State of Delaware v. MERSCORP Inc. | Biden: Private National Mortgage Registry Violates Delaware Law

4closureFraud's picture

Biden: Private National Mortgage Registry Violates Delaware Law

Attorney General files suit against MERS under the state’s Deceptive Trade Practices Act; Inaccurate and unreliable records harmed homeowners

Wilmington, DE – Delaware Attorney General Beau Biden filed suit today against the shadow mortgage registry known as MERS that is at the center of the housing crisis. The complaint, filed in the Delaware Chancery Court, charges that MERSCORP and its subsidiary Mortgage Electronic Registration Systems, Inc. have repeatedly violated the state’s Deceptive Trade Practices Act.

“Since at least the 1600s, real property rights have been a cornerstone of our society,” said Attorney General Biden. “MERS has raised serious questions about who owns what in America. A man or woman’s home is not just his or her largest investment, it’s their castle. Rules matter. A homeowner has the obligation to pay the mortgage on time, and lenders must follow the rules if they are seeking to take away someone’s house through foreclosure. The honor system won’t work.”

MERS engaged and continues to engage in deceptive trade practices that sow confusion among homeowners, investors, and other stakeholders in the mortgage finance system, seriously damaging the integrity of the land records that are central to Delaware’s real property system, and leading to improper foreclosure practices. These deceptive trade practices fall into three broad categories:

• MERS, through its private mortgage registry, knowingly obscures important information from
borrowers and the information that MERS does provide to borrowers is frequently inaccurate.
The opacity of MERS’ mortgage registration database makes it difficult for consumers to know
of or challenge inaccuracies in the MERS System. This harms borrowers when MERS
forecloses on borrowers in its own name, thus impairing a borrower’s ability to raise defenses.
This also hampers the ability of borrowers to seek out the owner of their loan to pursue loan
modifications or other loss mitigation relief.

• MERS often acts as an agent without authority from its proper principal. Because the MERS
System was both unreliable and frequently inaccurate, MERS often does not know the identity
of its proper principal. Where the name of the owner of the mortgage loan recorded in the
MERS System does not reflect the true owner, any action MERS takes on behalf of the
purported owner is without authority.

• MERS is effectively a “front” organization that has created a systemically important mortgage
registry but fails to properly oversee that registry or enforce its own rules on its members that
participate in the registry. Rather than maintaining an adequate staff to provide MERS’
services, MERS operates through a network of over 20,000 deputized non-employee corporate
officers who cause MERS to act without any meaningful oversight from anyone who works at
MERS. This has resulted in MERS recording so-called “robosigned” documents with country
recorders of deeds and failing to follow its own rules regarding proper institution of foreclosure

MERS, which is incorporated in Delaware and based in Northern Virginia, was formed in 1995 to facilitate the growing mortgage finance market. Large banks, such as Bank of America and Wells Fargo, the quasi-governmental institutions Fannie Mae and Freddie Mac, and other participants in the mortgage-lending industry created MERS to bypass the county Recorders of Deeds offices throughout America. Unfortunately, there was little to no outside oversight of MERS’ murky registry or transparency for homeowners. MERS did not meaningfully audit its records and failed to even enforce its own rules governing members’ conduct.

The complaint cites an example of a recent foreclosure in New Castle County in which MERS foreclosed on a loan in which it had no interest and without naming the real party in interest. In fact, the entity upon whose behalf MERS sought to foreclose had actually been dissolved months prior.

MERS’ own records indicated numerous transfers in and out of MERS that were not reflected in the county records, as required by MERS’ own rules. The confusing path and inaccurate records associated with this mortgage are not an isolated instance of bad record keeping by MERS. Rather, this type of confusion is endemic to the entire MERS System.

Specifically, the suit alleges that MERS violated Delaware’s Deceptive Trade Practices Act by:

• Hiding the true mortgage owner and removing that information from the public land records.

• Creating a systemically important, yet inherently unreliable, mortgage database that created
confusion and inappropriate assignments and foreclosures of mortgages.

• Operating MERS through its members’ employees, who MERS confusingly appoints as its
corporate officers so that such employees may act on MERS’ behalf.

• Failing to ensure the proper transfer of mortgage loan documentation to the securitization
trusts, which may have resulted in the failure of securitizations to own the loans upon which
they claimed to foreclose.

• Assigning and foreclosing upon mortgages for which MERS did not possess authority to act
because the mortgage loan was never properly transferred.

• Initiating foreclosures in the name of MERS without authority to do so or without appropriate
controls to ensure the actions were being carried out by the actual owner of the mortgage.

• Allowing the entry and management of data by those MERS members who are identified as
owners or servicers in the MERS System, instead of controlling entry and management itself.

• Initiating foreclosure actions in which the real party in interest was hidden, thus preventing
homeowners from ascertaining who owned their mortgage in order to challenge whether or not
they had a right to foreclose and limiting their legal defenses.

• Purporting to act as an agent without knowing the identity of its principal and therefore if it
acted within the scope of its agency or not.

• Encouraging reliance on the MERS System when MERS knew the system was unreliable and
by allowing its members to cause MERS to act beyond the scope of its authority in reliance on
such unreliable data.

• Taking instructions from entities who, despite being listed as note holders in the MERS system,
were not the proper principals to cause MERS to act under MERS’ rules.

• Assigning mortgages without authority to do so where MERS purports to act for the wrong
entity or where the requisite signature of a MERS signing officer is not actually executed by
that officer.

# # #



What is MERS: In 1995, banks and others in the mortgage lending industry created the Mortgage Electronic Registration System (“MERS”) – a national registry to track ownership and servicing rights for residential mortgages. This system is designed to facilitate mortgage securitizations and circumvent the traditional county Recorders of Deeds offices. The rapid rise in popularity of mortgage backed securities and their subsequent decline in value is a major cause of the housing crisis that sent America’s economy into the largest collapse since the Great Depression.

Foreclosure crisis in Delaware: Delaware is experiencing a record rate of foreclosures. The foreclosure rate tripled from 2008 to 2009, rising from 2,000 homes annually to 6,000. A record 6,457 homes were foreclosed on in 2010.

Who owns/uses MERS: There are more than 5,500 members representing the most significant players in the mortgage industry, including: mortgage lenders and servicers (Bank of America, CitiMortgage, Inc., GMAC Residential Funding Corporation, and Wells Fargo Bank, N.A.); government-sponsored entities (e.g., Fannie Mae and Freddie Mac); insurance and title companies and the Mortgage Bankers Association.

MERS in Delaware: MERS purports to hold more than 30% of Delaware mortgages. Since January 1, 2008, MERS has filed more than 1,600 foreclosure actions in its own name against Delaware homeowners. Additionally, thousands of other homeowners whose mortgages have been tracked in the MERS system were foreclosed on by entities whose right to the property was unclear because of the unreliability of MERS’ records. Thousands more Delaware homeowners currently hold mortgages with MERS listed as the owner, but with no way to actually determine the true owner.

What is Attorney General Biden alleging: MERS violated Delaware’s Deceptive Trade Practices Act by creating an unregulated shadowy registry that is unreliable and inaccurate and blocks homeowners from learning which entity truly owns their mortgage. The complaint highlights three major deficiencies:

• MERS obscures important information from borrowers and what is available to
borrowers is frequently inaccurate.

• MERS acts without authority

• MERS is a “front” organization that does not enforce its own rules

How the mortgage industry works: A mortgage loan taken out by a homeowner is really two documents – the first is a promissory note requiring the borrower to repay the holder of the note.

The second document (the mortgage instrument) allows the holder to foreclose on the property if the loan is not repaid. The person or entity holding the note receives the money from the borrower’s monthly mortgage payments.

How securitization works: Banks that make the mortgage loans to homeowners sell the mortgage notes to other financial institutions. Several times over, the loans are bundled into investments known as mortgage-backed securities and the notes are sold to large investment groups, such as pension funds.

Where MERS comes in: As the notes are sold in the securitization process, someone has to service the loans and hold legal title to the mortgage instrument. Servicers do all the work involved with a mortgage loan on the lender side – physically collecting and distributing payments, answering borrowers’ questions, etc. MERS acts as passive place-holder on the County Recorder of Deeds public registry. Additionally, MERS can also file foreclosure actions on behalf of the note-holders in foreclosure proceedings. MERS allows its members to sell mortgages many times over without recording the transactions at the local Recorders of Deeds offices, thereby avoiding fees, eliminating any official paper trail and creating significant confusion that has led to improper foreclosures.

What the lawsuit seeks: The suit asks the Court of Chancery to impose various sanctions on MERS, including requiring it to audit its records to ensure accuracy, stop foreclosing on homes without divulging the true owner of the mortgage, and correct records filed with county Recorder of Deeds that do not list the entity that owns the mortgage. The suit seeks a civil penalty against MERS of up to $10,000 for each willful violation of the Deceptive Trade Practices Act, as well as restitution to borrowers who were harmed by these violations. The exact amount will be determined during trial.


PDF copy of press release and the DELAWARE V. MERS FACT SHEET can be downloaded here...

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DymanicDoug's picture

MERS's problem that can not be "fixed" is they do not have any money or real interest in the property, MERS assignments are subject to attack for  this and other reasons. Forclosure in MERS name were prohibited by OCC in 2010...the truth of 8 million failed loans...yet to be written.. 

ZeroPoint's picture

Does this mean that Biden is going on the terrorist/no fly list?


I fully expect this to get very ugly, very quick.


Boxed Merlot's picture

And yes this is a political move. The dismantling of MERS has finally received the blessing of the powers that be-that may or may not be a good thing depending on restitution to the truly aggrieved. Let's hope this apple fell a little further away from the tree.

It's amazing / amusing to me that the US can threaten a sovereign nation regarding their financial records being kept private as the case with swiss bank accounts, but it takes 16 years for the Biden controlled state of Deleware to acknowledge their laws of incorporation may have been less than adequate in preventing a sham entity like MERS.

What other corporations have hidden under the watchful eyes of the Biden's?

Ruth's picture

This is the root to stabilizing the real estate market on a legal basis, the fraud brought on by lenders is a seperate step in the long way back.  To say that technology and the warpspeed was necessary to break our land laws is ridiculous.  Seems more letters are in order, and thank you to our Atty Generals that remain vigilant in fighting the good fight.

Lmo Mutton's picture



wareco's picture

This lawsuit will go nowhere, and 4closurefraud will never mention it again.

waterhorse's picture

Is that you, Janis or Karmela?

catacl1sm's picture


chunga's picture

MERS - AKA - The Secret Electronic Mortgage Society.

This link is to a *gasp* blog. The ad-free Foreclosure Hamlet. If you don't like blogs don't click it.

Bevilaqua v. Rodriguez (What does it tell us?)

Zombie lenders maintain homeowners have no right to challenge assignments. The MA Judicial Supreme Court (Oct. 18, 2011) calls bullshit on that citing COMMON LAW.

That means (to me) homeowners DO have the right to challenge assignments in either a Lien Theory state or a Title Theory state.

MERS blows.

MachoMan's picture

It is common practice to include contractual provisions in the mortgage/note that they can be assigned (and thus assigned without challenge/objection from the mortgagor/borrower).  Not sure what this is getting at...

chunga's picture

Forget Credit Default Swaps and all that for a minute. (Described nicely by Neil Garfield below - the 9-minute mark is where it get's good.)

Foreclosure Defense - What You Need To Know

I see "original" Notes all day long that contain material differences. I see loans being sold all the time to investors *after* foreclosure actions have been initiated.

Bottom line here to me is this - and I use an analogy that should resonate well on ZH.

If everyone who held in their hand a contract that entitled them to X ounces of gold suddenly called them in for physical delivery - are there really that many ounces of gold?

I truly believe there are more Notes out there than actual houses. That is why, on the rare occasion, a sly attorney manages to persuade a court to grant on Order to compel a response to discovery requests, alleged lenders seek open-ended extensions for more time and/or seek a protective order.

What would motivate them to do that?

MachoMan's picture

It's common place in business litigation...  literally, all day every day.  When you respond to discovery requests, you throw in a blanket objection for "proprietary information" or some bullshit like that...  the whole point of answering discovery requests is to answer without actually answering...  the art of the non-answer if you will.  But, sometimes you simply outright object...  and, in this case, the natural response by the original requesting party is to simply sign a protective order...  who gives a shit if the world knows?  As long as your client wins (gets the information), who cares...

Now, if they are the prosecuting party and decide to delay inevitably (also causing waste to the collateral), then I think you've got something...  I can't fathom, practically, there is any other answer other than they doubt their own standing to pursue the lawsuit.

The problem with protesting your assignment because of the suspicion of "extra" notes floating around is probably not going to get very far...  might even be sanctionable if you can't back it up any better...  especially in cases where the protesting party has executed an agreement that expressly contemplates downstream assignments AND that the protesting party has a contractual obligation to acknowledge the assignee...  presuming, of course, that proper notice is given.  Ultimately, you're going to have to prove that the particular assignment in question is an "extra" assignment... good luck with that.  It probably requires a "fishing expedition" not likely to be granted by ANY judge.  (you'd at least need a favorable judge assignment...  any, "by the book" kind of judge would throw that shit out).

Practically speaking, you've got an indigent client and this type of discovery is going to take a lot of time...  not saying it ultimately wouldn't lead to anything, but JFC...  not gonna happen in 99.9999999% of the cases.  And, frankly, deadbeats aren't a favorite of the law...  even as against shitass lenders and their assignees.


chunga's picture

Here's a great one. Defendant's Counsel "discovers" 4 "original" notes in a contested f/c. One is endorsed in blank, two are endorsed to different lenders, and another has only one witness, the others have two. All of them are dated and notarized one full year prior to the closing date (to back before they were aquired). At that time everyone in the building knew the originator had been aquired per SEC statements except the borrower.

In this case, an OCC inquiry was made on behalf of the borrower by a US Senator. The alleged lender responded to the OCC complaint that the Note had not been sold. In the meantime, two execs from the alleged lender asserted that the Note had been sold to an investor and persuant to their proprietary agreement it was none of their business. 

Counsel for the alleged lender proceeded to schedule an ex-parte MSJ despite answers/counter claims filed by defendants counsel.

It's like committing a crime and saying you're not guilty because you made a proprietary "trade secret" with your fellow burglars.

MachoMan's picture

WAAAAAA?  Please do this to me lol...  I wish someone would try...

There has to be more to the story...  Generally speaking, around these parts (especially in federal court), the court would even laugh that one out...  let alone the beatdown that would ensue from a capable attorney on the other side.

The fact that there are 4 "original" notes, in and of iteself, does no damage to the purported borrower.  Now, when the assignees of the bogus notes get pissed that they got ripped off, then they sue the seller and the purported borrower...  herp derp.  Borrower goes back to title company that handled the closing (because no one actually keeps copies of these documents) and gets a copy of the original...  (or heads down to the courthouse to get the only one that's actually filed)...  check and mate.  [now, if all 4 notes were assigned to these folks, you might have some problems...  but they won't be able to prove that to the court's satisfaction I'm sure...  once you raise the plausible inference, it's curtains].

Now, an answer or counterclaim isn't enough to withstand a M4SJ...  what typically happens is the creditor signs an affidavit that X bugger owed X$ to Y and we're the assignee of Y.  Then, as any good defense attorney would do, the borrower (bugger) signs an affidavit that he doesn't owe shit.  A fact question remains and the motion is defeated...  all day every day...

If an order is improperly entered, then they can seek to set it aside...  if the judge won't budge, then appeal...  obvious procedural errors are really, really easy decisions for appellate courts.  (they'll do anything not to actually decide the merits of a case).  You just have to nudge them into the whole, "you can serve justice AND not do anything (actually dive into the merits)" gig.

And no, it's not like commiting a crime and saying you're not guilty because your methods are proprietary...  This whole argument is instantly and easily defeated with a protective order...  happens every day.  Maybe that's their story to congress critters or government investigators, but that shit doesn't fly in real court.


chunga's picture

The Wakulla County (2nd circuit, FLA - Deutsche v. Graham et al) judge just ordered a very thorough "Request For Production". They key component of the very detailed production request = if any claim of privelege is made - who are they made between. Makes a great cite as well as Bevilaqua. The case I referenced above resulted in 200 pages of affidavits filed by Defendants Counsel. Counter claims included forgery, fraud on the court, and a ton of other shit. Luckily they found it on the docket and counsel for alleged lender cancelled the MSJ hearing they set ex-parte. Otherwise a writ of possession. Bogus. I believe the case will be dismissed w/o prejudice. Strike 1. Three strikes you're out. They've already spent more in legal fees than the house is worth and will be reponsible for defendant's fees to boot if it gets dismissed.

waterhorse's picture

If a homebuyer wanted a Fannie conventional was it possible to ever "opt out" of MERS at closing?  I don't remember being given a choice.  You either signed right then or you lost your deal.  How many folks were ever even told what MERS was/did?

chunga's picture

I still don't think anybody but MERS knows what MERS is supposed to do. According to them they can do anything they want.

Commander Cody's picture

Beau Biden related to Joe?  Both from Delaware, so must be.  Anyhoo, seems like MERS was set up purposefully to defraud county registrars of their fees and to easily transfer stolen (foreclosed) properties to banksters.  Without any assets, there will be no restitution from MERS, only a trail of stolen dollars residing in bankster coffers.  Yecch!

MachoMan's picture

How can you purposefully defraud county registrars when recording isn't required AND the laws were changed in most jurisdictions to facilitate the assignment of mortgages without the requirement to record the assignment?

The former point is lost on too many people associated with this issue...  I'll say it once again for emphasis because I suspect it will be a topic of much discussion in this thread (as it is always)...  YOU ARE UNDER NO OBLIGATION TO RECORD ANY DEED OR OTHER INSTRUMENT IN LAND...  THERE IS NO RECORDING POLICE...  YOUR PENALTY IS NATURALLY BUILT IN TO YOUR FAILURE IN THAT YOU DO NOT GET PRIORITY AGAINST RECORDED LIENS IF YOU FAIL TO FILE YOUR MORTGAGE...  It's not that complicated...

If you want to pay the recording fees and partake in the state's recording acts and get priority over other prospective lienholders, then you pay...  If not, then you go to the back of the bus.  It's a simple business decision...

The proper penalty for these unrecorded assignments should be to dump them to the back of the line...  and let the fly by night third mortgages take the lead.

waterhorse's picture

I'm not an attorney like you and I read your posts regularly and think you are pretty sharp, but please be patient here:  Couldn't MERS still claim to be in senior position with the first mortgage (in your scenario with a possible third mortgage) if there is no law to record, as you say?  Also, how can a database "own" anything?  And how can non-employees of MERS really have the authority to "transfer" anything? 

MachoMan's picture

MERS can still claim anything...  as can any downstream assignee...  all of the rights given to MERS (and its employees) are contractual.  If the contracts don't give MERS the authority to act as it does, then its acts are likely invalid...  there are many versions of MERS contracts and each rests upon its own language...

I think that MERS (whomever it purports to be the holder) actually is first in priority under the law (presuming its upstream assignor filed first).  Most states have allowed the assignment of mortgages without the need to record...  As a result, the recording acts expressly allow and protect the assingees. 

However, given the "loss" of transfer documents combined with the refusal to record (making determination of the true holder a futile effort), I think the proper equitable remedy/sanction is to shove the first mortgages to the back of the line...  if there is no one else in line, then the mortgage gets first priority...  In the end, it should be good as against the mortgagee no matter what (the mortgagee can't in good conscience sign the mortgage and pretend it doesn't exist...  this is what the law imposes).

When I say "there is no law to record," I mean that no one is under any affirmative duty to record...  (and, thus, no one has an affirmative duty to pay recording fees if they have a mortgage).  The trick is whether you want to partake in your jurisdiction's recording acts.  Sometimes, as in the case of many jurisdictions, even under the recording acts you don't have to record to receive their protection (the best laws money can buy, right?).  Apparently the recorders' offices didn't get the memo.


waterhorse's picture

thanks for the clarification.

narnia's picture

It was designed to facilitate a once liquid MBS market.  It had an added benefit of avoding recording fees.

It's such a mess that it's a Too Big To Address problem.  

Miss Expectations's picture

The suit seeks a civil penalty against MERS of up to $10,000 for each willful violation of the Deceptive Trade Practices Act, as well as restitution to borrowers who were harmed by these violations. The exact amount will be determined during trial.

Is anything criminal anymore?  

Isn't it possible that MERS aided and abetted in the selling of mortgages multiple times (i.e., putting them into different trusts)?  Did they destroy paperwork (evidence)?  Is this a fishing expedition that could lead to criminal indictments?  I have to believe that there is more to MERS than a "shadowy registry that is unreliable and inaccurate."

Will the County Recorders of Deeds be made whole by this action?



Benjamin Glutton's picture

Taylor Bean and Whitaker manufactured lots of fake mortgages to sustain cash flow. This guy was part of the no Criminal Left Behind Initiative.


By , Published: April 19, 2011

The owner of what was one of the nation’s largest privately held mortgage companies was convicted in federal court Tuesday of masterminding a nearly $3 billion mortgage fraud scheme.

Lee Bentley Farkas, 58, of Ocala, Fla., the owner and chairman of Taylor, Bean & Whitaker, was found guilty of all 14 charges against him for his role in defrauding investors and banks. The jury deliberated for a day and a half before returning its verdict.

MachoMan's picture

If you're going to get recovery for a circumvention of recording rules (which I believe has been made expressly legal in the vast majority of jurisdictions), then you're going to have to pay back any increased tax revenues from the increase in property values caused by MERS...  can't eat your cake and have it too.

PS, if you don't want to record, you don't have to...  however, if you violate a state's recording statute, then you can't partake in the state's protection... 

StychoKiller's picture

Hmm, please to explain how trashing a Real Estate title via MERS increases property values.

MachoMan's picture

It doesn't in the long run, but it certainly aids in the short term real estate machine and the distribution of massive amounts of loans to the american populace and...  thus helps keep an unnatural bid under the properties.  Essentially, it is just another mechanism or method from which cheap credit flows.  (it's not the genesis of the nominal increases in property values, but it does aid the creator).

In short, it helps in temporarily increasing/sustaining property values and, thus, the taxes collected on the properties...

The point is that while property prices were going through the roof (and creating a tax bubble as well), the recorders didn't say shit...  counties didn't say shit...  because they were racking up the dough as a middle man for cheap credit (tax revenue).  If they want to now go back and put the parties where they should have been had there not been a bubble, by requiring MERS to pay recording fees, then that's fine...  these counties can give back all of the tax receipts marginally created from MERS.  [aside from the fact that the lion's share of states, by virtue of model recording acts, exempted assignments from any recording requirement AND still gave assignments priority so long as the first mortgage was recorded].

NO ONE.  NO ONE is sincerely attempting to tackle this issue...  this is political grandstanding from jackoff county political wannabes...  or, in this case, the same with an AG (which itself is just a figure head role to fill the governor's seat).  Cash in on some popular sentiment while you can I guess.

At best you get a crybaby that's whining over sour grapes... 

kaiserhoff's picture

Oh, shit!

As this spreads, and it will, it will have at least 100 X the impact of the ongoing Greek Tragedy.

The banks take it from both ends on this.

Sathington Willougby's picture


Need name to pursue this in texas -  Attorney.  Found one but he oddly doesn't want more work on a case he already won...  Please advise.

Seasmoke's picture


eatthebanksters's picture

How about going after JPM, BAC, WF & Citi for the shit they have been and are still doing, bitchez!


sunnydays's picture

Those are MERS banks - so it stops them.  All the big Wall Street banks ARE MERS!

waterhorse's picture

MERS never received permission from any of the states to set up their scheme.  Drive this bastardized quasilegal bankster-profiteering database out of business permanetly.

Little John's picture

Nobody gave a damn as long as the housing bubble was inflating. Crony capitalism works that way.

waterhorse's picture

yes, I don't remember county recorders voicing any concern (with the exception of a couple of them in NY state who were told to accept MERS and mind their own business). 

Little John's picture

We are no longer a society ruled by law, we no longer have a free and independent press and we do not have honest money; this is not going to end well but it will end.  The rodeo is near.