Let's see: Mortgages are a specific type of legal device. Roughly they are designed to conditionally transfer the ownership of real property, contingent upon the faithful discharge of regular payments.
To create this legal device, the law had to define very specific conditions that had to be met, in order to ensure that these devices -- powerful as they are -- were not misused for unintended purposes. Unlike other collateralized loans, in this case the collateral is the holders dwelling or home. You'll, no doubt, note that bankruptcy courts treat homes as an asset that is different than other types of assets. If you read up on why this is, you'll begin to understand mortgages must use a different standard when treating a home as collateral.
Okay, that said, the point is this; unless the rules for legally creating a mortgage are followed very carefully, a court of law cannot ascertain if it is legal to treat a home as "mortgage collateral" or as a mere "security collateral".
The difference being in how the court should go about treating the home, in the instance of a loan default.
For example, if you purchased a $5,000 big screen tv and pledged your home as collateral, if you failed to pay, the courts would not take the home away from you to settle the debt. Contractors and others with non-mortgage claims against the home, have to wait for the home to be sold, before they can recover their claims. Not so with mortgages! So there is a very big class of difference between how the loan(s) against a home are arranged, and there are rules that must be followed, to create the special class of claims against real property known as mortgages.
So now enter
MERS! To list the home on the MERS system, MERS is filed with the registration authorities as the beneficial owner of the home. But this is different than the real owner, and it is different than the real beneficial mortgage holder/servicer(s).
Okay, here's the catch, the documents filed with the registration authorities, do not convey truthful information that the filers are legally entitled to give.
(Just because information is not truthful, does not mean it's improper, since the law may allow untrue information be filed for various procedural reason. However I note that no such exceptions exist for the class of machinations that MERS is seeking to use, because it did not exist when these laws were formulated.)
Thus the laws for creating a specific mortgage class of home-as-collateral are not met. Thus the mortgage is not legally enforceable, since the law cannot "see" a real mortgage, that was created according to the existing mandates of law.
Thus the loan made upon these representations and unapproved filings, must devolve to being "not a mortgage", or a mere "securitized loan", that does not include the special privilege of the lender being able to repossess the home on default. Thus any claim made against a home registered to MERS, does not have the force of mortgage law, required to protect the lenders interests, in the way that a legitimate mortgage properly filed, would.
In short, if your home was registered as being owned by MERS, you do not have a legal mortgage! What you have been given is; at best, a colleralized loan. Meaning that the lender has little choice but to wait for the sale of the home to collect his due. AND, must hazard extinguishment of the loan if submitted to bankruptcy court, just as any other ordinary loan would. By not faithfully fulfilling the exacting requirements of the laws governing the creation of a legal mortgage, the lender has forgone obtaining one.
Which is why the courts have ruled in several cases, that MERS registration does not fulfill the legal requirements for the establishment of a mortgage! Thus the attempt to substitute MERS for a proper filing completion, cannot be claimed to confer to the lender, the specific protections that a legal mortgage would.
That is the point that many lawyers and homeowners miss in foreclosure cases.
That since the requirements of a legal mortgage had not been faithfully fulfilled the loans made, if any, must be considered mere secured lending and not mortgage loans. Thus the lender must wait in line for payment, until the property is sold.
Naturally you are not to take the word of an opinion read on the internet as legal advice, you are tasked with obtaining legal confirmation of it yourself. Of course, in my opinion, from what I've been reading, you will probably meet with success more likely than not.
