The MERS Scheme

Many borrowers with Mortgage Electronic Registration Systems Inc. (MERS) named as a beneficiary on their mortgage don’t realize until it is too late, what they’ve been tricked into. (MERS Fraud) In fact, all borrowers with a MERS mortgage are actually the victims of monumental scam to benefit the mortgage banking industry at the expense of the public; a scam whereby the big players created a shell company called Merscorp to be named as a beneficiary on millions of mortgages even though it never lent a penny to anybody. As each borrower anew becomes the victim of a corrupt mortgage servicer and starts researching on the internet they all go down the same rabbit hole and come to the same corporate culprit and that is MERS.

The MERS scheme was created in the early 1990s as the mortgage industry began to embrace securitization of mortgage debt on a growing scale, securitization being the conversion of non-liquid 30- year mortgage loans into immediately liquid, Residential Mortgage Backed Securities (RMBS) that could be bought, sold, and traded by Wall Street. The lure for investors was high returns, especially with the more risky mortgages, and the lure for the banks was the constant flow of money as they recouped their monies within a first few years of origination by selling the RMBS to Wall Street Investors and so had more cash for new loans. The Glass-Steagall Act of 1933, which had previously separated investment banking from retail banking, was repealed in 1999 leaving the money to start coming directly from Wall Street Investment Banks which then financed the debt as well as chopping it up into stocks for investors. With the Wall Street Banks now dictating which loans they wanted to fund, investors took on more and more risk with the securitization of subprime mortgage debt which was the cause of the first crisis in 2006.

RMBS, whether backed by prime or subprime mortgage debt, are also attractive to investors because of their special tax benefits and bankruptcy remoteness, meaning the asset remains solvent even if the Wall Street firm goes bankrupt, as long as they have complied with the Real Estate Mortgage Investment Conduit (REMIC) Act. All that the REMIC Act required was two “true sales” where a seller receives compensation for a promissory note after an offer and acceptance by the buyer and then physically transfers and endorses the promissory note to the buyer and assigns it to them by recorded assignment. While the mortgage bankers liked the bankruptcy remoteness and the tax breaks, they didn’t care so much for the fees for assignments, especially since the reality of securitization was that one borrower’s note might be sold ten or twenty times resulting in millions (and eventually billions) in recording fees. Therefore to circumvent the recording requirements of the REMIC ACT, the mortgage bankers created a scheme called MERS.

The MERS scheme starts with the artifice of a shell corporation, MERS, embedded on the first page of every MERS mortgage or deed of trust as a “beneficiary” and a “nominee” for the lender and their successors. After creating this artifice, the mortgage bankers then utilized MERS to claim three distinct rights; that of a beneficiary, a nominee, and agent although an agent not subject to any agency law since the identity of the principle remains hidden behind the MERS shell company. With a MERS mortgage, corruption begins on day one.

First, the lender/ originators never conduct the true sales of the promissory note, as required by the REMIC Act and never record these sales prior to the closing date of the securitization. Years later, as they have needed to comply with the terms of the trust in order to foreclose, they paid employees to robotically sign (“robo-sign”) post-dated assignments which were recorded after the fact. As MERS enforced their claimed beneficiary rights against borrowers across the country, some courts granted them the rights of a beneficiary, some restricted their rights to that of a nominee, and some courts in judicial foreclosure states like Massachusetts allowed borrowers to challenge MERS standing to foreclose. (See: U.S. Bank National Ass’n v. Ibanez, 941 N.E. 2d 40 [Mass.2011] [holding that a pair of foreclosure sales were invalid because the foreclosing banks were not the mortgagees of record at the time of the foreclosure sale]; see also: Bevilacqua v. Rodriguez, 460 Mass. 762, 955 N.E.2d 884, 898 [Mass. 2011] [holding that the foreclosing bank did not hold title at the time of foreclosure sale]; see also: Eaton v. Fed. Nat’l Mortg. Assn, 969 N.E.2d 1118, 1134 [Mass.2012][(holding that a foreclosure sale was invalid because the foreclosing bank did not hold the Promissory NOTE at the time of sale].) Mostly, however, the bankers have been able to use the MERS identity to successfully foreclose.


Many individuals, including elected officials, have tried to bring down the MERS scheme and/ or get them to pay damages, through litigation including states and county recorders, but MERS has mostly beaten them back. In 2014, county recorder Nancy J. Becker sued MERS in the Eastern District of Pennsylvania federal court to challenge the practice of originators and servicers naming MERS as “beneficiary of record” or “nominee of the beneficiary” to avoid the recording fees that would otherwise have to be paid each time a mortgage was sold between real beneficiaries. Montgomery County v. Merscorp, Inc., 16 F. Supp.3d 542 (2014). Becker sued in her official capacity as the Montgomery County Pennsylvania Recorder of Deeds, but also on behalf of all other Pennsylvania Recorders of Deeds alleging that by creating their own private members-only registry for recording and tracking their own interests, the MERS Defendants had violated the Pennsylvania statute (21P.S. §351) which required these conveyances to be recorded by the county recorder.

On April 5, 2001, in response to complaints by county officials about the MERS fiction, New York’s Attorney General issued Informal Opinion No. 2001-2 stating that county clerks were not obligated to record a MERS mortgage if MERS was not the actual mortgagee and later that year Suffolk County Recorder Ed Romaine began refusing to record MERS mortgages. Merscorp, Inc., v. Romaine, 295 A.D.2d 431, 432, 743 N.Y.S.2d 562 (2002). Romaine’s action was upheld in the trial court as he asserted that MERS mortgages violated the “factual mandates” of New York’s mortgage statutes. Then Merscorp, Inc. took it to New York’s highest Court claiming that irreparable harm would come to their “business operation,” as well as to “the mortgage lending industry,” and to “the general public” if Romaine was not compelled to record their mortgages. Merscorp, Inc. v. Romaine, 8 N.Y. 3d 90 (2006.) The New York Court of Appeals reversed the trial court and compelled Romaine to record MERS mortgages. Merscorp, Inc., v. Romaine, 8 N.Y.3d 90, 861 N.E.2d 81, 828 N.Y.S.2d 266 (N.Y. 2006.)

Passing up the opportunity to nip MERS’ fraudulent business model in the bud, at a time (May 1, 2001) when only 16,000 MERS mortgages had been recorded, the New York Court of Appeals acknowledged that these mortgages clouded title but chose to kick the can down the road and leave it for someone else to deal with– like when it came time to assign these mortgages:

“…although the Clerk must record and index the MERS mortgage when presented, the Clerk may refuse to record a MERS assignment and discharge, because those instruments violate the "factual mandates" of section 321 (3) of the Real Property Law.” Merscorp, Inc., v. Romaine, 8 N.Y.3d 90, 861 N.E.2d 81, 828 N.Y.S.2d 266 (N.Y. 2006.)

The assignment issue came up in Judge Robert E. Grossman’s bankruptcy court in New York when US BANK intervened as a secured creditor after receiving an ASSIGNMENT from MERS “as the nominee of the original lender” and the debtor challenged MERS’ right to ASSIGN. In re Agard, 444 B.R. 231, 235 (U.S. 2011). Here, the lower state court had allowed a foreclosure after a MERS assignment and Judge Grossman was hand-cuffed by the Rooker-Feldman Doctrine and Res Judicata and forced to honor the state court’s foreclosure judgment and grant the rights of a secured creditor to US BANK even though Grossman did not believe MERS had the authority to own or ASSIGN mortgages, or to receive relief from the automatic stay as a creditor. In re Agard, 444 B.R. 231, 256 (U.S. 2011). Judge Grossman was limited to pointing out the preposterousness of an electronic database claiming to assign promissory notes, noting the MERS business model allowed members to self-report if they wished and took no part in any assignment of anyone’s Promissory note. In re Agard, 444 B.R. 231, 246 (U.S. 2011).


Ed Romaine argued that the fictional MERS mortgage itself prohibited a creditor from having the legally cognizable priority interest that is required for clear title because the mortgage could not be indexed according to the actual mortgagee pursuant to New York Real Property Law §316(a)(1). Merscorp, Inc., v. Romaine, 8 N.Y.3d 90, 861 N.E.2d 81, 828 N.Y.S.2d 266 (N.Y. 2006). In plain English the mortgage did not name a true beneficiary and therefore could not create a clear line from one beneficiary to another in the county records. The MERS circular argument – we said the emperor has clothes and now you can’t point out his nakedness without destabilizing the economy - was apparent in a California case where MERS sued borrowers in federal court after they quieted their title without naming MERS as a beneficiary. Mortgage Electronic Registration Systems, Inc., et al. v. Daniel Robinson et. al, 2:13-cv-07142-PSG-AS. In Robinson, MERS claimed that if they were not recognized as a true beneficiary it would render “millions of loans worth billions of dollars in California unsecured,” placing the responsibility on the court for something MERS had already done. Like the New York Court of Appeals, the judge in Robinson failed to assume this awesome responsibility, or to point out the plaintiff’s nakedness, and so the can was kicked further down the road and the MERS fiction continued.

According the U.S. Supreme Court, a mortgage and a Promissory note are inseparable and if one is assigned without the other it is “a nullity.” Carpenter v. Longan, 83 U.S. (16 Wall.) 271, 274 (1872.) In his opinion in Agard, Judge Grossman had also pointed out how the fiction of the MERS business model was itself the cause of unsecured promissory notes by splitting promissory notes from their mortgages:

“While it is generally true that a mortgage travels a parallel path with its corresponding debt obligation, the parties in this case have adopted a process which by its very terms alters this practice where mortgages are held by MERS as “mortgagee of record.” By MERS’s own account, the Note in this case was transferred among its members, while the Mortgage remained in MERS’ name. MERS admits that the very foundation of its business model as described herein requires that the Note and the Mortgage travel on divergent paths.” In re Agard, 444 B.R. 231, 247 (U.S. 2011).

Judge Grossman pointed out the absurdity of MERS’ misinterpretation of Carpenter v. Longan so as to claim that the mortgage and the note were inseparable, even though they had separated them. This was in direct conflict with the Supreme Court’s ruling in Carpenter v. Longan that when a mortgage and a promissory note were transacted separately those transactions were a nullity. However the mortgage banker owners of MERS now would bypass over 100 years of settled law with their MERS scheme, which would assign the mortgage without the promissory note, render the debt unsecured, and then join them back together again to create clear title when it was time to foreclose:

“The Movant’s failure to show that U.S. Bank holds the note should be fatal to the Movant’s standing. However, even if the Movant could show that U.S. Bank is the holder of the note, it still would have to establish that it holds the mortgage in order to prove that it is a secured creditor with standing to bring this Motion before this Court. The Movant urges the Court to adhere to the adage that a mortgage necessarily follows the same path as the note for which it stands as collateral. See Wells Fargo Bank, N.A., v. Perry, 875 N.Y. S. 2d 853, 856 (N.Y. Sup. Ct. 2009). In simple terms the Movant relies on the argument that a note and mortgage are inseparable. See Carpenter v. Longan, 83 U.S. 271, 274 (1872). Agard at 246-247.

SUING MERS by a Permissive Joinder Lawsuit

In 2001, when MERS sued Ed Romaine for not recording their mortgages in Suffolk County, there were a paltry 16,000 MERS mortgages recorded. Twenty years later over sixty percent (60%) of all mortgages and Deeds of Trust name MERS as a sham beneficiary and a new area of legal specialization has simultaneously, and not surprisingly, sprung up known as a foreclosure litigation. Meanwhile, the bankers that own MERS have continued to use the county recording system to record their mortgages while they have simultaneously invalidated that system by destroying clear title for millions of Americans by splitting mortgages from their promissory notes. Carpenter v. Longan, 83 U.S. (16 Wall.) 271, 274 (1872.) Ironically, the loss of funds to the county recorders from all these unrecorded assignments, while benefitting the bankers, has caused a cutback in municipal services, including the local state courts, where foreclosure-related litigation now represents about 70% of all civil cases. If you need proof of this, just sit in a civil courtroom in any county in California for one day and count the cases.

Under both the federal permissive joinder rule and the California Code, plaintiffs’ claims may be joined if they occur out of the same transaction, occurrence or series of transactions or occurrences and also arise out of common law or fact. [Fed. R. Civ. Proc. 20(a)(1); Cal. Code Civ. Proc. §378(a)(1).] As laid out in detail above, the MERS scheme is a common scheme, a common issue of law and a common series of occurrences. A MERS joinder lawsuit should start where the New York Appellate Court left off by attacking MERS’ false claims of the rights of a beneficiary including the right to assign after splitting the mortgage from the promissory note. Every holder of a MERS mortgage has had their promissory note rendered unsecured and has been deprived of clear title without notice in violation of the Fourteenth Amendment, because MERS placed no disclaimer on their mortgage that the fictional MERS beneficiary created for the benefit of the banking industry would render their debt unsecured and deprive them of clear title. A fictional beneficiary in your chain of title may not seem that important until you realize that fictional beneficiary has the right to sue you in federal court. Mortgage Electronic Registration Systems, Inc., et al. v. Daniel Robinson et. al, 2:13-cv-07142-PSG-AS. All citizens of this country, whether we have MERS mortgages or not, should demand a disclaimer on every MERS mortgage that this fake beneficiary is clouding a borrower’s title for the financial benefit of the banking industry and will also retain the right to sue you.


If you have a MERS mortgage and you have experienced some of these issues, you may be interested in being part of a MERS mass joinder lawsuit.