UNMASKING THE MASKED EXECUTIONER ON WALL STREET--MERS

By Nicholas M. Moccia
Law Offices of Robert E. Brown, P.C.

Throughout history, executioners have always worn masks.  In the American mortgage lending industry, Mortgage Electronic Registrations System, Inc., commonly known as “MERS”, has become the masked man wielding the home foreclosure axe.

Christopher L. Peterson, who is the Associate Dean of Academic Affairs and Professor of Law at the University of Utah, has unmasked the shadowy entity at the foreclosure chopping block—an entity conceived of and created by a tight-knit group of powerful mortgage industry insiders whose stated goal is to “capture every mortgage loan in the country.”  Any “Main Street” legal practitioner who so much as entertains the idea of doing foreclosure defense work should carefully peruse Mr. Peterson invaluable article on MERS entitled, “Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registrations System.”  The article can be downloaded for free at http://ssrn.com/abstract=1469749 .

This Article is the first academic piece that explores the legal and public policy foundations of the MERS system.  It explains how MERS works, why mortgage bankers created it, and what MERS has done to transform the underlying assumptions of state real property recording law.  Of particular value to the practitioner is the section which queries whether MERS actually has standing to bring foreclosure actions. 

MERS frequently attempts to bring home foreclosure proceedings in its own name rather than the name of the actual owner of the loan—its name is ubiquitous on legal captions nationwide.  In thousands upon thousands of cases MERS’ counsel continues to recite the statement “MERS holds legal title to the mortgage” as though it were, in Mr. Peterson’s words, “the finance equivalent of some tantric mantra.”  Yet, Mr. Peterson’s analysis exposes this claim as a simple falsehood--MERS is not a mortgagee simply because ink on paper makes this assertion.  In support of this claim, Mr. Peterson cites the following:  First,  MERS does not fund any loans; second, no homeowners promise to pay MERS any money and MERS is never entitled to receive any monthly payments; and third, and most importantly, MERS is never entitled to receive the proceeds of a foreclosure sale.

Mr. Peterson’s article is scholarly and well-cited.  It is a welcome companion to foreclosure defense practitioners and it would be a fitting, if not humorous, exhibit to every Motion to Dismiss for Lack of Standing against MERS.