It would be the nature of basic contract law, and the structure in this contract nullify the banks ability to foreclose.
Actually, as I understand and interpret it, since the banks no longer hold the mortgage note (paid in full when it was securitized), they have sold off their interest in the mortgage contract.
That wouldn't be such a problem since all that needs to be done is find the CURRENT holder of the mortgage note and name them as the plaintiff in the foreclosure proceeding.
But because 60 million of these mortgages are on the MERS system and the note holder is shielded behind that database, the current note holder has to be found and named as the plaintiff.
That's why it was so important when the Kansas Supreme Court ruled that MERS had no standing as a plaintiff because it was not a party to the mortgage contract.
In its opinion below, the Court of Appeals cited Thompson v. Meyers, 211 Kan. 26, 30, 505 P.2d 680 (1973), which provides the only discussion in Kansas of the legal significance of a nominee:
"In common parlance the word 'nominee' has more than one meaning. Much depends on the frame of reference in which it is used. In Webster's Third New International Dictionary, unabridged, one of the definitions given is 'a person named as the recipient in an annuity or grant.' We view a 'nominee', as the term was used by the parties here, not simply in the sense of a straw man or limited agent. . . , but in the larger sense of a person designated by them to purchase the real estate, who would possess all the rights given a buyer . . . ."
The legal status of a nominee, then, depends on the context of the relationship of the nominee to its principal. Various courts have interpreted the relationship of MERS and the lender as an agency relationship. See In re Sheridan, ___ B.R. ___, 2009 WL 631355, at *4 (Bankr. D. Idaho March 12, 2009) (MERS "acts not on its own account. Its capacity is representative."); Mortgage Elec. Registration System, Inc. v. Southwest, ___ Ark. ___, ___, ___ S.W.3d ___, 2009 WL 723182 (March 19, 2009) ("MERS, by the terms of the deed of trust, and its own stated purposes, was the lender's agent"); LaSalle Bank Nat. Ass'n v. Lamy, 2006 WL 2251721, at *2 (N.Y. Sup. 2006) (unpublished opinion) ("A nominee of the owner of a note and mortgage may not effectively assign the note and mortgage to another for want of an ownership interest in said note and mortgage by the nominee.")
The relationship that MERS has to Sovereign is more akin to that of a straw man than to a party possessing all the rights given a buyer. A mortgagee and a lender have intertwined rights that defy a clear separation of interests, especially when such a purported separation relies on ambiguous contractual language. The law generally understands that a mortgagee is not distinct from a lender: a mortgagee is "[o]ne to whom property is mortgaged: the mortgage creditor, or lender." Black's Law Dictionary 1034 (8th ed. 2004). By statute, assignment of the mortgage carries with it the assignment of the debt. K.S.A. 58-2323. Although MERS asserts that, under some situations, the mortgage document purports to give it the same rights as the lender, the document consistently refers only to rights of the lender, including rights to receive notice of litigation, to collect payments, and to enforce the debt obligation. The document consistently limits MERS to acting "solely" as the nominee of the lender.
Indeed, in the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable.
"The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. [Citation omitted.] Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. [Citation omitted.] The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust." Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo. App. 2009).
kscourts.org
So without MERS having a right to the debt, what standing do they have in any foreclosure? They may have the mortgage held in their name for purposes of tracking, but they don't own the debt. So they can't be a party to the foreclosure without being formally assigned the role as agent by the current holder of the debt. But they only loosely defined as "nominee" and not the debtholder's agent.
That's a major legal sticking point. The KSA stated you cannot separate assignment of the mortgage from the debt and that's EXACTLY what MERS has done.
Furthermore, by calling MERS a "straw man" for debt holders of those 60 million mortgages, they've sent a very clearly worded perspective that I doubt the SCOTUS will dare to overrule. After all, the SCOTUS refers to the same dictionaries that the KSA uses.
Hawk |
