Massachusetts Courts Split Hairs On Who May Seek Stay Relief
April 11th, 2008, 8:45 am
By L. Jed Berliner, Springfield Bankruptcy Attorney on Apr 10, 2008 in Massachusetts, Mortgages, Bankruptcy Practice and Procedure, General Bankruptcy Information
When a mortgage goes unpaid, a party can seek relief from bankruptcy’s automatic stay to foreclose. A mortgage can held by a lender, administered by a servicer, and owned by a nominee commonly called MERS (Mortgage Electronic Recording Service). All three have the right to go to bankruptcy court for relief from the stay. In re Huggins, 357 B.R. 180 (Bankr. D. Mass. 2006) (if MERS), Saffran v. Novastar Mortgage, Inc., 2007 U.S. Dist. LEXIS 96306, (if lender despite MERS as nominee). Servicers have standing under the servicing agreement, although there is no published Massachusetts decision on this.
Let’s make this more complex. Money moves faster than paper in Wall Street, because it moves electronically. If the original mortgage holder received money from another to sell the mortgage but did not sign an actual mortgage assignment, can the buyer seek relief from stay to foreclose? No. In re Maisel, 378 B.R. 19 (2007).
Kevin Lamson said,
June 19th, 2008, 1:54 pm
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC. A/K/A MERS IS PLAYING IT FAST AND LOOSE WITH THE TRUTH IN OUR COURTS!!!!
Mortgage Electronic Registration Systems Inc. “MERS” seems to be playing it fast and loose with the truth. While claiming to be the holder of notes in New York and South Carolina in order to feign standing to foreclose. MERS told the Nebraska Court of Appeals that: “it has never originated a loan, never serviced a loan, never held or owned a loan and that it never extends credit and that no debtors ever owe MERS any money”. Based upon these claims the Nebraska Court Appeals reversed a lower court’s finding that MERS was a mortgage banker under Nebraska law and must therefore be licensed as such. Mortgage Electronic Registration Systems Inc. v. Nebraska Dept. of Banking and Finance, 704 N.W. 2d. 784, 786, (2005)
Shortly after MERS told the Nebraska Court that it never held a note and was never owed any money. It tried to foreclose a mortgage in South Carolina by falsely claiming it held the note. Given MERS previous claims to the Nebraska Court, that it never held the note and was never owed any money, an astute South Carolina Judge took issue with MERS affidavit claim that it was the holder of the underlying note. In dismissing MERS foreclosure action the Court stated MERS claim that it was holding the note was: “Diametrically opposed to the way MERS operates, as described in the Nebraska case. As evidenced by the text of the Nebraska decision, MERS does not acquire notes or the debts thereby represented for or without consideration. It has neither the right nor the obligation to service the debts represented by the notes and/or secured by the mortgages. Furthermore, the principal/agent (nominee) relationship between its members and MERS is such that the “close-connectedness doctrine” would prevent MERS from qualifying as a holder in due course without notice, even if it did acquire some ownership interest in the debt”. Citing Midfirst Bank, SSB v. Haynes & C0., Inc. 893 F.Supp. 1304 (1994) *1318 – 1319 (D.S.C. 1994).
Apparently the New York Court were not aware of the fact that MERS is never the holder of a note. This is probably because some lawyer simply pulled the wool over the Court’s eyes. Just to feign standing. My what tangled web MERS has woven around the country.
It appears that some well meaning or politically motivated judges are completely ignoring the fact that MERS is not a lender, is not a creditor, never hold any promissory notes evidencing a debt and is never owed any money by anyone. Therefore MERS has NO legal standing to collect a debt through foreclosure or any other means. It has just gotten away with doing so for the past few years because our Court’s have not followed the long standing law of commerce that where a debt is evidenced by a negotiable instrument only the holder of the promissory note may collect the debt evidenced by the note. The inventors of the MERS “paperless” system did not take this into consideration when they invented the so-called MERS system. Now attorneys for “members” from around the country are scurrying around trying to establish standing by filing false affidavits making up inconsistent stories regarding who holds or lost the note in an attempt to feign standing so MERS can collect on a debt evidenced by a negotiable instrument that is held by another unnamed entity or trust.
Mortgage Electronic Registration Systems Inc. “MERS” seems to be playing it fast and loose with the truth. While claiming to be the holder of notes in New York and South Carolina Court’s in order to feign standing to foreclose. MERS told the Nebraska Court of Appeals that: “it has never originated a loan, never serviced a loan, never held or owned a loan and that it never extends credit and that no debtors ever owe MERS any money”. Based upon these claims the Nebraska Court Appeals reversed a lower court’s finding that MERS was a mortgage banker under Nebraska law and MERS did not have to be licensed as such. Mortgage Electronic Registration Systems Inc. v. Nebraska Dept. of Banking and Finance, 704 N.W. 2d. 784, 786, (2005)
Shortly after MERS told the Nebraska Court that it never held a note and was never owed any money. It tried to foreclose a mortgage in South Carolina by falsely claiming through an affidavit that it held the note. Given MERS previous claims to the Nebraska Court, that it never held the notes and was never owed any money, an astute South Carolina Judge took issue with MERS affidavit claim that it was the holder of the underlying note. In dismissing MERS foreclosure action the Court stated MERS claim that it was holding the note was: “Diametrically opposed to the way MERS operates, as described in the Nebraska case. As evidenced by the text of the Nebraska decision, MERS does not acquire notes or the debts thereby represented for or without consideration. It has neither the right nor the obligation to service the debts represented by the notes and/or secured by the mortgages. Furthermore, the principal/agent (nominee) relationship between its members and MERS is such that the “close-connectedness doctrine” would prevent MERS from qualifying as a holder in due course without notice, even if it did acquire some ownership interest in the debt”. Citing Midfirst Bank, SSB v. Haynes & C0., Inc. 893 F.Supp. 1304 (1994) *1318 – 1319 (D.S.C. 1994).
In April, Suffolk N.Y. Supreme Court Justice Denise F. Molia in MERS, Inc. v. Guggenheim, 1997/06, threw out a foreclosure action after finding there was insufficient evidence to demonstrate that MERS was the owner of the note and mortgage by reason of assignment or otherwise.’ The court granted summary judgment to the defendants on the grounds that MERS ‘was not a proper party to bring this action. Daniel S. Komansky, a Huntington attorney who represented the defendants in the case, said that in order to have proper standing to proceed in court as a plaintiff, MERS would need to have a stake in the promissory note. The lending institutions [in this case, Decision One Mortgage Company] are the true owners of the notes and mortgages, and it is these entities that have to bring foreclosure actions. A similar conclusion was reached in other recent cases by Suffolk Justices Paul J. Baisley Jr. (MERS Inc. v. Bassett, 15338/05), Thomas F. Whelan (MERS Inc. v. Acosta, 25985/05), and Edward D. Burke (MERS Inc. v. Ramdoolar, 019863/05). Under CPLR regulations, there are certain proofs that must be provided, that the plaintiff is owner of the note through assignment from the bank to the plaintiff.
5/30/2006 NYLJ 20, (col. 2) Page 2
5/30/2006 N.Y.L.J. 20, (col. 2)
One New York attorney who represents lenders is quoted as saying: “Typically, my clients still use MERS when the loan is being paid off correctly”, said Ted Eric May of Rockville Centre’s Sheldon May & Associates. “But once it defaults, they immediately go through another lender/servicer. If they’re foreclosing, they’d rather present the whole chain of title than go through MERS and risk losing. As a result, I personally advise clients against using the system.” Another New York attorney, Jordan S. Katz of Garden City, who represented MERS in several of the Suffolk County MERS foreclosures, said MERS has no plans to appeal the decisions. He said the positions being taken by some state judges with respect to MERS mortgages “is requiring mortgage lenders, servicers and their attorneys to rethink their strategies in that regard”.
MERS clearly is never the holder of the negotiable instrument and therefore under long standing uniform commercial laws MERS has absolutely notlegal right or standing to collect a debt owed to someone else that is the holder of the promissory note. And anyone who says otherwise is obviously on MERS or on of its “members” payroll.
If you have questions or comments please feel free to contact me at: kev_o_shanter@yahoo.com
Darrel said,
September 10th, 2009, 10:10 pm
In my Default Notice I have a Fair Debt Collection Practices Act Notice that states:
Name of Creditor to whom Debt is Owed: Mortgage Electronic Registration System, Inc.
Is this even legal under our (CA) or Federal laws?