July 3, 2014
The United States District Court for the Eastern District of Pennsylvania has issued a 45 page opinion in the matter of Montgomery County, Pennsylvania Recorder of Deeds v. MERSCORP and MERS, Case No. 2:11-cv-06968-JCJ. The opinion was just filed July 1, 2014.
The opinion traces the history of promissory notes and mortgage instruments in Pennsylvania and the statutory recording requirements incident to such transfers. Five questions were presented on cross-motions for summary judgment. MERS’ Motion for summary judgment was denied in its entirety, while the Plaintiff Recorder of Deeds’ Motion for summary judgment was granted in part.
The Court noted, on page 28 of the opinion, that “the most challenging issue” in the case was whether the MERS Defendants have been the transferor or transferee of unrecorded secured debt and if not, whether they are the proper parties who are subject to the mandates contained in the (Pennsylvania) recording statutes.
The Court noted that the MERS Defendants had repeatedly taken the position that MERS did not and does not negotiate or transfer promissory notes secured by mortgages. The Court then noted MERS’ inconsistent statement that “It is MERS that serves as the mortgagee of record in the public land records as the “nominee” for a lender (noteholder) and its successors and assigns.” The Court found that in contradiction to its own argument, MERS initially admits that it is in fact involved with the transfer of the note by virtue of its service as the mortgagee of record as the nominee for a lender/noteholder, and that when required to facilitate a foreclosure, MERS itself can become a note-holder.
We also know that MERS assignments almost always have the phrase that the mortgage or DOT is assigned “together with the note or other evidence of indebtedness”, which is also contradictory to the position taken by MERS that it does not negotiate or transfer mortgage-related notes.
MERS filed the Declaration of William C. Hultman, who has testified in numerous MERS-related cases. The Court found, in citing to specific deposition testimony of Hultman, that MERS is both named as the mortgagee and acts as agent for the lenders, including both the original lender and any downline claimed holders of the note. The Court found that MERS is “clearly” involved with the transfer of the note and mortgage. The Court also found that MERS is an agent of the lenders.
The Court ultimately concluded that the MERS Defendants are those who may be liable for and subject to the mandates of the Pennsylvania Recording Statutes, and also found that because over the years that the number of documents recorded by MERS has steadily increased that this has caused a decrease in the amount of recording fees collected by the County Recorders of Deeds, resulting in financial injury to Community Legal Services, the Legal Aid Network, and the Housing Alliance, all of which receive much of their funding from the collection of recording fees.
The Recorder also retained two expert witnesses, one of whom found that there were missing assignments that should have been recorded, that the MERS Milestones data was incomplete AND IN CONTRADICTION TO SECURITIZATION DEAL DOCUMENTS, and that title to the property had been corrupted by MERS’ failure to record a complete chain of title.
The second expert stated in his Declaration that licensed title agents have no access to information in MERS bar codes, which means that title searchers and consumers are denied the ability to ascertain who currently owns the note secured by a MERS mortgage and that neither the borrower nor the courts can ascertain the chain of events OR EVEN THE VALIDITY OF A TRANSACTION. The result is an “erosion of Pennsylvania’s land records and THE INABILITY TO EVALUATE THE MARKETABILITY OF TITLE AND CREDIT WORTHINESS OF THE CONSUMER. (note: we have capitalized the words above for emphasis).
The Court also noted the Recorder’s testimony that over the past several years, a number of residents who were facing foreclosure didn’t know who owned their mortgage or to whom they should be making their mortgage payments, and the Recorder attributed this to the fact that MERS is not recording all of the note assignments with the results of both a loss of revenue and land title records being incomplete.
The Plaintiff’s testimony showed that as a result of a forensic audit that a MERS-affiliated mortgage was transferred on average between 4 and 12 times, resulting in a loss to the county of $15.7 million in unpaid recording fees. The Court highlighted the testimony of MERS representative R. K. Arnold in a case in Alabama and held that the testimony was tantamount to an admission that by maintaining the recording system in Pennsylvania that the county recorders confer a benefit on MERS which MERS appreciates but does not pay for.
The Court granted the Recorder’s Motion for Summary Judgment on the claim for Declaratory Judgment, and held that the assignment or transfer of a promissory note secured by a mortgage on real estate is equivalent to a mortgage assignment, and that the MERS’ Defendants’ failure to create and record documents evincing these transfers violates Pennsylvania statutory law, thus determining that MERS was liable for damages and that the amount of damages will be taken up at trial.
This is a “Milestone” opinion. MERS’ inconsistent positions, myths, and fallacies have finally been debunked by a Federal court, and MERS’ liability for damages has been proven as well by a Federal Declaratory Judgment. Our congratulations to counsel for the Recorder who filed and continues to pursue this case, and to the Pennsylvania Federal court for this landmark decision which will hopefully start to “tear down the MERS wall.”
Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com