Curious “disclosure” by MERS and Countrywide: What is a nominee?

BOTTOM LINE: Use of a nominee causes an irreconcilable cloud on title entitling the homeowner to recovery on his homeowner title insurance policy. If homeowners purchased title insurance, they were at the same time in the same closing agreeing that the names of MERS and Countrywide would be used, for example, but that off-record activity could occur subjecting the homeowner to multiple liability and multiple foreclosures on the same property, each of whom he was bound to honor. This is precisely the kind of “disclosure” the 8th Circuit and others have been talking about. On its face, it creates irreconcilable conflicts which cannot be cured. You can’t “agree” that today is yesterday or tomorrow and that therefore the terms are different from what is stated in your agreement. Nobody could follow that kind of disclosure but that is exactly what what has been done and it based upon that confusion that intermediaries with no investment in the funding of any loan are nonetheless getting the windfall of residential real property transferred from the legitimate owner (the homeowner) to the illegitimate thief that stole it. Anyone can claim the status of being an intermediary and thus anyone can claim collection on the note and anyone can foreclose on the property.

Fortunately the law in every state holds that only the holder in due course can collect on an obligation. Unfortunately for hundreds of thousands of homeowners and millions more to come, they are getting away with it anyway. The measure that would put up a giant STOP sign would be the recognition that ALL of the title companies that issued title insurance policies are now liable under the terms of their policy — and all of them have a duty to defend the title of the homeowner pursuant to teh terms of the policy.

I received a “Disclosure Statement” currently in use in Florida by MERS and Countrywide which has led me to consider whether there is a direct action against the Title Agent and Title Insurance Company (if the homeowners purchased homeowner protection at closing). The allegations of such an action would be in addition to all others that have been mentioned on this blog. The claim against the title insurance company would be for them to pay or fix the problem you have with your title under the terms of the title policy, and not just because their agent was negligent or fraudulent in the manner in which the closing was conducted (which is the subject of other causes of action.

First let’s look at the “Disclosure Statement” which essentially makes the following assertions:

  • MERS is Mortgagee
  • MERS is not the real mortgagee
  • MERS is a private company tracking movements of your loan “as an alternative means of registering the mortgage lien in the public records.” [In other words an immediate cloud on title is created in Florida upon execution of such documents. The parties are admitting and acknowledging that off-record activity is intended to occur and will occur without notice to the world as what happened. It is thus an attempt to convert the judicial procedure of Florida into a non-judicial one — something that has been expressly rejected by the Florida legislature and courts]
  • Countrywide has nominated MERS to be its nominee. There is no recital that Countrywide is, was or will be the lender.
  • “Naming MERS does not affect your obligation to the Lender under the promissory note.” [Sorry, yes it does. This is like the bailment situations where the proprietor puts up a sign that says “not responsible for injuries or property loss.” They put the sign up because it works. Most people assume it states the law, period. But it doesn’t. Naming MERS as the Mortgagee and presumably naming Countrywide as the payee on the note creates a fatal flaw in the originating paperwork, especially when you consider the additional language on this “disclosure” document.]
  • This document was accompanied by another document called “Servicing Transfer Estimates” which clearly must be read in conjunction with all other loan closing documents including the above “disclosure” in which it is understood that servicing rights (not the note or mortgage per se) are or might be transferred and that a company called Recontrust, Company, N.A. “has been designated as the Trustee for this loan” (although it doesn’t say who designated them, how they did it or when. This document also discloses that Recontrust is a “member of the Countrywide family of companies” which means nothing. We do not know if it is a subsidiary, an affiliate, a joint venturer or wholly independent in a consortium led by Countrywide or some other entity.

All of this brings us to “what is a nominee “and what is the effect of having a “nominee.” See Our Glossary Under Foreclosure Forms, as quoted below.


  • See Nominee Trust Below
  • good-question-on-who-do-you-owe-money-to
  • mers-beneficial-interest-to-sue-cannot-exist-separately-from-other-beneficial-interests-in-the-note
  • A conduit or party acting as Mortgage Broker under false pretenses to the borrower giving the impression that it is has performed ordinary due diligence and applied ordinary underwriting standards to the approval of the loan, the appraisal, the borrower’s qualifications and ability to pay and the fees at closing. The Nominal Lender is the party named on the mortgage as the mortgagee and named on the note secured by the mortgage as the payee. It is usually a front for some larger entity or financial institution. In virtually all cases from 2001-2008 the party so named on the closing documents was a Nominal Lender. The nominal lender abandoned virtually all underwriting standards and assessment of risk of loss or default because the nominal lender was not assuming those risks. In all cases, the nominal lender had already pre-sold the or assigned rights under the mortgage and note before execution of the underlying documents (mortgage and note) or immediately after under the expectation and agreement, tacit or written, that the nominal lender would receive a fee or profit from closing the loan and that the actual funds would come from third parties involved in the securitization process eventually culminating in the issuance of ABS instruments. Thus the nominal lender lacks legal standing to pursue enforcement of the note or mortgage because the nominal lender has no financial interest in the note or the mortgage. It is equally true, however, that the claim under TILA, RESPA, RICO etc. might not be addressed to the correct party when the mortgage audit is completed and rendered with a proper request under RESPA for resolution. The nominal lender lacks legal authority to settle anything since it is no longer a holder in due course of the note or mortgage. In addition, the removal of the nominal lender from the actual underwriting and funding process probably extends the time for rescission indefinitely because the real parties in interest are never disclosed to the borrower. similarly it is unlikely that the nominal lender has the authority to negotiate a settlement or even execute a satisfaction of mortgage, since it cannot return the original note (see Lost, Destroyed Note).

Nominee Trust: See MERS

A nominee trust is generally described as being an instrument

  • (a) in writing,
  • (b) has one or more persons or corporations named as trustees,
  • (c) has an identified corpus, (“Corpus” means the asset or group of assets that are subject to the terms of the trust. In the mortgage meltdown context the Corpus is one or more (probably all) of the following:
  • (i) a particular mortgage, note or obligation related to a particular borrower and possibly a particular piece of property, generally a residential primary residence, generally but not always applicable in a non-judicial state where deeds of trust are employed in lieu of mortgages, (ii) a group of obligations (commonly referred to as a “pool” subject to a pooling and service agreement) relating to relating to but not necessarily derived from a specific group of borrowers, mortgages, notes, obligations and specific real estate, (iii) a group of obligations relating to commitments from specific borrowers, additional co-obligors arising from insurance, derivative indentures, credit default swaps, cross collateralization, overcollateralization and resulting reserves, statutory duties, and common law duties, (iv) a group of certificates issued to convey the ownership interest in the corpus to the owners of the certificates of mortgage-backed securities and (v) a resulting or constructive trust of all of the above wherein by operation of law and the employment of the single transaction doctrine and step transaction doctrine the entire trust includes as beneficiaries both the investors [current and past owners of certificates of mortgage backed securities] and “borrowers” (issuers and past issuers of mortgages, notes and obligations arising out of the securitization process, whether such issuance preceded the investment in certificates of mortgage backed securities or occurred afterward,

(d) has beneficiaries identified on a written schedule held by the trustees but not disclosed to the public, [in the mortgage meltdown context this would mean (i) the source of funds for the transaction {in the mortgage meltdown context, the source would be (as intended) a stacked successive group of individuals, trustees, investment banks, special purpose vehicles and investors as later changed, amended, altered or modified by insurance, collateralization, Federal Bailout and open or closed market trading on regulated or unregulated exchanges or shadow facilities}, and (ii) the source would be the issuer of the originating security (by operation of law) which would be the “borrowers” as identified in the originating “loan” documents. (SEE TILA, DISCLOSURE, RESPA: Borrower has a right to know the name and contact information of the lender, as well as all parties to the transaction and all fees and profits generated and/or received by all participants in order to assess the true value and cost of the “deal” the “borrower” was intended to execute at closing. It is a violation of TILA and other legal authority to hide and withhold this information. The creation of a scheme in which instruments are used as a pattern of conduct to hide and withheld the information from the borrower is by definition an intention to operate outside the requirements of laws governing mortgage lending and other forms of lending. It is partially for this reason that the right to rescind continues to run, the character of the transaction changes from issuing a negotiable instrument to a non-negotiable instrument, the defense of PAYMENT arises and that the transaction becomes, by operation of law a securities transaction involving a non-qualified issuer (the “borrower”) and a qualified investor neither of whom receives full disclosure.]

(e) contains various trustee powers as to corpus dispositions that can only be exercised when authorized by the beneficiaries. [Thus if U.S. Bank or Wells Fargo, for example, initiate foreclosure proceedings they must present a complete chain of authorization. This chain might include the unintended beneficiaries (borrowers et al) by operation of law].

The beneficiaries are the owners of the corpus for all purposes, including income, gift and estate taxation, except being the owners of record of the corpus. There is a Principal/Agent relationship between the Trustees and the Beneficiaries, and it is somewhat the reverse where usually in a Grantor Trust, the Trustee instructs the Beneficiaries on what he will/is allowed to do for them, but in a Nominee Trust the Beneficiaries direct the Trustee.

The nominee trust was conceived as an estate-planning vehicle to allow a decedent’s real estate to pass to beneficiaries without the necessity of it being probated, e.g., the undisclosed beneficiaries would be also be the trustees of the Nominee trust.

The trustees have liability in tort but not in contract if the trust has appropriate language stating that those dealing with the trust may look only to trust property when a dispute arises with the trustee and giving the trustee ostensible authority to deal with the trustee.

The reasons for holding title in such a trust are:

  • Anonymity of ownership, [TILA and other violations]
  • Ease of title transferability: you do not need to re-record a deed every time you want to change the percentage of interest in a property held by the trust, [See MERS]
  • Avoidance of state recording fees for deeds and a transfer tax (formerly known as tax stamps). Regarding new deeds (you can allocate and change a percentage of ownership in Realty merely be amending the percentage of ownership in the Schedule of beneficiaries) [In the mortgage meltdown context one of the many errors made by the participants in the securitization schemes is that they applied estate planning techniques and instrument to mortgage loans. No such application was ever intended by any legislature and no such application exists, legally, under any doctrine of law. ]

16 Responses

  1. in 2009 I had a mortgage broker draw up my mortgage which is a mers mortgage, 11 days later I was informed countrywide was my new servicer,then after bank of America became my servicer, I recently feel behind on payments, now facing foreclosure Ive asked bank of America who owns my mortgage they sent me a letter stating ginnie mae owns my mortgage (GNMA1 BANA 2936 PLS) They have me really confused Id like to know who can foreclose on me? also bank of America stated that I transfered all or part of my interest in the property and allowed my mortgage loan to be assumed?…

  2. I have a Fannie Mae loan that I got from a mortgage banker or loan broker. Fannie Mae’s name appears on the deed of trust.

    Does that mean that Fannie Mae is the nominal lender?


    It seems MERS can do what it wants to. The court in Hawaii doesn’t care if you have MERS as mortgagee and BOA or anyone else as lender. MERS can assign at will, and designate a servicer who can foreclose. We don’t have contract rights as “third parties”.

    “The court also rejected the plaintiffs’ allegations that MERS’ status as mortgagee caused the mortgage and the promissory note to become “split” from each other because they were not held by the same entity, and ruled that BNY Mellon could foreclose because they were acting as the agent of the noteholder.”

    I have a Taylor,Bean & Whitaker mortgage now serviced by Cenlar. My mortgage document shows MERS as the “mortgagee” and TB&W as the lender. The mortgage has not been reassigned from TB&W to any other entity in the county records. Is MERS really a legitimate noteholder in this?

  4. Fokls, get all your questions answered here
    Get on board and join us with the biggest battle of the Century against your greedy banks/wallstreet
    Tell them Armando U sent you
    Good Luck

  5. I live in Minnesota and just recieved a letter from an attorney that BAC will be forwarding the attorney documents to commence forclosure proceedings (a sheriff’s sale). It states that MERS as nominee for Countrywide is the original creditor for the debt. It does not state the current creditor and gives me 30 days to dispute the claim.

    I will be disputing and currently have verbaige as follows, “Your notice also advised that I have thirty days to dispute the validity of the debt and states that MERS as a nominee for CountryWide is foreclosing. The debt, as stated, is disputed. Please provide me with a copy of the note allowing MERS or CountryWide to foreclose and information on who is in possession of the note.”

    Is there something else I could be asking for or doing in this instance? If you are reading this in November of 2011, please respond via email Thank you. — Jenny

  6. Great post! Keep up the good work guys!

    Steve Vondran, Esq.
    Arizona Foreclosure Defense
    Phone (877) 276-5084

  7. […] Curious “disclosure” by MERS and Countrywide: What is a nominee? Posted on March 29, 2009 by livinglies (see also: December 7 First Amended Complaint 3 v Silverstein; You cannot understand California Non-Judicial Foreclosure law without Civil Code Section 2924—but what you learn from 2924 is that Civil Code Section 2924 protects the “living liars” so long as the correctly articulate the “living lies.”  See also Response to Order to Show Cause Suzanne Segal 11-24-09 and NOTICE OF CIVIL RIGHTS REMOVAL v BANK OF AMERICA AURORA I DIAZ 12-10-09-BARRETT DAFFIN FRAPPIER) […]

  8. I have some case law re: TILA tender rule. Who do I send it to?

    Also, the case law is not very encouraging. With the exception fo the 11th Circuit, most courts require the borrower to tender b4 granting rescission. The 4th Circuit is probably the worst. I have not Shepardized these cases though.

    I also have the Federal Reserve Board’s final rule that attempts to clarify the tender rule. However, even this, does give much direction:

    “Comment 15(d)(4)-1 is adopted as proposed, with some modifications for clarity, and does not address the additional issue raised by the commenters. The comment clarifies only that the sequence of procedures under§ 226.15(d)(2) and (3), or a court’s modification of those procedures under § 226.15(d)(4), does not affect consumers’ substantive right to rescind and to have the loanamount reduced, which may be necessary before the consumer is able to establish how the consumerwill refinance or otherwise repay the loan.”

  9. Mr. Garfield,

    Per your request here, I am researching some case law on tender.

    In my federal complaint I stated, “Plaintiff stands ready to restore any benefits received from the transacation to Defendant.”

    With this statement, I believe I was offering to tender. Do you agree? Please advise.



  11. The trial court judges in California are consistantly ruling that ORIGINAL notes are not required for the lender to conduct nonjudicial foreclosure.
    They have also consistantly recognized the ” tender rule”, requiring the homeowner to offer to pay, or actually par the debt prior to obtaining injunctive relief; e.g., TRO’S.
    If you have authority on these is issues please share.

  12. David Ronsenberg: See

  13. I am located in Florida and am preparing an answer to a foreclosure action filed by the mortgage servicer acting under an assigment of the mortgage by MERS to the servicer. The assignment was executed after the date of the default alleged in the foreclosure complaint. I am trying to locate a copy of the agreement between MERS and its customers that sets out the terms and conditions of MERS’ obligation to execute aan assignemnt of the mortgage. Can anyone help?

  14. California law has held for over 100 years that a California Deed of Trust is a conveyance of legal title to real property from the trustor to the trustee. The “trust” is created to secure the repayment of an obligation secured by the DOT. Beneficiaries do NOT hold legal title and, arguably, hold no form of title as the Trustor retains equitable title to the real property including the right to further encumber or, except for due on sal provisions, alienate his or her rights in the property. I have many published cases which expound upon this topic. While courts routinely treat DOTs as Mortgages for “practical” purposes the unique nature of California DOTs has never changed from that of a conveyance to a lien. Mortgages are hypothecations, DOTs are NOT.

  15. Taken directly from MERS Recommended Foreclosure Procedure Manual, 2002

    Once MERS is named in the original security instrument or by way of an assignment, the document is then recorded in the appropriate public land records. From this point on, no subsequent assignments of the mortgage to a MERS member needs to be recorded. MERS remains in the land records, as mortgagee, throughout the life of the loan so long as servicing is not sold to a non-MERS member. All subsequent transfers of ownership in mortgage loans and servicing rights for that loan are tracked electronically between MERS members through the MERS System. This process eliminates the opportunity for a break in the chain of title.

    Moreover, unless a MERS member transfers servicing rights to a loan registered on the MERS System to a non-MERS member, the loan stays on the system until it is paid off. The process to transfer servicing rights between MERS members requires an electronic confirmation from the buyer. It begins with the seller entering loan transfer information into the system, including the Mortgage Identification Number (explained below), the new servicer organizational identification number, the sale date, and the transfer effective date. The buyer then must submit a confirmation acknowledgment to the system. The old servicer and the new servicer are still required to notify the homeowner in writing when loan servicing is traded as required under the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et seq. A loan is de-registered from the system only if its servicing rights to a loan are transferred to a non-MERS member.

    This is where I get very confused. I hope that someone can enlighten me. I have an Assignment of Deed of Trust where MERS grants, assigns and transfers to GREENPOINT MORTGAGE FUNDING INC. all beneficial interest under my original deed of trust dated 4/14/2004. This document is signed on 9/17/08 by Tina Jones with MERS and recorded with the San Bernardino Recorder’s Office on 11/4/08. This document names Marin Conveyancing Corp as Trustee.

    I also have two Substitution of Trustee notices, one is signed on 10/13/08 and the other is signed on 11/10/08 by the same Tina Jones with Greenpoint Mortgage. Each Substitution of Trustee notices are basically identical with the exception of these dates, notary acknowledgements and the latter is recorded with the San Bernardino Recorder’s Office on 11/19/08.

    The verbiage reads “GREENPOINT MORTGAGE FUNDING, the undersigned, is the present Beneficiary under said Deed of Trust and desires to substitute a new Trustee under said Deed of Trust in the place of and instead of said original Trustee thereunder.

    Therefore, Greenpoint Mortgage Funding, present beneficiary hereby substitutes Old Republic Default Management as trustee under said deed of trust.

    Now the interesting part, on my recently received Notice of Trustee Sale notice signed on 2/6/09 and recorded on 2/17/09 (second filing by the way) it makes absolutely NO mention of GREENPOINT MORTGAGE FUNDING whatsoever. It states that MERS is the beneficiary again. It also refers to Old Republic Default Management as the trustee pursuant to the deed of trust recorded 4/22/2004 which is incorrect (Marin Conveyance is named) however incidental at this point.

    My question comes down to this. Is MERS legally in the right to pursue foreclosure proceedings when I have recorded documents stating that they are no longer the beneficial interest under my deed of trust? Based upon MERS Foreclosure Procedure outlined above, wasn’t MERS “de-registered” when the assignment was recorded?

    One final note: My sale date was postponed to 4/27/2009, the exact date that Bank of America replaces Countrywide as my named servicer.

    Diane of Socal

  16. Hello Mr. Garfield & Staff:

    Another GREAT article, and another tumbler picked in the lock!

    Hmmm. Preemptive application of unregulated estate planning schemes which are generally used as a haven from liabilities, but now applied to mortgages in order to “muddy the transaction,” confuse detection, evade both any pre-transaction regulation and the post-transaction Rule of Law, as well as facilitate fleecing of all tangible and intangible assets from the ignorant borrower.

    Information is empowerment. Hopefully the ‘Garfield Continuum’ will educate and enlighten the unintended beneficiaries, the borrowers.



    p.s. If I can be of assistance with the finalizing of the podcast(s) so that they’ll be available for download to the visitors of ‘LivingLies,’ please do not hesitate to delegate.

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