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While writing an expert declaration I managed to express something more clearly than I had previously done in other declarations. It starts off with the question “why does MERS” exist? And remember that the large banks all have the own version of MERS in house as well. My conclusion is that if the loans were truly securitized as represented, the county recording system would have been used.
While the argument is often advanced that MERS and equivalent databases at Aurora, Wells Fargo and Chase were created to facilitate the transfer of loans and mortgages, in my opinion this is a specious argument and certainly contrary to custom and practice in the industry.
If the loan was originated with funds of the REMIC, then the REMIC would have been named on the note and mortgage, disclosed to the borrower and there would be no reason to transfer the loans.
If the loans were purchased from the originator then a simple transaction would have taken place — the REMIC would have withdrawn funds, paid the originator, and received an indorsement and assignment of the note that would have been recorded. Again there would be no need for an elaborate system for transferring loans — unless the loans were being transferred in ways that the original investors did not know, and would not have permitted.
These passive unsecured databases are therefore merely tools of an illusion such that an official looking computer printout can be issued with different information about the loan tailored to the intended recipient of the report. The ability to manipulate data is infinite in these private databases whereas use of the county recording systems would have shown the actual trail of the loan, the money and the documents as required by law. Hence the obvious conclusion that the loans were not originated by the REMIC.
The real transactions would be disclosed if the alleged “holders” are required to show proof of loss and proof of payment. The banks are seeking to rely on a presumption about the real transaction rather than showing the actual transaction where the loan was transferred. That would require them to show money exchanging hands, which simply did not happen in virtually all cases where transfer of the loan is alleged.
By focusing on the “holder” definitions, the Court and counsel skip over the obvious. Who really is out of pocket on this transaction and why wasn’t it properly recorded in the county records. No, it isn’t to save money on filing fees. It was to cover-up the fact that they were trading with investor money.
It’s like someone gives you $10 to go to the store and buy something and on your way you stop off and gamble off 1/3 of it. Of course you are going to come back with less groceries. But if you make up a plausible story about prices going up at the store or getting mugged on your way home, you might get away with it. If you keep your own database on these events as proof of your lies, and if it looks formal enough, anyone might believe the reports.
Now your bets pay off. You still leave the person who gave you the $10 with a $3 loss and you keep the proceeds of the bets. The fact that the money you gambled was money entrusted to you for a specific purpose doesn’t even enter into the equation.
The conclusion I reach is that the only reason for these private databases is that the banks knew in advance that they would be diverting money into their own pockets and they wanted something that looked official to cover-up their illegal acts. It doesn’t seal the deal but it should get you some traction in court.