MERS, the exclusive so-called recording and tracking agent to the mortgage industry and focus of an ever expanding platform of criticism for fraud-based foreclosure practices, may have over-reached by aiding foreclosures as both a plaintiff - and defendant.
MERS (Mortgage Electronic Registration Systems), was created primarily to track the millions of mortgages originated nationwide but has redefined its role over the years taking an ambiguous interest in the mortgages it records and manages.
MERS positions itself on both sides of foreclosure lawsuits in what appears to be a leveraging strategy. However the dual positioning may back-fire and provide the basis for a loop-hole that could force the intractable giant to defend its co-defendant homeowner in the foreclosure it seeks to prevail in.
This practice of co-defendants seeking a defense from one another in civil lawsuits is most common with professional insurance agreements. When multiple contractors occupy a common work area such as a construction site or a hospital, these insurance agreements shields a particular contractor [or doctor] from claims arising out of the negligence of others.
This concept is particularly useful in a multiple contractor environment since plaintiff attorneys discriminate very little when identifying parties involved in their client's loss.
As mortgagee-in-chief, MERS is a party to the so-called mortgagor-mortgagee "covenant" with the homeowner which is an enforceable component of the loan. However the covenant has a subordinate position and is no more than the loan's embedded promise by the mortgagor-homeowner to satisfy the loan terms.
But if the mortgagor and mortgagee are both pitted on the same side within the context of the foreclosure lawsuit, it's not equitable for one co-defendant to blight the other particularly if the one showing indifference has allegiances to the plaintiff. This dynamic of MERS being a named co-defendant is essentially conflict of interest.
But MERS, with its Wall Street-like tactics promptly seeks to "split" that covenant from the loan during a highly complex loan pooling and securitization process. Until recently MERS' "mortgage splitting" has baffled even the courts in which the foreclosures actions are filed in.
MERS attempts to abandon that two-party covenant and lays as a dormant co-defendant to help advance the plaintiff's foreclosure action. In reality the foreclosing plaintiff is no more than a MERS assignee within MERS' closed eco-system of collateralized debt.
As the delegated mortgagee, MERS fills a role that is traditionally filled by a foreclosing bank. It commissions the foreclosure and hires local law firms to handle the foreclosure action, but cleverly names itself a defendant in an attempt to side-step that almost undetectable mortgagor-mortgagee covenant.
This side-stepping breach of the mortgagor-mortgagee covenant creates a unique opportunity for the embattled homeowner to seek a rigorous defense from its counterpart.
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