This page has been archived and commenting is disabled.
KABOOM | NY Appellate Division | Bank of NY v Silverberg - MERS Does NOT Have The Right to Foreclose on a Mortgage in Default or Assign That Right to Anyone Else
Appeals Court Clarifies MERS Role in Foreclosures
The
ubiquitous Mortgage Electronic Registration Systems, nominal holder of
millions of mortgages, does not have the right to foreclose on a
mortgage in default or assign that right to anyone else if it does not
hold the underlying promissory note, the Appellate Division, Second
Department, ruled Friday. "This Court is mindful of the impact that this
decision may have on the mortgage industry in New York, and perhaps the
nation," Justice John M. Leventhal wrote for a unanimous panel in Bank of New York v. Silverberg,
17464/08. "Nonetheless, the law must not yield to expediency and the
convenience of lending institutions. Proper procedures must be followed
to ensure the reliability of the chain of ownership, to secure the
dependable transfer of property, and to assure the enforcement of the
rules that govern real property." The opinion noted that MERS is
involved in about 60 percent of the mortgages originated in the United
States.
From the ruling...
(Emphasis added by 4F)
Decided on June 7, 2011
SUPREME COURT OF THE STATE OF NEW YORK
APPELLATE DIVISION : SECOND JUDICIAL DEPARTMENT
ANITA R. FLORIO, J.P.
THOMAS A. DICKERSON
JOHN M. LEVENTHAL
ARIEL E. BELEN, JJ.
2010-00131
(Index No. 17464-08)
[*1]Bank of New York, etc., respondent,
v
Stephen Silverberg, et al., appellants, et al., defendants.
LEVENTHAL, J.This matter involves the enforcement of the rules that govern real property and whether such rules should be bent to accommodate a system that has taken on a life of its own.
The issue presented on this appeal is whether a party has standing to
commence a foreclosure action when that party's assignor—in this case,
Mortgage Electronic Registration Systems, Inc. (hereinafter MERS) —was
listed in the underlying mortgage instruments as a nominee and mortgagee
for the purpose of recording, but was never the actual holder or
assignee of the underlying notes. We answer this question in the
negative.
...
On appeal, the defendants argue that the
plaintiff lacks standing to sue because it did not own the notes and
mortgages at the time it commenced the foreclosure action. Specifically,
the defendants contend that neither MERS nor Countrywide ever
transferred or endorsed the notes described in the consolidation
agreement to the plaintiff, as required by the Uniform Commercial Code.
Moreover, the defendants assert that the mortgages were never properly
assigned to the plaintiff because MERS, as nominee for Countrywide, did
not have the authority to effectuate an assignment of the mortgages. The
defendants further assert that the mortgages and notes were bifurcated,
rendering the mortgages unenforceable and foreclosure impossible, and
that because of such bifurcation, MERS never had an assignable interest
in the notes. The defendants also contend [*3]that the Supreme Court
erred in considering the corrected assignment of mortgage because it was not authenticated by someone with personal knowledge of how and when it was created, and was improperly submitted in opposition to the motion.
...
Here,
the consolidation agreement purported to merge the two prior notes and
mortgages into one loan obligation. Countrywide, as noted above, was not
a party to the consolidation agreement. " Either a written assignment
of the underlying note or the physical delivery of the note prior to the
commencement of the foreclosure action is sufficient to transfer the
obligation, and the mortgage passes with the debt as an inseparable
incident'"
...
Therefore, assuming that the
consolidation agreement transformed MERS into a mortgagee for the
purpose of recording—even though it never loaned any money, never had a
right to receive payment of the loan, and never had a right to foreclose
on the property upon a default in payment—the consolidation agreement
did not give MERS title to the note, nor does the record show that the
note was physically delivered to MERS. Indeed, the consolidation
agreement defines "Note Holder," rather than the mortgagee, as the
"Lender or anyone who succeeds to Lender's right under the Agreement and
who is entitled to receive the payments under the Agreement." Hence,
the plaintiff, which merely stepped into the shoes of MERS, its
assignor, and gained only that to which its assignor was entitled
(see Matter of International Ribbon Mills [Arjan Ribbons], 36 NY2d 121,
126; see also UCC 3-201 ["(t)ransfer of an instrument vests in the
transferee such rights as the transferor has therein"]), did not acquire the power to foreclose by way of the corrected assignment.
...
In sum, because MERS
was never the lawful holder or assignee of the notes described and
identified in the consolidation agreement, the corrected assignment of
mortgage is a nullity, and MERS was without authority to assign the
power to foreclose to the plaintiff. Consequently, the
plaintiff failed to show that it had standing to foreclose. MERS
purportedly holds approximately 60 million mortgage loans (see Michael
Powell & Gretchen Morgenson, MERS? It May Have Swallowed Your Loan,
New York Times, March 5, 2011), and is involved in the origination of
approximately 60% of all mortgage loans in the United States (see
Peterson at 1362; Kate Berry, Foreclosures Turn Up Heat on MERS, Am.
[*6]Banker, July 10, 2007, at 1). This Court is mindful of
the impact that this decision may have on the mortgage industry in New
York, and perhaps the nation. Nonetheless, the law must not yield to
expediency and the convenience of lending institutions. Proper
procedures must be followed to ensure the reliability of the chain of
ownership, to secure the dependable transfer of property, and to assure
the enforcement of the rules that govern real property.
Accordingly, the Supreme Court should have granted the defendants'
motion pursuant to CPLR 3211(a) (3) to dismiss the complaint insofar as
asserted against them for lack of standing. Thus, the order is reversed,
on the law, and the motion of the defendants Stephen Silverberg and
Fredrica Silverberg pursuant to CPLR 3211(a)(3) to dismiss the complaint
insofar as asserted against them for lack of standing is granted.
FLORIO, J.P., DICKERSON, and BELEN, JJ., concur.
ORDERED
that the order is reversed, on the law, with costs, and the motion of
the defendants Stephen Silverberg and Fredrica Silverberg pursuant to
CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against
them for lack of standing is granted.
Full opinion below...
It is well worth the read...
www.4closureFraud.org
»
- advertisements -
"I guess you need to know what you are talking about before you comment."
In sum, because MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the corrected assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to the plaintiff. Consequently, the plaintiff failed to show that it had standing to foreclose. MERS purportedly holds approximately 60 million mortgage loans (see Michael Powell & Gretchen Morgenson, MERS? It May Have Swallowed Your Loan, New York Times, March 5, 2011), and is involved in the origination of approximately 60% of all mortgage loans in the United States (see Peterson at 1362; Kate Berry, Foreclosures Turn Up Heat on MERS, Am. [*6]Banker, July 10, 2007, at 1). This Court is mindful of the impact that this decision may have on the mortgage industry in New York, and perhaps the nation. Nonetheless, the law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership, to secure the dependable transfer of property, and to assure the enforcement of the rules that govern real property. Accordingly, the Supreme Court should have granted the defendants' motion pursuant to CPLR 3211(a) (3) to dismiss the complaint insofar as asserted against them for lack of standing. Thus, the order is reversed, on the law, and the motion of the defendants Stephen Silverberg and Fredrica Silverberg pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against them for lack of standing is granted.
FLORIO, J.P., DICKERSON, and BELEN, JJ., concur.
ORDERED that the order is reversed, on the law, with costs, and the motion of the defendants Stephen Silverberg and Fredrica Silverberg pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against them for lack of standing is granted.
So your argument style is to reiterate the original position you are responding to and THEN put forward your opinions as facts and then accuse the other person of being the bad guy? How very Democratic of you ...
"Idiots that follow your advice ..." HMMMMmmmmm, what advice did I give on this topic are you criticizing? Please cite MY bad advice.
You state directly below, "Now, I sit on an advisory board of a regional bank."
Really? Then disclose the name of the bank. You have a vested interest in denigrating this article due to material concerns. NAME THE BANK.
barliman
Dumb, dumber, and dumberer. You just keep digging a bigger hole for yourself. I have a feeling you just cut and pasted that case. Google is your friend. Now go look up the property records and find the borrowers still are the title holders, with a mortgage lien still on the property. The courts DID NOT dismiss the mortgage, even after repeated motions. I fail to see where they have f&c title, thus NO FREE RIDE. I am not targeting you specifically, but stop posting that this in that in some way implies free property (now, or in the future). Ain't going to happen. I am on an advisory board, not the board of directors. Advisors come from the community (mostly businessmen and women). I have stock in that bank, and I am not prone to self-destruction (already in single digits).
The fact that MERS cannot foreclose DID NOT absolve the indebtedness, it stands. If the borrowers sold their house, they would be required to pay off the mortgage, IN FULL, before transferring title. I would expect their case to be fast tracked now, they should start scoping out the nearest bridge.
The fact that MERS cannot foreclose DID NOT absolve the indebtedness, it stands.
Nor did the Court in any way imply idebtedness is dissolved / impaired.
The Court said ability to foreclose is dissoved / impaired because MERS is not the lawful holder of the note & mortgage nor can MERS assign the note & mortgage to someone else.
The MBS trust would be lawful holder of the note & mortgage with right of foreclosure ...if the transfer had been properly recorded in county records. But it wasn't.
In all likelihood the note & mortgage originator received a check from an MBS trust (or multiple MBS trusts if the loan was sliced & diced), noted the sale(s) in MERS, then destroyed the original note & mortgage ...or may have kept them ...but they have no standing to foreclose since they were paid in full.
So MBS trusts are the losers here, and by extension MBS purchasers. They paid for the debt but didn't lawfully get the note & mortgage from the originator, hence they have no lawful standing to foreclose.
If the homebuyer makes payments, the trust does ok. If the homebuyer stops making payments, the trust has no lawful recourse to foreclose, and they're fucked.
Banks aren't stupid. They knew full well MERS recording wouldn't fly in county courts all across America.
I believe they did MERS to fuck MBS trusts and purchasers over, holding on to mortgage and note documents so THEY could foreclose and take property away from MBS trusts and purchasers.
But now they're discovering courts aren't going along with that little scheme since they were paid in full, and now they're scrambling to get notes and mortgages assigned to someone who can foreclose ...assuming they still have the original notes & mortgages, didn't destroy them.
But there isn't anyone. Because after-the-fact assignmets aren't recognized by courts either. And if courts did, which of multiple MBS trusts owning a slice of the debt would get the assignment?
After watching cash flows fall off and courts tossing out their attempts to forecolse for lack of original documents, MBS trusts are figuring out the banks' fraudulent little scheme, and put-back lawsuits are skyrocketing.
Disclaimer: This comment is intended as mere opinion, not legal advice. For legal advice consult an attorney.
then please reply to my original comment. The bank does not want that note back. Do they have to take the note back and pay off the MBS investors who currently own the note? If so you are right. There is no free home to the people living in it, but the bank takes a big loss
Oh ... no response on my advice you take issue with by specific citation?
There is no where I have made ANY comments remotely suggesting anyone ends up with a free ride (i.e. the debt is dismissed) even if the chain of title is broken. It might be an unsecured note if the chain of title is broken but they would still owe the money.
So ... stop LYING and misrepresenting my position.
Back to the issue of disclosure - NAME THE BANK you say you are providing with real estate guidance. You have a material interest in the MERS status quo.
NAME THE BANK.
barliman
Sorry, have to disagree with you on this...not to belabor the point...just for clarity. FYI, I have assigned and been assigned notes/deeds so I do understand how this works.
To the court, MERS on the mortgage might as well be invisible. So, yes the only lender that could actually foreclose is the originating lender, because the court only recognizes them as the real lender...so the original lender, who was made whole probably within 6 months of the origination is going to step back in to foreclose? Haven't they already been paid? Isn't the bank down the securitization chain going to have a problem with the originating lender getting to foreclose on the house after they were paid for the debt? Even if you could get the originating lender to come back in to foreclose and pay you back for the note, they surely wouldn't pay you 100% of what you paid them, right?
No, not really. The court is saying that MERS doesn't have a right to assign because they were never the note holder...so they can't assign it back to the original bank.
Only way I see for this to work for the bank is to have the original bank, noted on the Deed besides MERS, buy back the note from whoever is trying to foreclose...then the original could foreclose...maybe. Question is, since the original bank was made whole, why would they want to get involved at this point?
Correct, and all the original docs have been destroyed.
The Banks are neck-deep in poop. If they cant buy the courts, they are going to call in all their favours from their puppy-dogs in DC, and the mother of all bail-outs.
That is where the war is to be won, and lost.
Banks trying to buy off judges.....
"While the U. S. Department of Justice is actively prosecuting mortgage and foreclosure fraud, a national organization that helps homeowners avoid foreclosure has evidence that certain state judges appear to be protecting lawbreakers. Billions of dollars have been received by corporations in the foreclosure industry since the Great Recession began. Are these vast sums of money finding their way to elected state judges and politicians?"
http://www.examiner.com/architecture-design-in-national/national-mortgage-fraud-scandal-spreads-to-the-judiciary
This ruling just moved QE3 forward..
Remember all those "toxic assets" that TARP was supposed to take care of? They are still out there and continue to erode. This is just another crack in the wall of leveraged debt. Unfortunately this crack will be plastered over - this decision will never be allowed to be widely enforced.
Please enlighten us as how this will never be allowed to be enforced. It is the highest court in the state...
Aside from being fairly commonplace at this juncture... mers is a failed organization and concept... simple as that... the courts have been poking it for some time now.
Yes! Bozo's Bigtop Bitchez!
Could someone please break this down fo rme. I am considering paying off a big chunk of principal and then doing a refi to get my monthly payments down to half of what the yare now. I am conducting this madness in order to make a career change and will likely be making less money than I do presently. I know, I'm stoopid for not wanting to sit in a warm, dry cubicle for the rest of my natural life.
Anyways, what do I need to know? Should I hire an attorney to see who owns my note? Is it of any significance to me whatsoever to do that?
If your mortgage is held by a local bank or credit union (not sold to a second party) then you probably have a clear chain of title, and the paper work to back it up, but I would demand to see the wet ink documents as proof.
If your mortgage was sold and bundled, then you have the problem of getting the entities to produce the wet ink douments. If they can't or claim MERS as their documentation, then YOU have a problem, because the physical chain of title must be assumed to be impaired.
The wet ink documents contain a trail of ownership of the mortgage as it is transfered from one entity (and only one entity) to another. Its the only real, legal document that matters (not withstanding the MERS argument that "its in the system, honest, trust us"). It shows who you owe.
Do some reading and get some solid legal council before you shovel money into potential proverbial black hole.
First, see if your county recorder's office has their information online. If they do, they most likely have a name search feature. Search on your last name and see what pops up. Depending on how they quantify their information, you may have to do this under both under recorded and unrecorded (which is where MERS tends to show up). You may have to follow some hot links (open in new window unless you love clicking the back button).
You may be able to find out the pertinent information from the comfort of your own home. If not, I'd suggest a lunch time visit to the recorder's office and see what you can turn up.
As a suggestion, don't pay off your mortgage. If you have enough money to pay it down far enough to cut your payment in half, you have enough money to put aside and use it to make up the other half of your current mortgage payment while you try out the career change to see if it will work for you.
barliman
Mark 'em to market, suckahs.
EVERYONE Should STAND UP against the Bank Fraud and stop paying their mortgages! That is a intellectual Revolt!
this is not fraud upon the mortgagor/borrowers... however, it may be fraud upon the poor souls who purchased "securities"...
F*you MERS asshats
F*you MBS securitizers
F*you MBS tranch slicers and dicers
F*you from here to the horizon, and you had better go find a hole in the ground to jump into because it will be MUCH more enjoyable than what is about to happen to you all...
You destroyed the world because you are a bunch of greedy, lying scum bags. Now all of those MBSs and the slivers of risk you sold to everyone will be found to be patently WORTHLESS. 100% losses. ZERO capital recovery. TRILLIONS upon TRILLION completely disolved into vapor before your eyes...
And to all you moronic bond buyers who swallowed this swill; it be indeed be the innoculant botulism which will bring America to the ground...
ALL OF YOU are indeed worse than terrorists for destroying this nation.
I can't believe a court actually decided to stick to the law. This ruling just made my day. MERS was a crap idea conjured out of thin area for the benefit of creating MBS. Banks were bypassing the County Recorders Office so fast and furious that they wouldn't and couldn't be bothered to follow the law and recorder each transfer and assignment properly. I just hope the Supreme Court doesn't water this down or reverse or Congress decide to wash this all away.
THANK GOD for a COURT with a HAMMER!
If you dont believe in a God, then thank the mountains of FIAT that make it possible to ram this up the BANK! And from THENCE to WALLSTREET Resales of property the world over.
THey might as well burn the papers instead of trying to shuffle, mail, fax, unwind, hunt, rebate, research, appeal; commit suicide etc.
AND FUCK ME IF I AM SUCH A STOOPID CHUMPITH to REPAY my home free and clear already damn it!!!!
Now the market may commence squealing like a little teenager asking MORE! MORE! as everyone whose fingerprints are all over that exposed ruling scrambles for viagra.
I wonder what sort of effect (if any) this will have on the non-judicial states?
Oh wait, the only effect this will have is to create the mandate for nationaling Fannie/Freddie, because as we all know, the actions of the mortgage industry cannot be allowed to affect it.
It's the same for all... standing is standing... if you don't have the right to foreclose through the court, then you don't have the right to foreclose outside of the court...
Wow, I never felt stupid for having a paid off house before now...
exactly mate - from reading the comments, it seems most people are happy - they figure the banks are taking it up the ass...
As far as I can see that point of view is misguided. This is a big win for the politicos and bankers. It's the old Briar patch all over again.
The banks WIL NOT BE ALLOWED TO FAIL. The fact that some of the most irresponsible homeownerists have not lost their home is just another injustice against people like yourself, Mr Mordern.
1. Irresponsible poeple were given loans by irresponsible bankers.
2. The dollar values of these loans were backed by hard working American tax payers, and foreign investors from countries running trade surpluses- you know, the people who actually produced something (like the people who built those houses)
3. Bankers and mortgage brokers got FILTHY rich off of making these loans.
4. The reckless homeownerists feel vindicated that the law is on their side and along with the unions, government workers, banksters and other beneficiaries of the government they will vote in the incumbents and continue to leach off the few remaining wealth creators in the country
how is this good?
I am sooooooooooooooooo sick of hearing this! Yep, blame the people, and their responses to the fraud, rather than placing the blame where it squarely belongs.
Aditionally, mine is MERS, and my mortgage is current and I've never been late. I bought my home long before the bubble, but did re-ri for lower rates. I KNOW I'm not alone; I personally know several people in this boat. So why don't you tell this hard-working (but struggling!) American taxpaying producer what I should do? Give the TBTJ banks a pass?
While you're thinking about your answer, remember, they mucked things up, and now my title is likely clouded which has plenty of negative implications for me, including the fact that I no longer know if I'm paying the correct entity/person/creditor. I did nothing, and certainly nothing wrong, except pay as agreed.
The problem is that the reckless homeownerists do not want the situation rectified which would mean getting a clear title. Instead, they want a free house, for which they still don't have clear title ironically. This is why no one respects their argument.
Yes, it will cost money to rectify the titles but it can and must be done. There is no other solution. Any other path will continue to have a negative effect on the economy and keep the housing market in shambles.
Uhhhhh, really? How is it that you know what all the "reckless homeownerists" want? "Reckless" or not, all the homeowners I know with MERS paperwork and who actually understand this are interested in clear title. None expect a free house, even if it is a pleasant thought. Incidentally, long before I knew of this fraud, I tried to re-fi when rates were at bottom (several friends did the same); the answer was, not only no, but HELL NO. Now the damn bank sends me offers to re-fi weekly.
How do you suppose the titles can be rectified without yet another big bailout for the TBTJs?
Troublehoff,
First, since these idiots destroyed the deed-mortgage coupling (the County based registration, the paper work which physically proves the chain of title, etc) they essentially destroyed the entire legal ownership/owership underpinnings of at least 2/3rds of all US mortgages.
NO ONE knowns who they are paying, who is receiving the money or if that payment will in fact go uncontested, or in fact if there might be 3 or 4 claimants who might come forward trying to collect on the mortgage after the "payment service company" gets their payment (in whole or part).
What would you pay for a property that has no certain, intact chain of title?? Sharpen your broadsword because that is the era we are back in here...Pre-English property law, a matter of who can defend the property by arms is the owner.
Word!
this was my point of comment to, thanks for making it 1st and succintly.
It must be added that changes in assignment must be made at the county level with PAYMENT to clerk of courts or register of deeds. That's what MERS really did wrong, ripping off county governments 100's of millions in fee's had the paper work actually been filed correctly.
Anyone else reading this as a basis for breaking all MBS trusts made up in ANY part of MERS assigned mortgages?
"What game would you like to play, Dr. Falken?"
' Let's play Global Thermonuclear War.'
barliman
I would think the whole "security" thing was a bit impaired, no? I guess they can play in the land of unsecured creditors... but, before that happens, they'll be seeking putbacks for a hundred cents on the dollar.
In the end, the assclowns making bad lending decisions are going to eat the turd... (and if not, then they can steal the difference from us).
60% ....that sounds like a majority
and thus the fractured congress, unable to agree on the slightest matter before in 2011, joins hands across the aisle to protect the American homeowner witht the "Fairness in Housing 2011 Act" in which the kindly federal goverment protects the homeowners from the vagaries of inconsistent state law with the federal mortgage and deed recording system FedRes, which will replace the MERS system with a national title recording database which no state has authority to question thus protecting the homeowner from title issues resulting from their purchase of homes out of "illegal" foreclosures.
Look closely and you'll notice not one-in-fifty Attorney's General making any noise at all.
(a) they're probably too fucking stupid to get it; (b) work for the government [often a resting home for those that suck in private practice and/or don't want to work]; and (c) are just there waiting to be governor and know they'll need some donations in the near future for that ol' campaign fund.
June 7 was last Tuesday, a week ago. This is why XLF & BKX are +1.00% old news.
Has anybody noticed the laughing face in the mushroom cloud ?
Hey, it's Bozo the Clown !!
EPIC WIN
"So shines a bright deed, in a dark world"
– William Wonka
One bank will be sacrificed to the mob. Best guess is WF. But it could be BAC. Depends on which one gives more to the Obama campaign,
I would bet on BAC, but yes, WF is holding the Wachovia crud too. If you're dead, does it really matter how much the corpse is run over?
Is WF still holding all the toxic shit they got from Wachovia? If so, buh-bye.
"Nonetheless, the law must not yield to expediency and the convenience of lending institutions."
Wow, I'm speechless. Leventhal better check under his car before starting for the remainder of his life, accidents happen you know... especially when pissing off banksters.
As Paris Hilton would say...."Thats Hot"..................
it is about time.......
Holy shit !
The squatters are about to open a can of worms, erm, I mean a bottle of champaigne !
Hooray !