knowledge, any physical documents transferred on February 19, 2008?
A: I do not know.
Q: To your knowledge, does the 19th day of February, 2008 have any significance?
A: I do not know.
Q: Ma’am, if you signed this document on behalf of MERS, picking this date, this effective
date – –
A: I did not pick the effective date.
Q: But you ratified it by signing this; didn’t you?
Q: Didn’t you attest to the accuracy of that date by signing this document?
A: I would say, no.
Q: Did you attest to this document, as a whole, by signing it?
A: I do not think that in my capacity of signing these assignments, it was my position to attest. My role was to be given a document that had been reviewed by an attorney, had been reviewed by a title examiner, had instructions from the client, and I was to sign the assignment as secretary on behalf of MERS.
Q: Right. And when you signed it as secretary on behalf of MERS, were you approving and agreeing with the terms contained therein for MERS?
A: I believe I was approving and agreeing to the fact that the mortgage needed to be assigned from MERS to another entity.

In that light, Yves Smith’s report that “no one in the industry transferred the paper” makes perfect sense. But why was MERS created in the first place? MERS, the banks and the mainstream financial press all say that it was simply to save fees by digitizing mortgage electronic.

But as Ellen Brown notes, there is in reality a very different reason that the big banks created MERS: The rating agencies required that the conduit be “bankruptcy remote,” which meant it could hold title to nothing ….

Indeed, the secretary and treasurer of MERS admitted this in a deposition, stating:

As a requirement for mortgages that were securing loans or promissory notes that were sold to securitize trust, the rating agencies would only allow mortgages MERS — well let me step back. They required that a bankruptcy remote single purpose entity be created in order for transactions holding loans secured by MERS, by mortgages MERS served as mortgagee to be in those pools and receive a rating, an investment grade rating without any changes to the credit enhancement. They required that to be a bankruptcy remote single purpose subsidiary of MERS, of Merscorp.

And as a a forthcoming article in the Real Property, Trust and Estate Law Journal notes, saving fees was another motivation for the giant banks in running mortgages through MERS, but in a way which is shadier than routine cost-cutting efforts. In the mid-1990s mortgage bankers decided they did not want to pay recording fees for assigning mortgages anymore. This decision was driven by securitization—a process of pooling many mortgages into a trust and selling income from the trust to investors on Wall Street. Securitization, also sometimes called structured finance, usually required several successive mortgage assignments to different companies. To avoid paying county recording fees, mortgage bankers formed a plan to create one shell company that would pretend to own all the mortgages in the country—that way, the mortgage bankers would never have to record assignments since the same company would always “own” all the mortgages.

AP notes that banks hired hair stylists, Walmart floor workers and people who had worked on assembly lines as foreclosure “experts”. Some of these folks testified in deposition that they hardly knew what a mortgage or an “affidavit” is, and admitted that they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers’ accusations about document fraud. While I have not yet seen any evidence that the folks signing on behalf of MERS were of this caliber, nothing would surprise me at this point. MERS was and is, a large part of a laundering process.

So if you have been reading the newspaper or watching the little coverage of this in MSM and wondering why all these banks are halting their foreclosure procedures on their own initiative or why Attorney Generals in several states have stepped in and stopped or are threatening to halt these foreclosure efforts, now you know a little more and if you are like me I don’t like what I now know.

When you combine this information with articles circulating that banks are trading these toxic mortgages back and forth between themselves to also generate tax carry forward losses, well, my blood begins to rise in temperature a bit.  Sure smells a lot like fraud, tax evasion, and criminal activity that certainly should be controlled by the Rico Act.  We talk about financial reform legislation.  I think the Rico Act will do just fine. I think a few of these “big boys” modeling the latest fashion in broad stripped suits in front of a discerning crowd of hardened felons will do more to facilitate reform than all the hot air in Washington. It would also create an unemployment problem with lobbyists which isn’t a bad thing either.


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International business consultant, author, blogger, and student of life. After 35 years in business, trying to wake the world to a new reality. One of prosperity, abundance, and most importantly equal opportunity. it's time to redistribute wealth and power.

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