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Landmark National Bank v. Kesler
What was found in this case is basically that MERS is a straw man. You know, like a shady phony buyer who buys a home and never really intends to take possession of the home? The way the mortgage is split up essentially muddles the entire process but also provides “an opaque veil that clouds not only the actual real ownership of the promissory note, but title to the property.” In other words, MERS does the exact opposite of what it claims it set out to do. In regards to the straw man argument this is what the case found:
“The relationship that MERS has to (to holder of a loan) 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.”
Interestingly enough the Missouri court found that MERS was not the original holder of the promissory note and since the record never contained evidence that the original note holder never explicitly authorized MERS to transfer the note, the overall language was in essence not effective. This is a big case because it goes to the heart of how MERS plays a crucial role in splitting a promissory note and basically creates immediate flaws in title. In other words, to grease the market and blow up the MBS market these people failed to even adhere to their own tracking of a mortgage! This system is like trying to track a laundered note through the economy after one year. Who really owns the actual note or holds title to foreclose?
In the case in Kansas, the court finds that MERS has very little claim on the note:
“”What stake in the outcome of an independent action for foreclosure could MERS have? It did not lend the money to Kesler or to anyone else involved in this case. Neither Kesler nor anyone else involved in the case was required by statute or contract to pay money to MERS on the mortgage. [citation omitted](”MERS is not an economic ‘beneficiary’ under the Deed of Trust. It is owed and will collect no money from Debtors under the Note, nor will it realize the value of the Property through foreclosure of the Deed of Trust in the event the Note is not paid.”). If MERS is only the mortgagee, without ownership of the mortgage instrument, it does not have an enforceable right.”
This wouldn’t be such a big problem aside from the fact that MERS has its dirty hands on some 60 million mortgages (assuming processed). Matt Taibbi talked about this case:
“This is a potentially gigantic story. It seems that a court has ruled that about half of the mortgage market has been run as a criminal enterprise for years, which would invalidate any potential forelosure proceedings for about, oh, 60 million mortgages. The court ruled that the electronic transfer system used by the private company MERS — a clearing system for mortgages, similar to a depository, that is used for about half the mortgage market — is fundamentally unreliable, and any mortgage sold and/or transferred through MERS can’t be foreclosed upon, at least not in Kansas.”
So this is one big mess as you can imagine and Pandora’s Box may have been open.