Wednesday, May 19, 2010

A Bombshell - Tennessee Lawsuit Alleges MERS is a Scheme to Evade Taxes and Avoid Transparency in Public Records

"[And Defendant Banks foreclosed on borrowers knowingly using false documents]

May 1st, 2010 · Foreclosure

The attached lawsuit is a QUI TAM or false claims act which essentially seeks repayment for millions of dollars the Plaintiffs allege the State of Tennessee is owed based on the development of the MERS mortgage system. The allegations made in this suit could be made in every state that the MERS system operates in.

One of the most important questions to be answered in this whole mortgage mess is why governments at every level gave the keys to the courthouse and the public checkbook to the mortgage lenders and let them have an unregulated, unrestrained field day with one of the most important parts of our economy. I could write for days about that, but the primary principle that we learn again and again is….

BIG BUSINESS, WHEN ALLOWED TO OPERATE OUTSIDE THE PURVIEW OF PUBLIC INSPECTION AND REGULATION TAKES ADVANTAGE AND ABUSES CONSUMERS AND LEGITIMATE GOVERNMENT

The mortgage meltdown and the MERS mess is just one more example of this.

In lean budget times, and while we watch Fat Cats on Wall Street profit…..when does the public benefit?

4/28/10 - Case No: MCCHCURE 10-10 FILED UNDER SEAL
IN THE CHANCERY COURT FOR MONTGOMERY COUNTY, TENNESSEE AT CLARKSVILLE

on behalf of real parties in interest, all the counties of the State of Tennessee Counties.

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; BANK OF AMERICA,

N.A.; CHASE MORTGAGE SERVICES, INC.; CITIMORTGAGE, INC.;

COUNTRYWIDE HOME LOANS, INC.; COUNTRYWIDE HOME LOANS oF

TENNESSEE, INC; GMAC MORTGAGE, LLC; GMAC MORTGAGE LLC. OF

TENNESSEE; WELLS FARGO BANK, N.A.; and, DOES H-MMM,

4. Defendant Mortgage Electronic Registration Systems, Inc. ("MERS") has done

business and is doing business in each of thc above-named counties with its principal place of business in Reston, Virginia.

5. Defendant Bank of America, N.A. ("BofA") is a national association that originated and serviced residential home loans in the State.

6. Defendant Chase Mortoage Services, Inc. is a corporation that originated and serviced residential home loans in the State and is wholly orwned by J. P. Morgan Chase Inc.

7. Defendant CitiMortgage, Inc. is a corporation that originated and serviced residential home loans in the State. CitiMotgage, Inc. has the active assumed name "ABN AMRO Mortgage Group, Inc. in the State.

8. Defendants Countrywide Homes Loans, Inc. and Countrvrvide Home Loans of Tennessee, Inc. are corporations that oliginated and serviced residential home loans in the State. Countrywide Homes Loans, Inc. has the active assumed name America's Wholesale Lender in the State.

9. Defendants GMAC Mortgage, LLC and GMAC Mortgage, LLC of Tennessee are Lirnited liability corporations that originated and serviced residential home loans in the State and are wholly orwned by GMAC Mortgage Corporation. GMAC Mortgage, LLC has the active assumed name "DITECH" in the State.

10. Defendant Wells Fargo Bank, N.A. is a national association that oliginated and serviced residential home loans in the State. Wells Fargo Bank, N.A. has the active assumed name "America's Mortgage Outsource Program" in the State.

11. Defendants Doe H-MMM are corporations, partnerships, limited liability companies, or some other entities whlch are liable and responsible for concealing, avoiding or decreasing fees or monies which were owed to the above-named counties.

13. During the ten years irnmediately preceding the filing of this Complaint, Defendants made false representations and continue to make false representadons in recorded documents in order to avoid payment in full of all fees for recordation of documents reflecting the establishment, transfer, maintenance and/or release of secured interests in real property in the State, and further failed to record documents with the intent of avoiding parrments of recording fees to the counties evidencing transactions which in the ordinary, courrse of business in the absence of the MERS scheme, would have been recorded and for which fees would have been paid.

14. The Defendants adopted thc MERS' scheme to deplive county and state Governments of revenue used among other things to maintain county real property records, fund the judiciary, fund school systems, and provide other government services.

25. Falsely recording MERS as the beneficiary on their deeds of trust created an illusory, misleading and false chain of title that purported to justify payment of less money in recording fees, depriving the State and the counties of revenue in a time of financial hardship.

26. In the event of foreciosure, Defendants recorded false and misleading documents to facilitate non-judicial foreclosures including falsely asserting that MERS was authorized, as a "nominee of lender or beneficiary of lender" to commence foreclosure proceedings, as well as authentication of "appointment of substitute trustee" instruments by person falsely and fraudulently represented to be officers of MERS.

27. When a promissory note secured by a MERS deed of trust was assigned to a mortgage backed security entity ("MBS"), a securitized mortgage investor pool, mortgage loan pool, speclal purpose vehicle ('SPV"), or property mortgage investment conduit ("REMIC"), pursuant to MERS' own rules and membership agreements, the relationship of MERS and all of its members to the promissory note and deed of trust was extinguished, and a truthful recording was required accurately to reflect the change of status.

28. The MERS membership agreement obliged Defendants to make two separate recordings in the event of a transfer to a mortgage backed secutity pool or trust (MBS, SP\/, or REMIC) outside the MERS system: 1) an assignment of beneficial interest; and, 2) a designation of substitute trustee or beneficiary.

29. Immediately upon every such assignment to a securitized mortgage pool trust, the assignment of the Note and/or Deed of Trust to a new beneficiary was required to be recorded in the county where the property was located. Defendant MERS and the named Defendants, however, failed to make such recordings or pay the fees established by Tenn. Code Ann. §§ 8-21-1001. and 67-4-409 relative to those recordings to the county where the property was situated.

30. Despite the execution and recordation of more than 1,000,000 deeds of trust in the State being executed to secure promissory notes, which notes were then allegedly transferred to various MBS, SPV or REMIC's that were non-MERS Members, Defendants intentionally failed to record the documents described above, and other documents, so as to reflect the non-MERS' Members' interest in the loans and in the property records.

33. Defendants scheme to defraud included preparation and recordation of documents containing information Defendants knew were false, including without Limitation, documents which incorrectly and untruthfully designate MERS as a beneficiary or nominee of lender, including:

1) deeds of trust; 2) deeds of appointment of substitute trustee; 3) deeds of sale following foreclosure; 4) release of liens; 5) securing agreements;

6) recording documents which purported to assign from MERS to some other entities, even entities that are not MERS Members, a deed of trust without first transferring the underlying promissory note evidencing such indebtedness; and,

7) Preparing and recording other documents intended to avoid and/or decrease recording fees that would otherwise have reflected the truth.

35. MERS and other Defendants allowed non-MERS employees to identify themselves as officers or vice presidents of MERS, because it creates the illusion of a recorded chain of title whereby the actual creditors and/or loan beneficiaries remain hidden from public record. Because promissory notes were frequently assigned, the falsely recorded documents decreased the number of recording fees paid by Defendants.

36. Defendants knowingly, intentionally or with reckless disregard of the truth and requisite actionable scienter, caused, and continue to cause, to be made and used, false records statements designed to conceal, avoid and/or decrease their obligations to pay recording fees.

37. The stated MERS' business model was to eliminate the recordation of assignments and transfers of interests that affect property throughout the State and the remaining jurisdictions of the United States. MERS advertises itself, on its website and written material as providing the ability to avoid the expense of recording through a scheme whereby MERS falsely holds itself out to the world as a beneficiary, or as a noninee or mortgagee.

Each Defendant herein was aware, at all relevant times, that this recording fee avoidance scheme was predicated upon the false recordings disclosed in this Complaint.

38. Defendants affirmatively acted to cause MERS to be listed as the lien holder of record on all recorded security instruments relating to notes registered on the MERS System.

39. When ownership of any loan was transferred to a non-MERS member (i.e., an MBS), MERS and any of its Members had no further rights, interest or authority, to act relative to every one of such deeds of trusts and mortgages. As such, the applicable property records do not provide a clear and verifiable chain of title on any property interest bearing MERS' name. The recorded instruments failed to show that MERS or any of its members had no rights, interest or authority to act relative to such deeds of trusts, assignments of security interest, lien releases and other documents.

40. When a note associated with a deed of trust on property was transferred to a MERS member, the rules and policies of MERS required the assignment of the loan to the MERS member be executed by MERS and recorded in the county where the real property was located. The loan would thereafter be deactivated from the MERS System.

41. MERS maintains a list of all MERS Members, and no MBS pool or trust (i.e. MBS, SPV, REMIC) which owned loans secured by MERS deeds of trust on property in the State was or is a MERS Member.

43. Defendants' conduct enabled them to hide their activities with respect to: 1) acquisition of credit default swaps; 2) credit derivatives; 3) lack of any loan origination underwriting standards; 4) lack of any underwriting standards for the securitized mortgage trusts Defendants created; 5. hide/clouded their failure to comply with any IRS REMIC rules regarding transfer of loans to the REMIC entities; and, 6) create the appearance of an arms-length transaction.

44. The designation of MERS as a beneficiary or nominee of the lender on a deed of trust was an intentional and knowing false designation by MERS in numerous ways, namely: 1) neither MERS nor the "lender" so designated was the true lender; 2) MERS was not the nominee of the true lender of the funds for which the promissory note was executed; 3) MERS did not collect or distribute payments, pay escrow items, hold client funds on deposit, pay insurance for clients or borrowers, or pay taxes; 4) MERS had no right to collect money on the note or to receive any proceeds or value from any foreclosure; and, 5) the name "MERS" does not appear on any promissory note secured by property in the State.

45. Defendants have foreclosed on borrowers knowingly using false documents.

47. Defendants knew or should have known that the MERS scheme was a sham; was intended wrongfully to bypass the counties' recording requirements; frustrated the borrowers' rights to know the identity of the holder of the note that was secured by the deed of trust.

48. Defendants' actions were taken at the instruction of or with full knowledge by MERS and other Defendants that the recording of false documents and the failure to record truthful documents jeopardized the real property recording system enacted by the State for the purpose of maintaining certainty in property transactions and for public knowledge.

49. Defendants' scheme created a cloud on title as to property secured by MERS' deeds of trusts, security instruments, and lien releases throughout the State.

50. Unlike the recordation system adopted by the State, MERS' scheme lacks a reliable monitoring system to ensure that an accurate chain of title is available to the public. " "