This is a case of warning MERS to be mindful of the story it tells, because it’s going to have to stick to it.
There’s a new white paper on MERS that analyzes the ramifications of a MERS bankruptcy.
ALL IN ONE BASKET: THE BANKRUPTCY RISK OF A NATIONAL AGENT-BASED
MORTGAGE RECORDING SYSTEM
John Patrick Hunt,* Richard Stanton,† and Nancy Wallace‡
See, MERS keeps arguing inconsistently, as it suits its particular posture in cases it is litigating. It’s a nominee, no an actual beneficiary of the deed of trust, but it doesn’t hold the note, and it doesn’t accept payment, it’s a place holder, it’s an agent, ad nauseum…….
The authors argue that if MERS gets its wish, and it has some constitutional property interest in the multitudes of mortgages that it claims, these claims increase the risk that if MERS enters bankruptcy, the mortgages to which it holds legal title will enter the MERS bankruptcy estate. Can you imagine?
Here, the authors compiled law review articles criticizing MERS:
See, e.g., Christopher L. Peterson, Two Faces: Demystifying the Mortgage Electronic Registration
System’s Land Title Theory, 53 WM. & MARY L. REV. 111, 120, 161 (2011) (downloaded 6,412 times on SSRN as
of Jan. 2, 2012) [hereinafter Two Faces] (arguing that MERS maintains an “incoheren[t]” legal position that is
“exacerbated by a corporate structure that is so unorthodox as to be considered arguably fraudulent” and comparing
MERS, Inc. and the members of MERS to mythological figures such as Icarus who committed the “vital sin” of
“hubris”); Christopher L. Peterson, Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic
Registration System, 78 U. CIN. L. REV. 1359, 1407 (2010) (downloaded 4,290 times on SSRN as of Jan. 2, 2012)
[hereinafter Foreclosure and MERS] (summing up its conclusions about MERS as follows: “the judiciary has an
obligation to aggressively reexamine our financiers’ cut corners, false assumptions, and jaundiced legal theory”);
Nolan Robinson, The Case Against Allowing Mortgage Electronic Registration Systems, Inc. (MERS) to Initiate
Foreclosure Proceedings, 32 CARDOZO L. REV. 1621, 1653-54 (2011) (“While the MERS system may be a
‘commercially effective means of business,’ it runs afoul of established foreclosure law, and courts should rule
accordingly.”); David P. Weber, The Magic of the Mortgage Electronic Registration System: It Is and It Isn’t, 85
AM. BANKR. L.J. 230, 231 (2011) (arguing that use of MERS results in lack of transparency, insulation from
damages of mortgage originators who may have engaged in fraud, and propagation of “a false dichotomy where
MERS … can claim to be the mortgagee when that status is to its benefit, while simultaneously disclaiming that role
when it sees fit”); Tanya Marsh, Foreclosures and the Failure of the American Land Title System, 111 COLUM. L.
REV. SIDEBAR 19, 24 (2011) (“The residential foreclosure crisis has brought MERS’s flaws into clearer view. The
inherent opaqueness of MERS has apparently hidden from public view some rather shoddy recordkeeping practices
on the part of the lenders.”); Dustin Zacks, Standing in Our Own Sunshine: Reconsidering Standing, Transparency,
and Accuracy in Foreclosures, 29 QUINNIPIAC L. REV. 551, 552 (2011) (“MERS’s arguments to courts are so
numerous and contradictory as to make pinning down one core theory of standing impossible”).