How can MERS sue for legal relief when there is no injury, no financial harm?
The run rate for foreclosures has reached a million per year. That represents a great deal of harm to homeowners and their families. MERS caused this harm by its foreclosure actions, yet it never suffered any losses, the "injury" that Patterson references. MERS lacked the standing to initiate foreclosure actions and it lacked the right to allow lenders and servicers act in its name when they initiated foreclosures, as Peterson demonstrates.
C. MERS's Foreclosure Efforts Implicate the Federal Fair Debt Collection Practices Act
When MERS files bankruptcy claims or allows others to do so in its name, it participates in collecting the debt for the delinquent loan. It is a debt collector, plain and simple. As a result, it is subject to the Fair Debt Collection Practices Act (FDCPA). Why? As Peterson notes, "because MERS remits all proceeds of its collection activities to the actual owner of the loan (usually a securitization trustee), MERS is collecting a debt that is owed to another business entity" (p. 1386).
How does MERS, as debt collector, violate the FDCPA? Patterson makes these clear arguments:
"" the statute forbids harassment, false or misleading representations, and a variety of other unfair collection tactics, including threatening foreclosure when not legally entitled to do so.The statute also includes disclosure provisions, such as a requirement that debt collectors give consumers written validation and verification of the debt itself, as well as the identity of the creditor to prevent collection of debts or fees not actually owed" (p. 1386).
Since MERS is not the creditor, it has no right to represent itself as so. As such, it had no right to seek foreclosure. In doing so, MERS engaged in "unfair collection tactics." MERS failed to identify the true creditor for the mortgage. In doing so, it failed to meet disclosure provisions of the FDCPA and is subject to available penalties.
MERS initiates the collection of debts that is has no right to collect. This sounds like the definition of "constructive fraud: when the circumstances show that someone's actions give him/her an unfair advantage over another by unfair means (lying or not telling a buyer about defects in a product, for example)" Law.Com. MERS knew the defects in its mortgage agreements and system. It follows that the collections actions had no basis as well. The organization and its backers never thought anyone would ask.
D. Loans Recorded in MERS's Name May Lack Priority Against Subsequent Purchasers for Value and Bankruptcy Trustees
"Under state law, if a mortgagee fails to properly record its mortgage, and then someone subsequently buys or lends against the home, the subsequent purchaser can often take priority over the first" (p. 1394).
MERS ignored the well-established legal processes that give priority to properly recorded mortgages. Peterson explains this at some length citing the original mortgage recording statute laying out the consistent requirements found across the nation today:
"" the very first American recording statute, adopted by Massachusetts Bay Colony in 1640, required recording the names of the parties-including both the names of the grauntor and grauntee""
This standard is virtually unchanged in the vast majority of state code. This legal standard, "does not contemplate nor allow obscuring actual ownership through naming only a mortgagee of record in nominee capacity" (p. 1396).
Since MERS ignored state law in recording mortgages, the claims to the property can be usurped by others with properly recorded documents. This throws into question any value that the purchasers of MBS have to recover their investments.
Absolute Requirements for any Settlement with the Lending Industry and Big Banks