Latest on MERS and "possession of the Note"

3 Apr

There is a great case re MERS’ authority to operate in CA since it is NOT registered to do business. The case is Champlaie. It
states that MERS is not a foreign lending institution, nor is it creating evidences.

The case is also interesting since it discusses why those who foreclose do not have to be in possession of the promissory note.Here are three paragraphs below from the court, although they are taken from different pages.
It is not helpful for us but the court does question why those who foreclose do not have to be in possession of the note.

“Several courts have held that this language demonstrates that possession of the note is not required, apparently concluding that the statute authorizes initiation of foreclosure by parties who would not be expected to possess the
note. See, e.g., Spencer v. DHI Mortg. Co., No. 09-0925, 2009 U.S. Dist. LEXIS 55191, *23-*24, 2009 WL 1930161 (E.D. Cal. June 30, 2009) (O’Neill, J.).
However, the precise reasoning of these cases is unclear.FN14”

“To say that a trustee’s duties are strictly limited does not appear to this court to preclude possession of the note as a prerequisite to foreclosure. On the other hand, perhaps it is not unreasonable to suggest that such a prerequisite imposes a nonstatutory duty.”

“At some point, however, the opinion of a large number of decisions, while not in a sense binding, are by virtue of the sheer number, determinative. I cannot conclude that the result reached by the district courts is unreasonable or does not accord with the law. I further note that this conclusion is not obviously at odds with the policies underlying the California statutes. The apparent purpose
of requiring possession of a negotiable instrument is to avoid fraud. In the context of non-judicial foreclosures, however, the danger of fraud is minimized by the requirement that the deed of trust be recorded, as must be any assignment or substitution of the parties thereto. While it may be that requiring production of the note would have done something to limit the mischief that led to the economic pain the nation has suffered, the great weight of authority has reasonably concluded that California law does not impose this requirement.”

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2 Responses to “Latest on MERS and "possession of the Note"”

  1. BRENTON April 4, 2010 at 4:00 pm #

    TIMOTHY McCANDLESS, does this sort of “supersede” Neil Garfield’d Declaration?
    TRUST DO NOT OWN A NOTE, MORTGAGES WERE “POOLED” INTO TRUST, ORIGINAL NOTE WAS PAID OFF, ETC…

    So, even if the note was not made “burden of proof” upon the lender, by the Court, it would seem that legally, the lender or trustee of the asset pool does not have ANY right to foreclose or collect on the note, since a trust does not OWN the note.

    Likewise, if the original lender never sold the note and still has it, then the transaction is straight between borrower and lender, thus, note is not really an issue.

    per the declaration:
    “This means that the “Trust” does NOT own the pool nor the loans in the pool. It means that the “Trust” is merely an operating agreement through which the investors may act collectively under certain conditions.”

    Thanks Tim. Best blog site around!!!!!!!!!!!!

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