In the zeal to stall lenders’ efforts to foreclose on woefully delinquent mortgages, the plaintiff bar has put forward a variety of theories. Some of the more interesting theories involve the relationship between the promissory note and the mortgage (or deed of trust) that secures the note. The lenders may have made these theories easier for borrowers’ advocates to advance, when they created the MERS system for recordation.
MERS was designed as a system to facilitate the secondary market in mortgage loans by permitting the mortgage document to be recorded just once, in the name of MERS, and then having transfers of the mortgage noted electronically on MERS’ own records, with MERS acting as the title holder for all the successive owners of the note and the mortgage. This was a smart idea, since the lag time associated with recording assignments of the mortgage document created a huge tracking problem for custodians and secondary market participants. Nevertheless, with recordation in the name of MERS, rather than being in the name of the owner of the note, borrowers have found an opportunity to assert deficiencies in the foreclosure process entitling them to defend against foreclosures.
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