Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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Karl
One thing I have tried to understand but failed, is how the mortgage document I signed could create an agency relationship between the Lender and MERS.

Looking up the creation of a principal/agency relationship through a Power of Attorney, it seems that both principal and agent need to sign the contract.

How is it that MERS can claim that through the borrowers sole signature on the mortgage document they get the powers granted in the mortgage documents.

I have read court cases where they state this claim, but there is never a reference to a statute or law that explains the legal foundation for that claim.

Can a “third party”, the borrower, really set up an agency relationship for two other entities?

Any explanation of the legal framework of this would be really be appreciated, and if there is a reference to a court case that has dealt with the issue would be even better.
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?
Would not the signing of a mortgage by the homeowner be agreeing to an 3rd agency relationship between the originating lender and MERS?

The one question to ponder, does your mortgage contain an avenue for fraud at inception?
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Cabinetmaniac
Karl wrote:
One thing I have tried to understand but failed, is how the mortgage document I signed could create an agency relationship between the Lender and MERS.

Looking up the creation of a principal/agency relationship through a Power of Attorney, it seems that both principal and agent need to sign the contract.

How is it that MERS can claim that through the borrowers sole signature on the mortgage document they get the powers granted in the mortgage documents.

I have read court cases where they state this claim, but there is never a reference to a statute or law that explains the legal foundation for that claim.

Can a “third party”, the borrower, really set up an agency relationship for two other entities?

Any explanation of the legal framework of this would be really be appreciated, and if there is a reference to a court case that has dealt with the issue would be even better.


Great question!

A third party cannot create an agency relationship.

In Agard MERS argues that the express terms of the mortgage coupled with the provisions of the MERS membership agreement, is "more than sufficient to create an agency relationship between MERS and lender and the lender's successors in interest" under New York law and as a result establish MERS's authority to assign the Mortgage.

The court found: "this Court finds that MERS's "nominee" status and the rights bestowed upon MERS within the Mortgage itself, are insufficient to empower MERS to effectuate a valid assignment of mortgage. "

http://scholar.google.com/scholar_case?case=8153177940312132244&q=In+re+Agard+444+BR+231+-+Bankr.+Court,+ED+New+York,+2011+&hl=en&as_sdt=2,10

By signing the mortgage you have agreed to MERS' agency relationship, if in fact they can prove one exists. It is often the case that they cannot prove it.

Further reading:

RESTATEMENT (THIRD) OF AGENCY

http://users.wfu.edu/palmitar/ICBCorporations-Companion/AdditionalReadings/Restatement%28third%29Agency.pdf



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Cabinetmaniac
? wrote:
Would not the signing of a mortgage by the homeowner be agreeing to an 3rd agency relationship between the originating lender and MERS?


It would be agreeing to one but it would not create one.

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Karl
Thank you Cabinetmaniac for getting me to look in that direction.
Looking into agency relations led me to this:

NOMINEE TRUST
You may find real estate titled in a "nominee trust." The document will provide that the "trustees" will hold bare legal title to the property, and will do nothing except what they are directed to do by the beneficiaries. The beneficiaries are not set forth in the instrument, but are shown on a Certificate of Beneficial Interests, which is not recorded. The nominee trust is not a trust - it is an agency arrangement in which the "trustees" are agents for undisclosed principals.
A true trust is an arrangement under which a "grantor" or "donor" transfers property to a trustee to use for the benefit of one or more beneficiaries. The trustee holds legal title to the property, and the equitable or beneficial title is held by the beneficiaries. The trust instrument, not the beneficiaries, tells the trustee what to do.
The nominee trust was used to conceal the identity of the true owner (such as when someone was assembling parcels of land for a shopping center and did not want this to be known), when the owner of property wanted to transfer it to beneficiaries in separate gifts (for example, $13,000 of the value of a property each year, by simply changing the Certificate of Beneficial Interests), or when the real ownership was in an estate planning trust which the owner wanted to keep private.
The trustees do not file income tax returns - the activities of the trust are shown on the tax returns of the beneficiaries. If the trustees undertake any action on their own, even opening a bank account, except as directed by the beneficiaries, they may convert the nominee trust into a corporation for tax purposes, with horrendous tax consequences to record a simple statement of certain trust provisions, which is sufficient to complete the chain of title. We tax lawyers bid farewell to the nominee trust, which has given us heartburn for years.


Do you think the Nominee Trust is the blueprint for the MOM mortgage language?
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Karl wrote:
Thank you Cabinetmaniac for getting me to look in that direction.
Looking into agency relations led me to this:

Do you think the Nominee Trust is the blueprint for the MOM mortgage language?


The nominee trust is a method of managing the sale of pools of mortgages.

The mortgage banking industry realized in the '90s that if they were to sell pools of mortgages and their derivatives that they would need a different system than the old method of recording real estate assignments with the county in which the property was located.

They created MERS as a central registry to facilitate that end. The MERS mortgage is recorded once with the county. Subsequent trades and assignments are then recorded only on the MERS system. This facilitated multiple transactions without the hassle of actually recording assignments. The system was meant to be faster and more cost effective.

In order for the MERS scheme to work they had to figure out a way to grant MERS sufficient power to act on behalf of member lenders, so they created the Fannie Mae/Freddie Mac Uniform Mortgage Instrument and other similar instruments that name MERS as either Nominee/Beneficiary/Mortgagee or a combination thereof. The banks didn't seem to care that their scheme did not comply with statutory requirements in most jurisdictions. In fact they claimed their system was legal and sufficient nationwide.

The courts originally would often rule in favor of MERS. The glut of foreclosures, which resulted from the collapse of the housing bubble and economy, has forced the courts to rethink that predilection. While some courts are still siding with MERS there are many courts that have ruled against them.

Courts have called into question MERS' standing and found it wanting. In many cases this is because MERS never held or owned the note or mortgage. In other cases MERS has not proven a sufficient agency relationship with the lender to act beyond its original purpose of mortgage registry. It has been ruled that MERS is not beneficiary. It has been ruled they are not mortgagee. It has been found that as nominee MERS has very limited power. It has been found that the mortgage and MERS membership agreement together are insufficient to prove an agency relationship.

MERS has been successful in keeping most of these cases from appellate courts. The sheer volume of cases has allowed a few to slip through though to our benefit.

As I stated before a third party cannot create an agency relationship. By signing a mortgage that states that MERS is nominee, beneficiary, or mortgagee the mortgager cannot grant an agency relationship for the lender. The lender is not signatory to the mortgage. MERS must look outside the mortgage to prove they are an agent. The MERS membership agreement did not create an agency relationship either.

Barring a separate agency contract with the lender (I have never heard of any) it is starting to look as though the courts going forward will be finding more and more that MERS is simply a registry and has no legal power beyond that.

Angelo's post about Judge Shack is informative in regard to agency: http://ssgoldstar.websitetoolbox.com/post/Yet-another-Schack-Decision-in-NY.....Possible-quotrobosignerquot-6105927


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