Some Homeowners Facing Foreclosure Saying To Banks ‘Show Me The Note’

RICHMOND (CBS 5) — Banks seem to have most of the power when it comes to foreclosures, but some homeowners are fighting back with a new battle cry: “Show Me the Note!”

Chuck and Eric are trying to hang on to their Richmond home.

“We are not going to let the bank take the house,” said Chuck, sitting in his study surrounded by foreclosure documents.

The trouble started two years ago when their adjustable rate mortgage jumped from $2,600 to $4,400 a month. They soon fell behind and the bank foreclosed. But there was a problem with the paperwork.

“They don’t have the note! It’s as simple as that,” said Eric, referring to the promissory note that homeowners give the bank, promising to pay back the loan.

So where is the note? Normally it stays with the bank that issued the mortgage. But the note can also be traded or sold to other institutions. When that happens, the sale is supposed to be recorded with the county, showing who has legal claim on the house.

That’s basically how things have worked in America since the 1600s.

Then about 10 years ago, Wall Street got together with banks to sell huge blocks of mortgages like stock. And to keep track of it all, they created a separate , private system called MERS – the “Mortgage Electronic Registration System.” Electronic is the key – because the transactions are all computerized. So, MERS never gets the original promissory note.

“The deeper you look, the more illegal the actions are of these banks,” said Reno attorney Robert Hager, who’s suing MERS and hundreds of banks, alleging they’ve been foreclosing on homes without showing a true legal link to the note.

“It’s an industry-wide fraudulent scheme,” said Hager, “in which the parties that are foreclosing have no authority to foreclose and take the property away from these borrowers and homeowners.”

Hager’s lawsuit charges bank officials with using “false, fraudulent, misleading and untruthful documents.” For example, he displays four different foreclosure documents signed by MERS vice-president “Linda Green.” But each document has a different signature.

As another example, Hager shows several foreclosure papers where the true owner of the promissory note is apparently missing or unknown – so bank officials used placeholder names like “Bad Bene” and “Bogus Assignee.”

“And these were homes that were actually foreclosed on, and taken from people, by ‘Bad Bene’ and ‘Bogus Assignee,” said Hager.

Chuck and Eric say that fighting the banks can be pretty scary. “The banks know the average person is going to be intimidated,” said Eric. “They’re going to be frightened. They’re going to be confused. And they’re not going to know what to do.”

To save their home, Chuck and Eric have joined a growing movement called “Produce The Note!” or “Show Me The Note!” One Tactic: instead of paying the mortgage, they are paying a lawyer to fight the foreclosure in court until they can negotiate a new loan. So far it is working. They say in the last year the bank has tried to foreclose 10 times – but still has not shown them the note.

“So each day you sit and wonder: Will this go on?” said Chuck. “Will the banks agree to what we’re trying to fulfill? Or will they continue trying to steal our home?”

MERS said there is nothing fraudulent about its system, and the company expects the courts to eventually settle these foreclosure battles in its favor. The following is a press release and statement by the company.

Statement by R.K. Arnold, President and CEO of MERSCORP, Inc.
October 9, 2010
Contact: Karmela Lejarde
703-772-7156RESTON, Virginia (October 8, 2010) – MERSCORP, Inc. (MERS) President and Chief Executive Officer R.K. Arnold today issued the following statement regarding the organization and clarifying certain aspects of its operations:

“MERS is one important component of the complex infrastructure of America’s housing finance system. Billions of dollars of mortgage money flow through the financial system every year. It takes many, often-unseen mechanical processes to properly get those funds into the hands of qualified homebuyers.

Technology designed to reduce paperwork has a very positive effect on families and communities. They may not see it, but these things save money and time, creating reliability and stability in the system. That’s important to keep the mortgage funds flowing to the consumers who need it.

With millions of Americans facing foreclosure, every element of the housing finance system is under tremendous strain. What we’re seeing now is that the foreclosure process itself was not designed to withstand the extraordinary volume of foreclosures that the mortgage industry and local governments must now handle.

MERS helps the mortgage finance process work better. The MERS process of tracking mortgages and holding title provides clarity, transparency and efficiency to the housing finance system. We are committed to continually ensuring that everyone who has responsibilities in the mortgage and foreclosure process follows local and state laws, as well as our own training and rules.”

Facts about MERS

(from MERS Communications Manager Karmela Lejarde)

FACT: Courts have ruled in favor of MERS in many lawsuits, upholding MERS legal interest as the mortgagee and the right to foreclose. This legal right springs from two important facts:

  1. MERS holds legal title to a mortgage as an agent for the owner of the loan
  2. MERS can become the holder of the promissory note when the owner of the loan chooses to make MERS the holder of the note with the right to enforce if the mortgage loan goes into default.

MERS does not authorize anyone to represent it in a foreclosure unless both the mortgage and the note are in MERS possession. In some cases where courts have found against MERS, those cases have hinged on other procedural defects or improper presentation of MERS’s legal interests and rights. Citations can be found at the end of this document.*

FACT: MERS does not create a defect in the mortgage or deed of trust.

Claims that MERS disrupts or creates a defect in the mortgage or deed of trust are not supported by fact or legal precedents. This is often used as a tactic by lawyers to delay or prevent the foreclosure. The mortgage lien is granted to MERS by the borrower and the seller and that is what makes MERS the mortgagee. The role of mortgagee is legal and binding and confers to MERS certain legal rights and responsibilities.

FACT: The trail of ownership does not change because of MERS.

MERS does not remove, omit, or otherwise fail to report land ownership information from public records. Parties are put on notice that MERS is the mortgagee and notifications by third parties can be sent to MERS. Mortgages and deeds of trust still get recorded in the land records.

The MERS® System tracks the changes in servicing rights and beneficial ownership. No legal interests are transferred on the MERS System, including servicing and ownership. In fact, MERS is the only publicly available comprehensive source for note ownership.

While this information is tracked through the MERS® System, the paperwork still exists to prove actual legal transfers still occurred. No mortgage ownership documents have disappeared because loans were registered on the MERS® System. These documents exist now as they have before MERS was created. The only pieces of paper that have been eliminated are assignments between servicing companies because such assignments become unnecessary when MERS holds the mortgage lien for the owner of the note.

FACT: MERS did not cause mortgage securitization.

MERS was created as a means to keep better track of the mortgage servicing and beneficial rights as loans were getting bought and sold at a high rate during the late 1990s.

At the height of the housing market, low interest rates prompted some homeowners to refinance once, twice, even three times in the space of months. Banks were originating loans at more than double their usual rate. Assignments—the document that names the holder of the legal title to the lien—primarily between servicing companies, were piling up in county land record offices, awaiting recording. Many times the loans were getting refinanced before the assignments could get recorded on the old loan. The delay prevented lien releases from getting recorded in a timely manner, leaving clouds on title.

MERS was created to provide clarity, transparency and efficiency by tracking the changes in servicing rights and beneficial ownership interests. It was not created to enable faster securitization. MERS is the only publicly available source of comprehensive information for the servicing and ownership of the more than 64 million loans registered on the system. The Mortgage Identification Number (MIN), created by MERS, is similar in function to a motor vehicle VIN, which keeps track of these loans. Without MERS the current mortgage crisis would be even worse.

FACT: Lenders cannot “hide” behind MERS.

MERS is the only comprehensive, publicly available source of the servicing and ownership of more than 64 million loans in the United States. If a homeowner needs to identify the servicer or investor of their loan, and it is registered in MERS, they can be helped through MERS® ServicerID or via toll-free number at 888-679-6377.

FACT: MERS fully complies with recording statutes.

The purpose of recording laws is to show that a lien exists, which protects the mortgagee and any bona fide purchasers. When MERS is the mortgagee, the mortgage or deed of trust is recorded, and all recording fees are paid.


a. IN RE Mortgage Electronic Registration Systems (MERS) Litigation, a multi-district litigation case in federal court in Arizona who issued a favorable opinion, stating that “The MERS System is not fraudulent, and MERS has not committed any fraud.”

b. IN RE Tucker (9/20/2010) where a Missouri bankruptcy judge found that the language of the deed of trust clearly authorizes MERS to act on behalf of the lender in serving as the legal title holder.

c. Mortgage Electronic Registration Systems, Inc. v. Bellistri, 2010 WL 2720802 (E.D. Mo. 2010), where the court held that Bellistri’s failure to provide notice to MERS violated MERS’ constitutional due process rights.

(© CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)


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