“MERSCORP cannot hold liens owned or serviced by terminated members.” DreamBuilder Invs. v. Merscorp Holdings, Inc.

(See: SDNY – Feb. 18, 2022:DreamBuilder Invs. v. Merscorp Holdings, Inc).

Here is an interesting case that was recently decided in the Southern District of New York on behalf of MERS who successfully argued,

The membership rules and procedures also state that MERSCORP cannot hold liens owned or serviced by terminated members. Id. ¶ 36. The terminated member is responsible for executing a release of the security instrument upon termination. Id. ¶ 40. MERSCORP is required to provide notice to the terminated member regarding their release responsibilities, and if the terminated member fails to take proper action, MERSCORP has the right to release the liens that MERSCORP is holding on their behalf. Id. ¶ 41; Doc. 7-1 at 14- 15. After Dreambuilder’s termination, MERSCORP was not able to identify all of the liens MERSCORP might be holding on Dreambuilder’s behalf due to Dreambuilder’s failure to properly update the system. Doc. 7 ¶ 37.

 

MERSCORP has argued for years that no matter what happens to its members (bankruptcy, dissolution, suspension, etc.), MERS maintains a lien interest as mortgagee and/or beneficiary in the recorded security instrument(s) for life (until the mortgage and/or deed of trust is satisfied or reconveyed, even after assignment of the security instrument to a non-MERS Member requiring “deactivation” within the MERS Registry). But not here in Dreambuilder. MERS must have forgotten this part when it came to the New Century bankruptcy and the “termination” of the MERS Executory Contracts (as just one example). And though it comes as no surprise, MERS also argued, “MERSCORP was not able to identify all of the liens MERSCORP might be holding on Dreambuilder’s behalf due to Dreambuilder’s failure to properly update the system.”

As most are now aware, this was a widespread problem throughout the entire industry back in the day, as was alleged in the State of Kentucky’s complaint against MERS in 2013 (See: mers-complaint.pdf (ky.gov).

It is a fact that the vast majority of MERS Members during the time leading up to the collapse in 2008 (and many still to this day) were not maintaining and updating accurate data within the MERS System in violation of the MERS “Rules & Procedures,” yet MERS rarely acted against any of its members by terminating their agreements. However, MERS did terminate some, as did the courts. Members themselves may also have done so simply by going dormant or having their lending or servicing licenses suspended or revoked. How many of the thousands of MERS Members went bankrupt or vanished from the industry without a trace and without any successors and/or assigns? What happened to their memberships with MERS?

Bottom line, borrowers are entitled to know whether any alleged MERS Member in their chain of title has ever been terminated (let alone had any actual “Membership Agreement” to begin with), and if so, why MERS’ lien interest has not been released?

 

Bill Paatalo – Private Investigator – OR PSID# 49411

Bill.bpia@gmail.com