Mortgage Issues

MORTGAGE ISSUES
Sunday, May 2, 2010

Moderator: Matthew Mason, Esq., NACBA Director (Detroit, MI)
Panelists: O. Max Gardner III, Esq. (Shelby, NC)
Prof. Christopher Peterson, Esq., Univ. of Utah College of
Law (Salt Lake City, UT)
Pamela Stewart, Esq., NACBA Director (Houston, TX)

National Association of
Consumer Bankruptcy Attorneys

18
th
Annual NACBA Convention - 2010
San Francisco, CA

Educational Program Materials

April 30 May 2, 2010

San Francisco Marriott Marquis

Copyright 2010

National Association of Consumer Bankruptcy Attorneys, Inc. (NACBA)

All rights reserved.

Printed in the United States of America

This publication is designed as a resource for use by attorneys. The contents are not intended to be specific legal
advice with regard to any particular matter. Users of this publication are advised to perform their own independent
study of issues covered. Subsequent changes to statutes or in case law may have occurred. Furthermore, the
accuracy of the contents has not been verified.
Table of Contents
1. Outline MERS NACBA Presentation 021010
2. Table of Contents 021510
3. NACBA 2010 Mortgage Issues MERS Article Peterson
4. NACBA 2010 Mortgage Issues Max and Dicks Basic Roadmap Securitized
Mortgage
5. NACBA 2010 Mortgage Issues Complaint Mortgage Void Transfer and
Assignment
6. NACBA 2010 Mortgage Issues Complaint Avoid Mortgage Securitized
Trust
7. NACBA Mortgage Issues Motion to Dismiss MERS No Standing
8. NACBA Mortgage Issues Motion to Dismiss Motion for Relief No Standing
9. NACBA Mortgage Issues First Interropgatories and Request to Produce
10. NACBA 2010 Mortgage Issues Request for Production Documents
Mortgage Loans Fees
11. NACBA 2010 Mortgage Issues First Request for Admissions Real Party
Interest Securitized Trust
12. NACBA 2010 Mortgage Issues HAFA Short Sale Agreement Ex A
13. NACBA 2010 Mortgage Issues HAFA Request Approval Short Sale Ex A1
14. NACBA 2010 Mortgage Issues HAFA Short Sale Approval Ex B.
15. NACBA 2010 Mortgage Issues HAFA Deed In Lieu Ex C
16. NACBA 2010 Mortgage Issues Recent MERS Cases

Mortgage Issues: Foreclosure, Subprime Mortgage Lending, and the
Mortgage Electronic Registration System *

Christopher L. Peterson, Associate Dean for Academic Affairs and Professor of Law, S. J
Quinney College of Law, Salt Lake City, Utah, O. Max Gardner, Esq., Shelby, North Carolina,
Pamela Stewart, Esq., Houston, Texas and Matthew J. Mason, Esq., Detroit, Michigan,
Moderator.

I. The American Real Property Recording System Professor Christopher Peterson
II. The Origin and Operation of MERS
III. The Questionable Legal Foundation of MERS
A. MERS Does Not Own Legal Title to Mortgages Registered On Its Database
B. MERS Lacks Standing to Bring Mortgage Foreclosures
C. MERS Foreclosure Efforts Implicate the Federal Fair Debt Collection Practices Act
i. MERS is a Third Party Debt Collector
ii. Mortgage Servicers that Cloak Themselves in MERS Name Should be
Construed as Debt Collectors
D. Loans Recorded in MERS Name May Lack Priority Against Subsequent Purchasers
for Value and Bankruptcy Trustees
IV. Securitization and Mortgage Litigation O. Max Gardner
A. Identifying the Parties
B. The Objective of the Litigation
C. The Complaint/ Opposing Motions for Relief from Stay
i. Standing - Not Real Party in Interest
ii. Invalid Assignment
iii. Incorrect Account/no documentation
D. The Defendants
E. How to Deal with the 12(b)(6) Motion
F. Discovery
i. Turning the Complaint into Request for Admissions
ii. What Good are Interrogatories
iii. The Request for Production of Documents, collection notes, KLTs, P309s,
etc.
iv. Depositions of all Signors
G. The FRCiv P 30(b)(6) Witness
H. The Master Document Custodian and Deposition with Subpoena to Produce
I. The Settlement Agreement
V. Home Affordable Foreclosure Alternatives (HAFA) Pamela Stewart
A. Short Sale
B. Deed in Lieu

* A copy of the working draft of the article Foreclosure, Subprime Mortgage Lending, and
the Mortgage Electronic Registration System by Professor Peterson, is in the materials. See
also: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1469749
Table of Contents

Mortgage Issues: Foreclosure, Subprime Mortgage Lending, and the
Mortgage Electronic Registration System

Christopher L. Peterson, Associate Dean for Academic Affairs and Professor of Law, S. J
Quinney College of Law, Salt Lake City, Utah, O. Max Gardner, Esq., Shelby, North
Carolina, Pamela Stewart, Esq., Houston, Texas and Matthew J. Mason, Esq., Detroit,
Michigan, Moderator.

I. Outline

II. Exhibits
A. Working Draft Article, Christopher L. Peterson, Foreclosure, Subprime
Mortgage Lending and the Mortgage Electronic Registration System.
B. Your Clients Securitized Mortgage: A Basic Roadmap.
C. Sample Complaint, Chapter 13, Adversary Proceeding, Backdated
Assignment Invalid, Proof of Claim Not Supported by Documentation
D. Sample Complaint, Chapter 13, Adversary Proceeding, Securitized Trust, No
Standing to Support Proof of Claim; No Supporting Documents in Violation of
Rule 3001, Invalid Fees and Charges.
E. NCLC, Sample Motion to Dismiss State Court Foreclosure Complaint,
MERS: No Standing: Not Real Party in Interest.
F. Motion to Dismiss Motion for Relief from Automatic Stay, No Standing:
Not Real Party in Interest.
G. Sample Interrogatories and Request for Production of Documents: Securitized
Trust.
H. Sample Request for Production of Documents: Mortgage Loan Transactions,
Transaction History, Payment History, Substantiation of Legal Fees and
Expenses.
I. Sample Request for Admissions: Proof of Claim, Fees and Charges.
J. Home Affordable Foreclosure Alternatives Program (HAFA): Short Sale
Agreement.
K. HAFA Program: Request for Approval of Short Sale.
L. HAFA Program: Alternative Request for Short Sale Approval.
M. HAFA Program: Deed in Lieu Agreement.
N. Recent MERS Cases

Electronic copy available at: http://ssrn.com/abstract=1469749
1

FORECLOSURE, SUBPRIME MORTGAGE LENDING, AND
THE MORTGAGE ELECTRONIC REGISTRATION SYSTEM

Christopher L. Peterson
*

TABLE OF CONTENTS

I. THE AMERICAN REAL PROPERTY RECORDING SYSTEM
II. THE ORIGIN AND OPERATION OF MERS
III. THE QUESTIONABLE LEGAL FOUNDATION OF MERS
A. MERS Does Not Own Legal Title to Mortgages Registered On Its
Database
B. MERS Lacks Standing to Bring Mortgage Foreclosures
C. MERS Foreclosure Efforts Implicate the Federal Fair Debt
Collection Practices Act
i. MERS is a Third Party Debt Collector
ii. Mortgage Servicers that Cloak Themselves in MERS Name
Should be Construed as Debt Collectors
D. Loans Recorded in MERS Name May Lack Priority Against
Subsequent Purchasers for Value and Bankruptcy Trustees
IV. ANALYZING MERS ROLE IN THE RESIDENTIAL MORTGAGE MARKET
A. MERS and the Mortgage Foreclosure Crisis
B. MERS and Atrophy of the Land Title Information Infrastructure
C. Title Recording Law and Democratic Governance
V. CONCLUSION

INTRODUCTION

In the past two years, subprime mortgage lending has forced the American
economy to the brink of a depression and fundamentally undermined world faith in
American consumer financial markets.
1

A host of dubiously underwritten
mortgage loans helped inflate a bubble in residential real estate values.
2
As it has

*
Associate Dean of Academic Affairs and Professor of Law, University of Utah, S.J .
Quinney College of Law. The author wishes to thank the following for helpful
conversations, comments, encouragement, research assistance, and/or suggestions: April
Charney, Prentis Cox, Ron Fuller, Michael Kent, Kathleen Keest, Tera Peterson, Diane
Thompson, and Michael Wolf. I am also grateful for helpful comments and questions posed
by faculty, students, and other participants attending presentations related to this project at
Seton Hall University, the University of Houston Law Center, Ohio State University, and
Harvard Law School.
1
Compare Paul Krugman, Crisis of Confidence, N.Y. TIMES, April 14, 2008 with Robert J .
Samuelson, How this Crisis is Different, WASH. POST., March 18, 2008.
2
Kareem Fahim & J anet Roberts, Foreclosures, With No End in Sight, N.Y. TIMES,
May 17, 2009, at NJ 1.
Electronic copy available at: http://ssrn.com/abstract=1469749
MERS - Working Draft 10/5/2009 6:01PM
2008] MORTGAGE ELECTRONIC REGISTRATION SYSTEM 2

become clear that millions of Americans are not capable of repaying loans crafted
for them by commission hungry brokers, the liquidity of securities drawn from
those loans froze.
3
Currently about 25 percent of all subprime home mortgages are
delinquent with millions more likely to follow.
4
One rating agency predicts that
between 40% and 50% of all subprime mortgages originated since 2006 will
eventually end in foreclosure.
5
As the volume of foreclosures increased, it put
downward pressure home prices creating the first decline in the national median
price for previously owned homes since the Great Depression of the 1930s.
6

According to one estimate over a quarter of all American households are currently
have negative equitythey owe more on their home mortgage than their home is
worth.
7
About half of all subprime borrowers are underwater on their loans.
8

Thousands of financial foreclosure rescue predators and con artists are openly
stalking desperate families looking for a financial lifeline.
9
County and municipal
governments in the Los Angeles area have begun campaigns to exterminate a
scourge of mosquitoes breeding in the rotten water of swimming pools behind
thousands of abandoned suburban homes.
10
In Cleveland, Ohio an estimated
15,000 of the areas 84,000 single-family homes are sitting vacant and
deteriorating into urban blight with squatters and scavengers taking over entire
neighborhoods.
11
America lost friends in places as far off as Norway and Australia
when municipal pension funds bottomed out on investments in American subprime

3
J oshua Boak, IMF Puts Subprime Loss Near $1 Trillion: Economic Damage
Equals $143 for Every Person on the Planet, CHI. TRIB., April 9, 2008, C1.
4
Paul Gores, Trouble at Home Among the 50 States and District of Columbia, MILWAUKEE
J OURNAL SENTINEL, August 21, 2009, at 1; E. Scott Reckard, States Mortgage Woes
forecast to Rise: Delinquencies on Loans will continue to Climb through 2009, TransUnion
Projects, L.A. TIMES, August 25, at 2.
5
Grant Bailey, Vincent Barberio, & Glenn Costello, Revised Loss Expectations for
2006 and 2007 Subprime Vintage Collateral, www.fitchratings.com, March 25,
2008, at 2.
6
Banks Collect Houses Amid Subprime Fallout, INTL HERALD TRIB., J uly 3, 2007, 10.
7
J ody Shenn, Underwater Mortgages to Hit 48%, Deutsche Bank Says,
Bloomberg.com, August 5, 2009, available at:
http://www.bloomberg.com/apps/news?pid=20601110&sid=ac9y1xr7yNhQ.
8
Les Christie, Underwater World, CNNMoney.com, August 6, 2009
9
Donna Leinwand, Foreclosure Rescue Scams Multiply: States, FTC Tackle
Fraud Virus Hitting Some Homeowners, USA TODAY, August 4, 2008, at 3A.
10
Steve Chawkins, A Magical Misery Tour in Stockton, L.A. TIMES, December 13,
2007, A1; Devid Streitfeld, Blight Moves in After Foreclosures: Untended
Properties Become Eyesores; Then There are the Uninvited Guests: Mosquitoes,
Vandals and Squatters, L.A. TIMES, August 28, 2007, A1.
11
Erik Eckholm, Foreclosures Force Suburbs to Fight Blight, N.Y. TIMES, March 3, 2007,
A1 (Many of the houses are filled with smelly trash and mattresses used by vagrants. They
have been stripped of aluminum siding, appliances, pipes and anything else that scavengers
can sell to scrap dealers.); Alex Kotlowitz, All Boarded Up, N.Y. TIMES, March 8, 2009
(The city estimates that 10,000 houses, or 1 in 13, are vacant. The county treasurer says it's
more likely 15,000. Most of the vacant houses are owned by lenders who foreclosed on the
properties and by the wholesalers who are now sweeping in to pick up houses in bulk, as if
they were trading in baseball cards.

mortgage securities.
12
The International Monetary Fund estimates subprime losses
at nearly a trillion dollars; about $143 for every person on the planet.
13

Reckless overleveraging on Wall Street combined with losses in mortgage
securities to squeeze the investment banking establishment. Two of the nations
formerly most reputable investment houses, Bear Sterns and Lehman Brothers,
collapsed when it became clear that its billions of dollars of their subprime
mortgage assets were virtually worthless.
14
For its part, the Federal Reserve Board
of Governors slashed interest rates on loans offered to member banks, keeping the
economy afloat, but fueling concerns of a return to 1970s-style stagflation.
15

Teetering on the edge of financial abyss, the Fed opened up new credit lines to
Wall Street investment firms, creating financial arrangements not unlike deposit
insurance, but chillingly devoid of traditional deposit insurance regulatory
oversightwithout any explicit prior approval from Congress,
16
In addition to the
crumpled Wall Street investment houses and hedge funds, smaller subprime
mortgage loan originators folded up their tents like the Bedouinover 100
different subprime mortgage origination companies systematically collapsed.
17

Currently over four hundred banks are on the FDICs problem list.
18

With so many fundamental changes, opportunities for moral hazard, agency
cost problems, consumer abuses, and impending lawsuits, perhaps the only group
with plethora of opportunities are law professors looking for salient article topics.
Indeed, the academy has responded with a new crop of scholarship exploring the
role of investment bankers, rating agencies, hedge funds, mortgage brokers,
mortgage originators, and loan servicers. It is, however, somewhat ironic that
virtually no academic attention has been paid to the one particular company that
has been a party in more subprime mortgage loans than any other. Mortgage
Electronic Registration Systems, Inc., commonly known as MERS, is a
corporation registered in Delaware and headquartered in the Virginia suburbs of
Washington, D.C.
19
MERS operates a computer database designed to track

12
J ulia Werdigier, Wall St.s Pullback on Financing Creates Openings for
Europes Smaller Banks, N.Y. TIMES, March 22, 2008, C3.
13
Boak, supra note X, at C1.
14
WILLIAM D. COHAN, HOUSE OF CARDS; A TALE OF HUBRIS AND WRETCHED
EXCESS ON WALL STREET 4 (2009); Devin Leonard, How Lehman got Its Real
Estate Fix, N.Y. TIMES, May 3, 2009, at BU 1.
15
Tom Lauricella, Quarterly Markets Review: Trying to Get Up Off the Mat ---
Bernanke Offers a Hand, As Stocks Fall in Quarter; Where's the Turning Point?
WALL ST. J ., April 1, 2008, C1.
16
Top Officials: Bear Rescue was not a Bailout; Senators are Told Possible
Collapse was Threat to Global Financial System, CHI. TRIB., April 4, 2008, C1.
17
Steve Stecklow, Subprime Lenders Failure Sparks Lawsuit Against Wall Street
Banks: People Who Bought Its Notes Lost All; FBI Comes Calling, WALL. ST. J .,
April 9, 2008, A1.
18
Damian Paletta & David Enrich, Banks on Sick List Top 400: Industrys Helath
Slides as Bad Loans Pile Up; Deposit-Insurance Fund Shrinks, WALL. ST. J .,
August 28, 2009.
19
Carson Mullen, MERS: Tracking Loans Electronically, MORTGAGE BANKING,
May 31, 2000, 62

servicing and ownership rights of mortgage loans anywhere in the United States.
20

Originators and secondary market players pay membership dues and per-
transaction fees to MERS in exchange for the right to use and access MERS
records.
21

But, in addition to keeping track of ownership and servicing rights, MERS has
attempted to take on a different, more aggressive, legal role. When closing on
home mortgages, mortgage lenders now often list MERS as the mortgagee of
record on the paper mortgagerather than the lender that is the actual
mortgagee.
22
The mortgage is then recorded with the county property recorders
office under MERS, Inc.s name, rather than the lenders nameeven though
MERS does not solicit, fund, service, or ever actually own any mortgage loans.
MERS then purports to remain the mortgagee for the life of a mortgage loan even
after the original lender or a subsequent assignee transfers the loan into a pool of
loans that are ultimately sold to investorsa process known as securitization.
Although MERS is a young company, 60 million mortgage loans are registered on
its system.
23
Indeed, today MERS is legally involved in the origination of
approximately 60% of all mortgage loans in the United States.
24
In past
generations, employees of county recording offices kept records of each individual
company that recorded mortgage loans and mortgage loan assignments. But today,
increasingly recording officials carry on something of a bizarre puppet show,
dutifully filing away records of the name of one company repeated over, and over
again: MERS.
MERS justifies its role in mortgage loan closings and securitization deals by
explaining that it is acting as a nominee for the parties.
25
The mortgage lending
industry obtains two principal benefits from attempting to use MERS as a
mortgagee of record in nominee capacity. First, under state secured credit laws,
when a mortgage is assigned, the assignee must record the assignment with the
county recording office, or risk losing priority vis--vis other creditors, buyers, or
lienors. Most counties charge a fee, ranging from $25 to $50, to record the
assignment, and use these fees to cover the cost of maintaining the real property
records.
26
Some counties also use recording fees to fund their court systems, legal
aid organizations, low income housing programs, or schools.
27
In this respect,
MERS role in acting as a mortgagee of record in nominee capacity is simply a tax

20
Howard Schneider, MERS Aids Electronic Mortgage Program, MORTGAGE
BANKING, J anuary 1, 1997.
21
Id.
22
See infra note X and accompanying text.
23
Kate Berry, Foreclosures Turn Up Heat on MERS, AM. BANKER, J uly 10, 2007,
at 1.
24
Id.
25
26
Andrew Lipton, Mortgage Electronic Registration Systems, Inc. (MERS): Its
Impact on the Credit Quality of First-Mortgage Jumbo MBS Transactions,
Moodys Investors Service Structure Finance Special, April 30, 1999, at 2.
27
See, e.g., Chelan County Auditor, Recording Fee Disbursement,
http://www.co.chelan.wa.us/ad/adr_fees.htm, (viewed Sept. 2, 2009) (illustrating
distribution of county recording fees in the State of Washington).

evasion tool.
28
By paying MERS a fee, the parties to a securitization lower their
operating costs. The second advantage MERS offers its customers comes later
when homeowners fall behind on their monthly payments. In addition to its
document custodial role, and its role as a tax evasion broker, MERS also frequently
attempts to bring home foreclosure proceedings in its own name, rather than the
name of the actual owner of the loan, which is often a trust owned by investors.
29

This eliminates the need for the trusta purely legal business entity with no
employees, offices, or assets other than its loansto foreclose in its own name, or
to reassign the loan to a loan servicing company to bring the foreclosure.
30

Throughout history, executioners have always worn masks. In the American
mortgage lending industry, MERS has become the veiled man wielding the home
foreclosure axe.
This Article is the first academic piece that explores the legal and public
policy foundations of the MERS system. Part I provides a brief explanation of the
origins of the county real property recording systems and the law governing real
property liens. Part II explains how MERS works, why mortgage bankers created
the company, and what MERS has done to transform the underlying assumptions
of state real property recording law. Part III explores three controversial legal
issues confronting MERS and the companies that have relied on it. In particular,
this Part queries whether MERS actually has standing to bring foreclosure actions;
whether MERS should be considered a debt collector under the federal Fair Debt
Collection Practices Act; and whether loans recorded in MERS name should have
priority in various collateral competitions under state law and the federal
bankruptcy code. Next, Part IV explores whether MERS bears some responsibility
for the current mortgage foreclosure crisis and what the long term effects of
privatized land title records will have on our public information infrastructure. Part
IV also considers the deeper question of whether the mortgage banking industry, in
creating and embracing MERS, has subverted the democratic governance of the
nations real property recording system.

I. THE AMERICAN REAL PROPERTY RECORDING SYSTEM

Public land title records have been a fundamental feature of American law
since before the founding of the Republic. Unlike feudal Europe, where most real
property was tied up in successive generations of aristocratic families, most early
colonists came to America seeking new opportunities.
31
Relatively wide
availability and lack of ancestral estates facilitated more frequent transfers of real
property among businesses and families.
32
Moreover, the American entrepreneurial

28
29
Christopher L. Peterson, Predatory Structured Finance, 28 CARDOZO L. REV.
2185, 2208-12 (2007).
30
Id.
31
POWELL ON REAL PROPERTY 82.01[1][b] (Michael Allen Wolf ed., 2007)
32
Id.

spirit combined with the modest means of most colonists to create great demand
for loans secured by the one widely available asset: land.
33

Perhaps then, it is not surprising that in the early seventeenth century,
Americans began experimenting with laws requiring that parties create public
records of conveyances and mortgages.
34
For example, in 1636 the General Court
of Massachusetts Plymouth Bay Colony adopted its first recording law which
required that all sales exchanges fites mortgages leases or other Conveyences of
howses and lands the sale to be acknowledged before the Governor or any one of
the Assistants and committed to the public Record.
35
Similarly, in 1639 the
Connecticut General Court insisted that all bargines or mortgages of land
whatsoever shall be accounted of no value until they be recorded.
36
Particularly
suspicious of concealed ownership, early Virginia law only required public
recording of real property interests when the grantee did not take possession of the
property.
37
By the revolution, every English colony had adopted a statutes
requiring that parties to a mortgage record their names, and a description of the
property in public office designed for that purpose.
38
Then, as now, mortgagees
that fail to record their mortgages or assignments, risk losing the ability to enforce
their contract as against a subsequent purchaser for value.
39

The necessity and usefulness of these early public title records is attested to by
their nearly universal and uninterrupted force in subsequent American law. Indeed,
Pennsylvanias first recording act, first adopted in 1717, remains in force to this
day.
40
Currently, all fifty states and the District of Columbia have recording
statutes similar to their colonial predecessors.
41
Moreover, preservation of public
records of mortgages proved so successful, in the twentieth century, all fifty states
have adopted Article 9 of the Uniform Commercial Code which creates an
analogous recording system for virtually all forms of personal property.
42
The
early colonial objective of these laws was, as it is today, to prevent disputes over
property rights and to facilitate the use of land as collateral by creating a
transparent public record that facilitates certainty in private bargains. Title
recording acts preserve an accessible history of land ownership with the same
dignity and evidentiary value that attaches to public records all for the benefit of

33
SYDNEY HOMER & RICHARD SYLLA, A HISTORY OF INTEREST RATES 280-81 (3d ed. 1996).
34
See, e.g., Piddge v. Tyler, 4 Mass. 541, 543-44 (1808) (discussing evolution of title and
mortgage recording law in Massachusetts).
35
Powell, supra note X, at 82.01[1][b] (quoting 11 Records of the Colony of New
Plymouth in New England 12 (D. Pulsifer ed. 1861)). The earliest American deed record
was a deed copied into the Plymouth Bay Colonys record book in 1627. PATTON AND
PALOMAR ON LAND TITLES 4 (3d ed. 2003).
36
Id. (quoting Trumbell, Connecticut Public Records of the Colony Prior to the Union with
the New Haven Colony May 1665 35 (1850)).
37
POWELL, supra note X, at 82.01[1][b]. Virginia adopted its first recording statute in
1639. PATTON AND PALOMAR, supra note X, at 4 n.7.
38
PATTON AND PALOMAR, supra note X, at 4.
39
5 TIFFANY ON REAL PROPERTY 1457 (1939); CARYL A. YZENBAARD,
RESIDENTIAL REAL ESTATE TRANSACTIONS 5:7 (1991); GRANT S. NELSON &
DALE WHITMAN, 1 REAL ESTSTE FINANCE LAW 5.34 (5
th
ed. 2007
40
PATTON AND PALOMAR, supra note X, at 4 n.7.
41
PATTON & PALOMAR, supra note X, at 4.
42
UNIF. COM. CODE. Art. 9. X.

the entire community.
43
Real property recording systems create an archive that
protects communities from commercial chaos following floods, earthquakes, fire,
hurricanes, financial panics, wars, and other disasters. Public land title records
created a platform, or infrastructure, upon which private commerce could take
place. Indeed, real property recording statutes are the earliest and most practical
expression of the American commitment to the use of transparent rule of law in the
preservation and orderly exchange of property rights.
All this is not to suggest that maintaining public land title records has been
easy or inexpensive. To record a mortgage or an assignment of a mortgage, the
mortgagee must generally deliver a copy of the document in question (often
executed in the presence of witnesses or a notary public) to a county clerk that time
stamps, indexes, and files the document. Most counties charge a fee, ranging from
$25 to $50, to cover the cost of maintaining the recording system, and possibly to
generate revenue for other county services such as schools, roads, or legal aid
offices.
44
The basic structure of most county title recording systems has included
two indexes: one that alphabetically lists the name of every grantor that has
recorded a document within a given time frame, and another that lists the name of
every grantee that has recorded a document within the same time frame.
45
When a
mortgage lenderwhich, like a buyer, is characterized as a purchaser under
property lawcontemplates offering a loan secured by the land, it can use these
indexes to verify that the debtor actually owns clear title to the land in question.
46

The lender wants to know whether the prospective debtor has already sold the land
or granted a mortgage to someone else. Historically, prospective purchasers began
their search by looking for the debtors name in the grantee index in reverse
chronological order. The prospective lender searches under the borrowers name
until it finds a record showing the name of the individual or business that sold or
gave the property to the borrower. This process is repeated for the debtors grantor,
and in turn the grantors grantor, creating a chain of title all the way back until a
root of title is found.
47
Next, the creditor searches the grantor index in
chronological order for each past owner of the land to discover whether it has been
sold or mortgaged to anyone not yet discovered. The creditor will want to find a
release showing that any past mortgages granted by any past or present owner have
been satisfied. After a thorough search, the recording system can reassure
prospective purchasers of the safety of their investment.
As Americas population has grown, time has passed, and commerce has
become more complex, real property title recording systems have become
voluminous and increasingly difficult to search.
48
In addition to deeds and
mortgages, they also can now include other property interests such as mechanics
liens, tax liens, and easements. As a result, title insurance companies have

43
PATTON & PALOMAR, supra note X, at 4.
44
Lipton, supra note X, at 2.
45
POWELL, supra note X, at 82.03[2][b].
46
POWELL, supra note X, at 82.01[2][a].
47
POWELL, supra note X, at 82.03[2][b].
48
Charles Szypszak, Public Registries and Private Solutions: An Evolving
American Real Estate Conveyance Regime, 24 WHITTIER L. REV. 663, 665-67
(2003).

developed expertise in bearing the cost of uncertainty associated with purchasing
interests in real property. Mortgage originators generally purchase insurance from
companies that specialize in searching title records that can be transferred to
secondary market mortgage assignees.
49
Moreover, because many counties
continue to use older, paper-based real property records, title insurance companies
have been maintaining plant copies of the public real property records since the
1960s.
50
These insurers, in effect, have carbon copies of most county real property
records and continually update them by entering each new recorded document into
their systems.
51
These private plant real property records are now generally
maintained on computers and are easier to search than public title records, but they
cannot function without the law creating legal incentives to deposit records into the
central government maintained system. Moreover, private plant recording systems
lack the permanence and stability of public records since title insurers are subject
to computer malfunction, fires, theft, bankruptcy, and are only willing maintain
records to the extent that is profitable to do so. While plant systems are easier to
search, they do not have the track record of hundreds of years of stability that
backs up public systems. Despite the introduction of private plant records, the
public title records continue to serve as the authoritative evidentiary benchmark in
disputes and as an archive upon which plant records can be constructed or
reconstructed.

49
Szypszak, supra note X, at 683.
50
11 THOMPSON ON REAL PROPERTY 92.05(b) (David A. Thomas, ed., 2
nd

Thomas ed. 2002).
51
Quintin J ohnstone, Land Transfers: Process and Processors, 22 Valpo. U. L.
Rev. 493, 507-08 (1988).

Figure A. Subprime Mortgage Loan Origination under Traditional
Interpretation of State Land Title Recording Acts.

Figure A. provides a graphic representation of the origination, assignment, and
recording of a typical subprime mortgage loan under a traditional interpretation of
state land title recording acts. In a typical subprime mortgage loan, a homeowner
communicates with a mortgage broker that receives a commission for selling the
loan. At closing the homeowner signs a promissory note on behalf of the
originating lender and a mortgage or deed of trust with the originator as the
mortgagee or the trust beneficiary. Before closing the originator generally
purchases a title insurance policy from a title insurer that searches the public land
title records, or a plant copy taken from the public records. Typically subprime
originators quickly assign their loans to a seller, which is usually a subsidiary of an
investment bank. Ultimately the promissory note and mortgage are then assigned,
along with many other loans, to a special purpose vehicle that usually takes the
form of a trust. A special purpose vehicle is a business entity that is exclusively a
repository for the loansit does not have any employees, offices, or assets other
than the loans it purchases. A pooling and servicing agreement specifies a trustee
to manage the loan assets and a servicer to collect monthly payments and interact
with the homeowner. The trust, then, transfers the right to receive the income
stream to an underwriter and then various investors such as mutual funds, hedge
funds, pension funds, and insurance companies. Under a traditional interpretation
of state land title recording acts, the seller and the trust must both record their
assignments in order to protect the priority of their mortgage against a subsequent
bona fide purchaser for value. Despite the costs recording mortgages and
p yme
Investors ,.
$ JlUl'Chase price1
1securities . .
( Placement Agent )
$ trust yield
t secunhes
Und.elWriter
.)-
$ cOnmUssion
$ JlUl'Chase p r i c e ~
Trust I
$ JlUl'Chase pricei
~
( Seller
'.
administrative
~
note
mortgage
$ fees seITlCes
( Trustee
$ less seller's
recording fee
discount record of
note
assignment
recording fee
mortgage
record of
( Servi.cer
recording fee assignment
record of
mortgage
cOnmUssion
Originator
u=ance( J
$ .I Tltle
("\ Insurer
prenuum
1
Broker
County Recording
note
Office
$ principal \. ) mortgage
title search
Homeowner
$ a nts

assignments, not a single American legislature has ever seriously considered
eliminating their public land title recording acts.
52

II. THE ORIGIN AND OPERATION OF MERS

Given the venerable and uninterrupted legacy of land title recording acts, it is
interesting that first fundamental change to the American public land title
recording systems in over three hundred years was not initiated by publically
elected leaders. Instead, the Mortgage Electronic Recording System was conceived
of and created by a tight-knit group of powerful mortgage industry insiders.
53
In
October of 1993, a task force of mortgage finance companies released a white
paper at an annual convention of mortgage bankers.
54
The paper suggested that an
electronic book entry system of tracking mortgage loans would be better for the
mortgage lending industry than the legal system of county recording offices.
55
The
paper encouraged comments from the real estate finance industry, leading to the
formation of a steering committee affiliated with the Mortgage Bankers
Association of America (MBA).
56
The MBA is a trade association supported
through dues paid by mortgage lending companies that conducts public relations
for the industry. This committee of mortgage bankers retained Ernst & Young, an
accounting firm, to study the feasibility of developing MERS. In addition to
studying the technological and financial hurdles, the accounting firm also did some
telephone interviews with mortgage loan originators, servicers, warehouse lenders,
custodians, assignment processors, and employees at Fannie Mae and Freddie Mac.
The accountants primary conclusion was that that the finance industry could save
a lot of money by deciding not to pay the fees that local governments require to
record mortgage assignments.
57

The legislative history of the MERS concept is not found in Congressional or
state assembly records, but in the trade magazine Mortgage Banking. In 1995 and
1996 the MBA trade associations steering committee developed a business plan
that would make MERS a reality.
58
The principal consultant involved in creating
MERS explained that the [o]riginal investors came in on faith because the

52
PATTON & PALOMAR, supra note X, at 4 (Recording acts are now in force in
all the states and the District of Columbia.).
53
Mullen, supra note X (MERSCORP, Inc., was formed by Mortgage Bankers
Association of America (MBA) member companies as a central electronic loan
registry in an ambitious attempt to help lenders streamline the lending process and
eliminate the need to record assignments when selling loans to other mortgage
companies.).
54
Phyllis K. Slesinger & Daniel McLaughlin, Mortgage Electronic Registration
System, 31 ID. L. REV. 805, 810-11 (1995).
55
Id.
56
Id.
57
Slessinger & McLaughlin, supra note X, at 811-12 (estimating savings of $51.7
million annually for mortgage servicers and $14.1 million annually for mortgage
originators).
58
Schneider, supra note X.

details of how MERS would work werent ironed out until mid-1996 at working
group meetings involving different industry players.
59
MERS Senior Vice
President of Operations and Information Management explained that the legal and
technological questions behind MERS were answered when [l]enders and
servicers of various sizes, along with the secondary market agencies, got in a
room together, walked through the process, and came to an agreement.
60
Two
years after releasing the initial white paper, MERS, Inc. incorporated in Delaware
as a non-stock corporation owned by mortgage banking companies that made
initial capital contributions ranging from $10,000 to $1,000,000.
61
According to a
Mortgage Banking Association Executive Vice President involved in the creation
of MERS the primary goal of the MERS initiative was to [l]ower costs for
servicers.
62

Although at first, MERS was only able to attract the participation of Fannie
Mae and Freddie Mac, private label subprime mortgage securitizers began using
MERS in 1999.
63
Today, mortgage finance companies currently use the MERS
name to interact with the land title recording system in one of two ways: either by
recording MERS name as an assignee, or by recording MERS name as the
original mortgagee. Figure B provides a graphic representation of the former.
Under this recording strategy the originating lender makes a traditional mortgage
loan by listing itself as the payee on the promissory note and as the mortgagee on
the security instrument. The loan is then assigned to a seller for repackaging
through securitization for investors. However, instead of recording the assignment
to the seller or the trust that will ultimately own the loan, the originator pays
MERS a fee to record an assignment to MERS in the county records. MERS
counsel maintains that MERS becomes a mortgagee of record even though its
ownership of the mortgage is fictional.
64

59
Id.
60
Id.
61
Id. The charter members of MERS, Inc. were: 1
st
Nationwide Mortgage; Allied
Group Mortgage, Inc.; American Home Funding; American Land Title
Association; Crestar Mortgage Corp.; Fannie Mae; Freddie Mac; GE Capital
Mortgage Services, Inc.; GMAC Residential Funding Corp.; HomeSide Lending,
Inc.; Knutson Mortgage Corp; Lau Capital Funding; Merrill Lynch Credit Corp;
Mortgage Bankers Association of America; Mortgage Guaranty Insurance Corp.;
Northwest Mortgage, Inc.; ReliaStar Mortgage Corp.; Source One Mortgage
Services Corp.; Texas Commerce Bank, NA; Chase Manhattan Mortgage; and,
Weyerhaeuser Mortgage Company. Id. Mortgage Electronic Registration Systems,
Inc. is actually a wholly owned subsidiary of MERSCORP, Inc. The dual structure
of the company was designed to prevent creditors of MERSCORP from attempting
to seize loans recorded in the Mortgage Electronic Registration Systems, Inc.s
name in the event that MERSCORP, Inc. declares bankruptcy. Mullen, supra note
X, at 62.
62
Id.
63
Mullen, supra note X.
64
R.K. Arnold, Yes, There is Life on MERS, 11 PROBATE & PROPERTY 32, 34
(J uly/August 1997). Arnold explains:

Figure B. Subprime Mortgage Loan Recording with MERS as Purported
Assignee.
Although MERS records an assignment in the real property records, the
promissory note which creates the legal obligation to repay the debt is not
negotiated to MERS.
65
Everyone agrees that MERS is never entitled to receive a
borrowers monthly payments, nor is MERS ever entitled to receive the proceeds
of a foreclosure or deed of trust sale. MERS has no actual financial interest in any
mortgage loan. MERS does not even provide lien releases of the mortgages it
purports to own, instead referring title attorneys, refinancing lenders, and
consumers to the loans servicer.
66
MERS revenue comes, not from repayment of

When a mortgage is registered on the MERS system, it receives a
mortgage identification number (MIN). The borrower executes a
traditional paper mortgage naming the lender as mortgagee, and the
lender executes an assignment of the mortgage to MERS. Both
documents are recorded in the public land records, making MERS the
mortgagee of record. From that point on, no additional mortgage
assignments will be recorded because MERS will remain the mortgagee
of record throughout the life of the loan.
Id.
65

66
Please Release Me!, INSIDE MERS, J an./Feb. 2004, 2. MERS instructs servicers
to prepare and record lien releases entirely on their own. But, the servicers are
instructed to do so in MERS name, even though MERS has nothing to do with the
decision to release the lien. Id.
Investors
note
actual mortgage
$ trust yield
note
actual mortgage
$ purchase price securities
MERSCORP, Inc. recording fee
record of
c
assignment assignment
$ commission
Placement Agent
$ less sellers
discount
recording fee COWlty RecordiJIg
record of
actual mortgage '- O_ffi.cT"""_e__."
title search

the loan or the disposition of collateral, but from fees that the originator and other
mortgage finance companies pay to MERS. Once a loan is assigned to MERS, the
public land title records no longer reveal who (or what) actually owns a lien on the
property in question.
After a few years in business, MERS decided it could help mortgage
financiers pay even less to county governments by simply doing away with the first
assignment to MERS, and instead listing MERS as the mortgagee in the original
mortgage. Figure C provides a graphic representation of subprime mortgage loan
origination where the parties record MERS name as the original mortgagee. Once
again, although MERS does not actually advance any loan principal to the
homeowner, does not have the right to receive any payments from the borrower,
and is not the actual party in interest in any foreclosure proceeding. Nevertheless,
the actual mortgagee pays a fee to MERS to induce MERS to record the mortgage
in MERS name. By eliminating the reference to an actual mortgagee or the actual
assignee, MERS estimated it would save the originator an average of $22.00 per
loan.
67

67
MERS Frequently Asked Questions, Does MERS change the current mortgage
closing process?, www.mersinc.org/why_mers/faq.aspx, viewed J une 9, 2004
([Y]oull save $22 or more per loan when you specify MERS as the Original
Mortgage of Record in the mortgage or deed of trust.); Mullen, supra note X
(The good news for companies embracing the system changes was that using
MOM [MERS as Original Mortgagee], as the practice has come to be known,
provides an immediate cost reduction of approximately $22 per loan.). Early
estimates suggest that the average cost reduction when MERS acts as an
assignee were between $15 and $17 a loan. Lipton, supra note X, at 2. More
recent estimates suggest that using MERS saves lenders and servicers
approximately $40 over the entire life of a mortgage loan. David F. Borrino,
MERS: Ten Years Old, USFN,
http://imis.usfn.org/Resources/ArticleLibrary/1733.aspx, (May 11, 2006) viewed
J uly 13, 2006.

Figure C. Subprime Mortgage Loan Recording with MERS as Purported
Mortgagee.

In addition to its record keeping and recording system liaison roles, MERS has
also become directly involved in consumer finance litigation. Historically, when a
homeowner defaults on a home mortgage the owner of the mortgage loan, or a
servicer hired to collect borrower payments, sues the homeowner in a foreclosure
action. In states requiring judicial proceedings for foreclosure, this process also
typically involves either in-house or retained outside legal counsel.
68
In states that
allow non-judicial foreclosure, this process is often faster and may not involve
significant participation by attorneys.
69
But, when MERS is listed in county
records as the owner of a mortgage, courts have generally made the natural
assumption that the appropriate plaintiff to brining a foreclosure action is MERS.
In order to move foreclosures along as quickly as possible, MERS has allowed
actual mortgagees and loan assignees or their servicers to bring foreclosure actions
in MERS name, rather than in their own name.
70
Thus, not only does use of
MERS services allow financiers to avoid county recording taxes, it also allows

68
12 THOMPSON ON REAL PROPERTY 101.04(b)(1) (1994 & Supp. 2007).
69
12 THOMPSON ON REAL PROPERTY 101.04(c)(1) (1994 & Supp. 2007).

70
MERS, STATE BY STATE MERS RECOMMENDED FORECLOSURE PROCEDURES,
supra note X, at 8 (Employees of the servicer will be certifying officers of MERS.
This means thay are authorized to sign any necessary documents as an officer of
MERS. . . . In other words, the same individual that signs the documents for the
servicer will continue to sign the documents, but now as an officer of MERS.)
$ payments
( Investors
$ p1ll'Chase price
1securities . .
( Placement Agent "")
$ trust yield
1 ( . secunhes
Und.elWllter
~
$ commission
$ p1ll'Chase price~
"SPV"
$ p1ll'Chase pricej
administrative ( Seller
J
$ fees services
note
actual mortgage
( Trustee
note
$ less sellers actual mortgage
discount
record of
MERSCORP, Inc. purported
( Servicer )
fee
J MERS, Inc.
mortgage
r
recording fee
1
cornnusslOn
o .. t " insurance
.1 Title rJ
County RecordiJIg $
nguu or J
7'\
premium
. ~ Insurer
Office
Broker
I note
1 )
$ principal \..
actual mortgage
title search
(' "
" HomeownerJ
orted mortgage

them to list an obscure, evidently official institution as the instigator of a
foreclosure.
With these services on offer, the mortgage finance industry quickly and
wholeheartedly embraced recording and foreclosing its mortgage loans in the name
of MERS, rather than the actual parties in interest. Instead of legislation or a
landmark court ruling, mortgage industry insiders report that the key development
in the acceptance of the MERS was the endorsement of credit rating agencies such
as Moodys, Standard and Poors, and Fitch Investment.
71
For example, in 1999
before any significant appellate judicial opinion on the subjectMoodys investor
services issued a report concluding that MERS mechanism to put creditors on
notice of a mortgage would not be harmed.
72
Moodys concluded without citation
to any court opinion, or even to any state recording statute, that subsequent
creditors of the entity selling the mortgages to the MBS [mortgage backed
securities] transactions [sic] should not be able to contest the conveyance of the
mortgages based on lack of notice.
73
In a front page article covering the Moodys
opinion Mortgage Banking reported that the most significant finding in the report
specified that in transactions where the securitizer used MERS, there would be no
need for new assignments of mortgages to the trustee of MBS transactions.
74

With the rating agencies stamp of approval, the use of MERS exploded in the
early 2000s. By late 2002 MERS had recorded its name, instead of the actual
assignee or mortgagee, in ten million residential home mortgages.
75
As the
subprime mortgage refinancing boom took off, MERS registered an average of
21,000 loans on its system per day.
76
Only a year later, the total number of loans
recorded in MERS name doubled to 20 million.
77
By May of 2007, this number
had tripled again to 60 million loans.
78
Sixty percent of all new mortgage loan
originations are recorded under MERS name, and more than half of the nations
existing residential loans are recorded under MERS name.
79
Not satisfied, MERS
CEO insists that [o]ur mission is to capture every mortgage loan in the country.
80

III. THE QUESTIONABLE LEGAL FOUNDATION OF MERS

Because MERS came to own over half of the nations mortgage loans in a
time span more brief than many lawsuits, there is sparse appellate law explicitly
dealing with the company and its unprecedented attempt to usurp county title
recording systems and become the national foreclosure plaintiff. The few opinions
that exist confronted issues of first impression with little in the way of legislative

71
72
73
74
75
MERS Registers 10 Million Loans, INSIDE MERS, Nov./Dec. 2002, 1.
76
Id.
77
MERS Registers 20 Million Loans, INSIDE MERS, J an./Feb. 2004, 1.
78
Berry, supra note, X, at 1.
79
MERS Registers 20 Million Loans, supra note X, at 1; Berry, supra note X.
80
Id.

or scholarly advice. Moreover, most of these opinions were written without the
benefit of hindsight brought to light by the recent collapse of the nations subprime
mortgage lending industry. Accordingly, as the judiciary presides over the forced
displacement of millions of American families from their homes, it is worthwhile
to take a fresh look at the legal foundation of MERS role in the land title
recording and home foreclosure systems. This Part looks at three important
doctrinal questions that remain unanswered regarding MERS: whether MERS
owns title to mortgages either as a mortgagee or an assignee; whether MERS has
standing to bring foreclosure lawsuits; whether MERS is a debt collector for
purposes of the federal Fair Debt Collection Practices Act; and, whether MERS has
priority against subsequent bona fide purchasers for value (including bankruptcy
trustees). While these are basic doctrinal questions, they nonetheless have
profound consequences, not only for the mortgage lending industry, but also for
the world economy.

A. MERS Does Not Own Legal Title to Mortgages Registered on Its Database

While the preceding Parts of this article have explained what MERS does, it
remains unclear what MERS is. Obviously, at the most simple level, MERS is a
Delaware corporation that provides mortgage loan related services. But even
MERS own contracts, attorneys, and spokespersons present a muddled account of
MERS identity in relationship to the mortgage loans registered on its database.
For example, the boilerplate contract provision used by mortgage originators in
MERS as original mortgagee loan contract states:

MERS is Mortgage Electronic Registration Systems, Inc. MERS is a
separate corporation that is acting solely as nominee for Lender and
Lenders successors and assigns. MERS is the mortgagee under this
Security Instrument. MERS is organized and existing under the laws of
Delaware, and has an address and telephone number of P.O. Box 2026,
Flint, MI 48501-2026, tel. (888) 679-MERS.
81

The second sentence seems to suggest that MERS is some sort of agenta
nomineeof the actual mortgagee. Yet, the third sentence flatly asserts that
MERS is the mortgagee. Which is it?
82
What is clear is that MERS cannot be
both. Surely, it is axiomatic the same entity cannot simultaneously be both an agent
and a principal with respect to the same property right.
83

81
Mortgage Electronic Registration Systems, Inc. v. Bluming, No. GD05-16795,
Civil Division, Court of Common Pleas of Allegheny County, PA, slip op. (May
31, 2006) (J . Timothy Patrick OReilly).
82
Cf Landmark Nat. Bank v. Kesler, No. 98489, 2008 WL 4180346, (Kan. App.
Sept 12, 2008) (Specifically, the mortgage says that the mortgagee is MERS,
though solely as nominee for the Lender. Does this mean that MERS really was
the mortgagee, even though it didnt lend money or have any rights to loan
repayments?).
83
The very first section of the Restatement of Agency Law clearly delineates that
an agent and a principal are different persons. Restatement (Third) of Agency Law

Nevertheless, other explanatory materials written by MERS to assist its
members in understanding the MERS system are equally schizophrenic. For
example, the companys Recommended Foreclosure Procedures report takes the
position that MERS is merely an agent:

MERS acts as a nominee (a form of agent) for the servicer and beneficial
owner of a mortgage loan in the public land records. MERS is designed to
operate within the legal framework in all U.S. jurisdictions and did not
require any changes to existing laws.
84

In contrast, MERS takes the opposite position when confused loan officers and
foreclosure attorneys press with pointed questions like Under what section of law
does MERS, if named nominee have the authority to assign and/or discharge the
mortgage?; Is a nominee like a power of attorney for the lender?; and, How
ought the mortgage be recorded in the clerks office?
85
In response to these three
questions MERS Vice President and Corporate Counsel explained:

Mortgage Electronic Registration systems, Inc. (MERS) gets its authority
to assign and/or discharge a mortgage because MERS is the mortgagee,
and as such holds legal title to the mortgage. The nominee language
does not take away from the fact that MERS is the mortgagee.
86

MERS position is no clearer in litigation. Interestingly, the company tends to
argue it is an actual mortgagee or assignee when it brings foreclosure actions;
but, when sued in cases alleging fraud, deceptive practices, or other statutory
consumer protection claims associated with loans registered on its system,
MERS argues it is merely an agent without exposure to liability.
87
Even more

1.01 (Agency is the fiduciary relationship that arises when one person (a
principal) manifests assent to another person (an agent) that the agent shall act
on the principals behalf and subject to the principals control. . . .). Moreover,
neither the popularity of MERS self-characterization, nor its contractual recitation,
are controlling. Id. 1.02 (An agency relationship arises only when the elements
stated in 1.01 are present. Whether a relationship is characterized as agency in an
agreement between the parties or in the context of industry or popular usage is not
controlling.).
84
MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC., STATE-BY-STATE MERS
RECOMMENDED FORECLOSURE PROCEDURES 4 (2002) (hereinafter MERS STATE-
BY-STATE FORECLOSURE PROCEDURES). Interestingly, the report does not cite
any legal authority for the proposition that MERS operates within the legal
authority of every state in the Union.
85
MERS Forum, FAQ with Sharon Horstkamp, MERS Vice President and
Corporate Counsel, www.mersinc.org/forum/viewreplies.aspx?id=13&tid=73 last
viewed June 9, 2004.
86
Id. (emphasis added).
87
Compare Landmark Nat. Bank v. Kesler, No. 98,489, 2008 WL 4180346, at
*1-*2 (Kan. Ct. App., Sept. 12 ,2008) (What is MERSs interest? MERS claims
that it holds the title to the second mortgage . . . . MERS objects to its

perplexing, in a series of bankruptcy cases filed and then consolidated in the
same bankruptcy court, MERS simultaneously brought the same type of
foreclosure related actions both solely in its own name and as a nominee on
behalf of other entities.
88

While the language in MERS boilerplate contracts is not particularly
enlightening, the basic economic principals of the law provide a simple answer to
this puzzle. The American legal tradition looks to the economic realities of a
transaction in determining whether a business is a secured creditorincluding a
mortgagee.
89
The most familiar application of this principal is found in the
Uniform Commercial Codes distinction between a security interest and a lease.
90

The U.C.C. insists that the words used by the parities to a contract are not
controlling.
91
Contracts where the parties explicitly describe a transaction as a
lease are universally construed as a security agreement where there is no
reasonably foreseeable likelihood of the lessor regaining possession of the goods
after the lease term.
92
Security agreements governing realtymortgages and
deeds of trustare no different on this point. Contracts creating mortgages are
construed as such even where the parties choose to describe the bargain with
different language.
93
It is equally axiomatic that where contracts do not create a

characterization as an agent) with In re Escher, 369 B.R. 862 (E.D. Pa. 2007)
(MERS role as nominee leads the Court to conclude that it cannot be liable on
any of the Plaintiffs [Truth in Lending or Pennsylvania consumer protection]
claims. A nominee is understood to be an agent for another. . . . Therefore MERS
will be dismissed from this action and no further reference to MERS will be
made. ); Hartman v. Deutsche Bank Nat. Trust Co., No. 07-5407, 2008 WL
2996515, *2 (E.D.Pa. Aug. 1, 2008) (accepting MERS argument that it could not
be liable under the Truth in Lending Act because there was no colorable allegation
that [the plaintiffs] mortgage loan was assigned to MERS, or that MERS was
ever the owner of that obligation.); Brief in Support of Defendants Motion to
Dismiss at 3, King v. Ocwen, Civil Action No. 07-11359, 2008 WL 2063553
(E.D.Mich, April 14, 2008) (arguing that MERS could not be liable for Fair Debt
Collection Practices Act violations because HSBC was the mortgagee for the
property. Ocwen is the servicer for the property. [And,] MERS acted solely as the
nominee for the original mortgagee of the property) (emphasis added).
88
In re Hawkins, No. BK-S-07-13593-LBR, 2009 WL 901766 (Bkrctcy.D.Nev.
March 31, 2009) (holding MERS lacks standing to lift automatic stay).
89
Blanco v. Novoa, 854 So.2d 672, 674 (Fla.App.Ct., 2003); Land Mark Nat. Bank
v. Kessler, No. 98,489, 2008 WL 4180346, at *1 (Kan. Ct. App., Sept. 12 ,2008);
Major's Furniture Mart, Inc. v. Castle Credit Corp., Inc., 602 F.2d 538, 543 (3rd
Cir.1979)
90
U.C.C. 1-203 (2005).
91
In re Homeplace Stores, Inc., 228 B.R. 88, 94 (Bankr.D.Del.1998).
92
In re WorldCom, Inc., 339 B.R. 56, 64 (Bankr..S.D.N.Y. 2006); Edwin E.
Huddleson, III, Old Wine in New Bottles:UCC Article 2a Leases, 39 Ala. L. Rev.
615, 627 (1988).
93
Standard Leasing Corp. v. Schmidt Aviation, Inc., 576 S.W.2d 181, 184 (Ark.,
1979); Trustees of Zion Methodist Church v. Smith, 81 N.E.2d 649, 650 (Ill.App.
Ct.,1948); Parry v. Reinertson, 224 N.W. 489, 490 (Iowa 1929); Hargrove v. Gerill
w

mortgage, courts will not construe one to exist merely because of boilerplate
language in the written memorialization of the deal.
94
MERS is not a mortgagee
(or an assignee) simply because ink on paper makes this assertionrather the la
compels courts to look to the economic nature of the transaction to identify MERS
role.
95

Indeed, the fundamental economic reality of MERS involvement in the
mortgage lending industry suggests that MERS is not a mortgagee with respect to
any loan registered on its database. A mortgagee is simply the party to whom a
parcel of real estate is mortgaged. Or, as Blacks Law Dictionary explains, a
mortgagee is [o]ne to whom property is mortgaged; the mortgage creditor, or
lender. -- Also termed mortgage-holder.
96
MERS is not the party to whom family
homes are mortgaged for at least three fundamental economic reasons. First,
MERS does not fund any loans. No money coming out of a MERS deposit account
is tendered as loan principal to homeowners. Second, no homeowners promise to
pay MERS any money. To this effect, MERS is never identified as the payee in a
promissory note and MERS is never entitled to receive any monthly payments
from the mortgagor. Finally, and perhaps most important, MERS is never entitled
to receive the proceeds of a foreclosure sale. Instead, these funds go to the actual
mortgagee (or assignee of the mortgagee) that is the true owner of the lien.
In cases where MERS claims to own legal title to mortgages by virtue of
assignment its position is no stronger. Unlike the investment trust that actually
owns the mortgage in a typical subprime securitization structure, MERS does not
pay the loan originator value in exchange for the mortgage. On the contrary, the
originator or a servicer pays MERS to take the assignment.
97
In these cases

Corp., 464 N.E.2d 1226, 1230, (Ill.App. Ct.1984); In re Berg, 387 B.R. 524, 555
(Bankr..N.D., 2008).
94
Secretary of Veterans Affairs v. Roma Food Enterprises of Florida, Inc., 840
So.2d 1066, 1066-67 (Fla.App.Ct., 2003); Moon v. Moon, 776 N.Y.S.2d 324, 325
(N.Y.A.D., 2004).
95
J a-Mo Associates, Inc. v. 56 Fulton St. Garage Corp. 30 A.D.2d 287, 290 (N.Y.
A.D. 1968) (While the court is not bound by the label which the parties applied to
the payment and may examine the true nature of the transaction, the payment here
bore none of the distinguishing characteristics which would render section 233 (of
the Real Property Law . . . ) applicable. There was no intention that the landlord
hold the money as security.) (citations omitted); Szabo Food Service, Inc. of
North Carolina v. Balentines, Inc., 206 S.E.2d 242, 249 (N.C. 1974); (It has long
been the rule with us that in determining whether a contract is one of bailment for
use, a lease with an option to purchase, or one of sale with an attempt to retain a
lien for the purchase price, the courts do not consider what description the parties
have given to it, but what is its essential character.) (citation omitted); Lee v.
Barnes, 362 P.2d 237, 240 (Wash. 1961) (The label affixed to a security interest
by the parties does not necessarily determine its legal significance.); See also
Dougherty v. Salt, 125 N.E. 94 (1919) (widely studied case explaining that [a]
note so given is not made for value received, however its maker may have
labeled it.)
96
BLACK'S LAW DICTIONARY (8th ed. 2004), mortgagee.
97
Arnold, supra note , at 33.

MERS is still not entitled to receive repayment of the mortgage loan.
98
Nor is
MERS entitled to the proceeds of a foreclosure sale.
99
MERS is being paid fees to
provide record keeping and foreclosure services, rather than MERS paying to own
liens on family residences.
Federal consumer protection and bankruptcy law also suggests that the MERS
does not own legal title to loans registered on its database. For example, under both
the Truth in Lending Act and the Home Ownership and Equity Protection Act a
mortgage assignee can be liable for an original lenders violations of those
statutes.
100
If MERS actually does own legal title mortgages it takes on
assignment, then it would have taken on potential liability under these statutes
for millions of the nations residential mortgage loans. Perhaps even more absurd,
suppose for a moment that MERS were to declare bankruptcy. If courts ultimately
agreed that MERS owns legal title to mortgage liens, it stands to reason that the
companys creditors would have a claim on that property. Yet it is commercial
madness to suggest that the right to foreclose on over half nations residential loans
could be sucked into one small companys bankruptcy proceedingseven though
that company never paid value for a single mortgage loan.
101

Moreover, the venerable rule that a mortgage follows a negotiated promissory
note belies MERS claim of owning legal title to mortgages.
102
Courts are virtually
unanimous in holding that where a mortgage lender with a promissory note
negotiates that note to a holder, the holder of the promissory note also obtains any
mortgage securing that note.
103
Indeed, this is the very reason why the U.S.

98
MERS RECOMMENDED FORECLOSURE PROCEDURES, supra note X, at 4 (MERS
does not create or transfer beneficial interests in mortgage loans or create
electronic assignments of the mortgage. What MERS does do is eliminate the need
for subsequent recorded assignments altogether. The transfer process of the
beneficial ownership of mortgage loans does not change with the arrival of
MERS.).
99
Id.
100
15 U.S.C. 1641 (2006).
101
Section 541 of the Bankrtupcty Code states that a bankrupt companys estate is
comprised of all the following property, wherever located and by whomever held:
all legal or equitable interests of the debtor in property as of the commencement of
the case. 11 U.S.C. 541(a)(1) (2009). Realistically, if the issue were ever forced
to the forefront, one would expect a court to conclude that the liens owned by
MERS were not included in MERS, Inc.s bankruptcy estate because [p]roperty of
the states does not include . . . any power that the debtor may exercise soley for the
benefit of an entity other than the debtor. Id. at 541(b)(1). This merely affirms the
point: MERS does not own mortgages.
102
RESTATMENT (THIRD) OF PROPERTY: MORTGAGES 5.4 (a), cmt. B (1997);
NELSON & WHITMAN, supra note X, at 5.27; GEORGE E. OSBORNE, HANDBOOK
ON THE LAW OF MORTGAGES 223 (1970);
103
In re Ivy Properties, Inc., 109 B.R. 10, 14 (Bkrtcy.D.Mass.,1989) (under
Massachusetts common law the assignment of a debt carries with it the underlying
mortgage); Margiewicz v. Terco Properties of Miami Beach, Inc., 441 So.2d 1124,
1125 (Fla.Dist. Ct. App.1983) (When a note secured by a mortgage is assigned, the
mortgage follows the note into the hands of the assignee); Rodney v. Arizona

Supreme Court heldover a century agothat a mortgage can have no separate
existence from its promissory note.
104
MERS claim to own legal title to
mortgages, despite the promissory notes those mortgages secure having been
negotiated elsewhere, flies in the face of the legal maxim endorsed by the Supreme
Court: accessorium non ducit, sequitur principalemthe accessory does not lead,
but rather follows the principal.
105
Mortgages are inseparable from promissory
notes because of the dependent and incidental relation that a mortgage has with
the obligation it secures.
106
The parties to mortgage securitizations do not
generally negotiate promissory notes to MERS.
107
Doing so would make no sense,
since MERS does not pay value for the note and is not entitled to receive payment.
Moreover, negotiating a note to MERS would expose MERS to assignee liability
for misbehavior on the part of loan originators by virtue of statutory and common
law assignee liability rules.
108
If a mortgage follows the note, then ultimately the
mortgage is owned by the trustee (assuming the securitization parities successfully
complete their paperwork), to whom the note is eventually endorsed. Suppose for a
moment that a disagreement arose between MERS and a securitization trustee over
who had legal title to a mortgage loan deposited into a securitization trust: No one

Bank, 836 P.2d 434, 436 (Ariz. Ct. App.1992); Brewer v. Atkeison, 25 So. 992,
993 (Ala. 1899) ([A]n assignment by the mortgagee of one of the mortgage notes
operates as an assignment pro tanto of the lien upon the lands.); Martindale v.
Burch, 10 N.W. 670, 671 (Iowa 1881) (That an assignment or transfer of a note,
secured by a mortgage, operates as an assignment of the mortgage lien, is a settled
rule of law.); Robinson Female Seminary v. Campbell, 55 P. 276. 277 (Kan.
1898) (the assignment of the note operated as an assignment of the mortgage
made to secure the note.); Page v. Pierce, 26 N.H. 371, 1853 WL 2428, at *4
(1853) (It is settled in this State, that the assignment of a debt secured by a
mortgage of land, is ipso facto an assignment of the security also.).
104
Carpenter v. Longan, 83 U.S. 271, 274 (1872). Compare J ackson v. Mortgage
Electronic Registration Systems, Inc., Slip Op., 2009 WL 2461257, *5 (Minn.
Aug. 13, 2009) (By acting as the nominal mortgagee of record for its members,
MERS has essentially separated the promissory note and the security instrument,
allowing the debt to be transferred without an assignment of the security
instrument.) with MERS STATE-BY-STATE FORECLOSURE PROCEDURES, supra
note X, at 5 (To reflect the interrelationship of the promissory note and mortgage
and to ensure these two instruments are tied together properly, the recital paragraph
names MERS, solely as nominee for Lender, as benefirciary.).
105
Id. at 276.
106
In re Hwang, -- B.R--, 2008 WL 4200129 at *5 (Bkrtcy.C.D.Cal. Sept. 4 2008)
(quoting Carpenter, 83 U.S. at 276).
107
Landmark Natl Bank v. Kessler, Land Mark Nat. Bank v. Kessler, No. 98,489,
2008 WL 4180346, at *1 (Kan. Ct. App., Sept. 12 ,2008); Peterson, Predatory
Structured Finance, supra note X, at X; Steven L. Schwarcz, The Alchemy of Asset
Securitization, 1 STAN. J .L. BUS. & FIN. 133, X (1994).
108
See, e.g., 15 U.S.C. 1641. Furthermore, although MERS would be considered
a holder, it would not be considered a holder in due course, since it does not pay
value for the negotiated instrument. Uniform Commercial Code 3-3XX.

can seriously claim that courts would award legal title to MERS instead of the
trustee acting on behalf of investors that actually paid for the loan.
In thousands of cases around the country MERS counsel continues to recite
the statement that MERS holds legal title to the mortgage as though it were the
finance equivalent of some tantric mantra. Yet, any meaningful economic analysis
of this claim exposes it as a simple falsehood. MERS does not own the lien
because it does not own the proceeds of the sale rendering disposition of the
property seized in exercising the lien.

B. MERS Lacks Standing to Bring Foreclosure Actions

If MERS does not own the liens on which it is recorded as mortgagee or
assignee, this naturally raises the question of where it gets the authority to bring
lawsuits attempting to eject families from their homes. The concept of standing, or
locus standi, refers to the capacity of a litigant to show a sufficient connection to
the subject matter of a lawsuit to justify the party's participation in the case. In state
courts, the requirement of standing sounds in the police powers of the states
sovereign authority to administer justice.
109
But in federal courts, the standing
doctrine derives from the justiciability requirement of Article III, 2 of the
Constitution which grants the federal judiciary the power to resolve only actual
cases and controversies.
110
The Supreme Court has developed an extensive
jurisprudence for determining whether the standing requirement of Article III is
satisfied.
111
Many state supreme courts have imbedded this federal jurisprudence
into their own state law, making their standing doctrines indistinguishable despite
differing sources of law.
112
On the other hand, some states have not followed
federal law in resolving the outer bounds of their standing requirements.
113
States
that have developed their own standing rules have generally been more permissive

109
See Hawkeye Bancorporation v. Iowa College Aid Com'n, 360 N.W.2d 798,
802 (Iowa 1985) (Unlike the federal courts, state courts are not bound by
constitutional strictures on standing; with state courts, standing is a self-imposed
rule of restraint); N.Y. State Club Ass'n, Inc. v. City of New York, 487 U.S. 1, 8
n.2 (1988) (the special limitations that Article III of the Constitution imposes on
the jurisdiction of the federal courts are not binding on the state courts); Asarco
Inc. v. Kadish, 490 U.S. 605, 617 (1989) (holding that the constraints of Article III
do not apply to state courts).
110
U.S. CONST. Art. III, 2.
111
Allen v. Wright, 468 U.S. 737, 751 (1984) (court recognizes the extensive body
of case law on standing).
112
See Stasha D. McBride, Civil Procedure: Time to Stand back: Unnecessary
Gate-Keeping to Oklahoma Courts, 56 Okla. L. Rev. 177, 177 (2003) (the
Oklahoma Supreme Court has implemented state standing requirements that
precisely mirror the federal standing doctrine)
113
Helen Hershkoff , State Courts and the Passive Virtures: Rethinking the
J udicial Function, 114 Harv. L. Rev. 1833, 1838 (2001) (Many state courts do
conform the scope of their judicial function to the Article III model).

in allowing plaintiffs to state a claim.
114
And, the Supreme Court has conceded to
states the power to do so, even where state courts adjudicate federal questions.
115

Federal courts, and states that model federal justiciability requirements,
impose a three part standing test requiring: (1) an injury in fact, (2) causation, and
(3) redressability.
116
Under the injury element, the Supreme Court has explained
that courts must find a concrete and particularized invasion of a legally protected
interest.
117
The causation element requires a fairly traceable connection between
the alleged injury in fact and the alleged conduct of the defendant.
118
And, for an
injury to be redressable, it must be likely that the plaintiffs injury will be
remedied by the relief the plaintiff seeks in bringing the suit.
119
When a debtor
cannot repay a mortgage loan this causes a clear injury in fact to the investors that
have purchased securities that draw on revenue from that loans monthly
payments. What is less is clear how a debtors failure to pay causes an injury in
fact to MERS, a company that has no factual expectation of receiving loan
payments or the proceeds of a foreclosure sale. MERS makes the same amount of
money with respect to the original mortgage agreement whether the borrower
repays or not.
Even if a court is willing to accept MERS dubious claim that it owns legal
title to a mortgage, this purely nominal ownership does not give rise to an actual
injury in fact required by the latest standing precedent. In J une of 2008 the
Supreme Court confronted for the first time the question of whether bare legal
title to a financial obligation is sufficient to create standing under Article III. In
Sprint Communications, Co. v. APCC Services, Inc.
120
the Court heard facts which
bear a resemblance to those involved in MERS transactions. The Sprint case
involved public payphone customers who made long-distance telephone calls using

114
It is unclear whether under their police powers states may adopt more restrictive
standing rules than federal courts. Arguably state courts may be obliged to apply
law at least as permissive on standing as federal standing rules when adjudicating a
federal claim. However, when adjudicating a state claim, one would suspect that
state courts are free to decline to exercise their sovereign power provided that
doing so does not deny due process of law. See generally Helen Hershoff, State
Courts and the Passive Virtues: Rethinking the Judicial Function, 114 HARV. L.
REV. 1833, 1835-37 (2001) (analyzing relationship of state standing law in relation
to the federal case and controversy requirement).
115
Asarco, Inc. v. Kadish, 490 U.S. 605, 617-18 (1989) (permitting adjudication of
federal claims in state court where plaintiff would not have met federal
justiciability requirements). In contrast, where a state claim is removed from state
court to federal court, the federal judiciary applies federal standing law. Intl
Primate Prot. League v. Admrs Tulane Educ. Fund, 895 F.2d 1056, 1058 (5
th
cir.
1990).
116
Sprint Communications Co., L.P. v. APCC Services, Inc., 128 S.Ct. 2531, 2535
(2008).
117
Id.
118
Id.
119
Id.
120
Sprint Communications Co., L.P. v. APCC Services, Inc., 128 S.Ct. 2531
(2008).
y
the
d

a toll free 1-800 telephone number and an access code that allowed customers to
draw on prepaid calling cards issued by Sprint Communications, a long-distance
carrier.
121
Sprint Communications, in turn, had contracts with payphone operators
to pay dial-around fees to the operators to compensate them for the cost of
allowing payphone users to connect to Sprints long-distance services in the first
place.
122
Because payphone operating companies have had difficulty obtaining
payment from Sprint and other long distance carriers, many operators assigned
their dial-around claims to billing and collection firms called aggregators to sue
on their behalf.
123
The named plaintiff, an aggregator called APCC Services, had
separately agreed to remit all the proceeds of its lawsuit back to the payphone
operators and that the operators would pay quarterly fees for the aggregators
services based on the number of payphones maintained by each operator.
124
In
defending the lawsuit, Sprint argued that the APCC services did not have standing
because it was the payphone operators, rather than the aggregator that brought the
suit, that were injured in fact.
125
The federal district court disagreed arguing that an
assignee for purposes of collection is entitled to bring a lawsuit when an assignor
transfers absolute legal title to a debt.
126
The U.S. Court of Appeals for D.C.
Circuit eventually agreed, allowing APCCs claims to go forward.
127
In a close 5-
4 decision, Justice Breyer delivered a majority opinion with an extensive
discussion of the history of standing in assignment. Although prior to the 17
th

century English law did not recognize assignments at all, by the early 18
th
centur
equity would allow suits by an assignee of the equitable interest in a debt where the
assignee also had a power of attorney granted by the original obligee.
128
The
original obligee could also sue based on the theory that it retained legal title to
debt, even though it had assigned away its beneficial interest.
129
The majority then
went on to point to a more recent history suggesting that courts have long foun
ways to allow assignees to bring suit; that where assignment is at issue, courts
both before and after the foundinghave always permitted the party with legal
title alone to bring suit; and that there is a strong tradition of specifically so suits
by assignees for collection.
130
Chief J ustice Roberts, writing the Sprint minority, focused on the fact that
under its compensation arrangement with payphone operators APCC did not was
not entitled to any of the proceeds of a successful lawsuit. Chief J ustice Roberts
dissent took issue with the majoritys historical characterizations emphasizing that
[w]e have never approved federal-court jurisdiction over a claim where the entire

121
Id at 2534.
122
Sprint Communications Co., L.P. v. APCC Services, Inc., 128 S.Ct. 2531, 2534
(2008).
123
Id.
124
Id.
125
Id. at 2542.
126
Id. at 2534.
127
Id. at 253435.
128
Id. at 253637.
129
Id. at 2537.
130
Id. at 2541.

relief requested will run to a party not before the court. Never.
131
The dissent
expressed concern that by granting standing to collection agencies that lack some
beneficial interest, such as the payphone claim aggregators, the right to sue risks
becoming a marketable commodity severed from a personal stake in the
litigation.
132
For its part, the majority contended that the dissents concerns were
over-stated since federal courts routinely entertain suits which will result in relief
for parties that are not themselves directly bringing suit such as where [t]rustees
bring suits to benefit their trusts.
133

In its role as a foreclosure lawsuit plaintiff, MERS is in many respects
comparable to APCC services and other payphone dial around fee claim
aggregators. Like the aggregators, MERS does not own any equitable or beneficial
interest in the debts it collects.
134
Similar to APCC, MERS remits the proceeds of
any foreclosure sale to the actual, beneficial loan owners and is compensated out
fees for registering loans on the MERS system.
Still, there are at least two crucial distinctions between payphone aggregators,
such as APCC Services, and MERS. First, MERS claim of ownership rests on an
argument that it holds only legal title to the mortgage, rather than legal title to the
debt. But this claim flies in the face of Supreme Court jurisprudence treating notes
and mortgages securing notes as inseparable.
135
Thus, the Courts holding that an
assignment of the note carries the mortgage with it, while an assignment of the
latter alone is a nullity.
136
Second (and perhaps even more fundamentally), the
Sprint case is distinguishable from MERS because in the relationship between
payphone operators and claim aggregators, such as APCC Services, there is only
one assignment and one party that purports to hold legal title to the debt. In a
mortgage securitization deals, there is another party that already lays claim to legal
title to the debt: the trustee that holds legal title to trust assets on behalf of
investors that purchase beneficial interestsmeaning asset backed securities
drawn from the trust. In securitization deals, mortgage loans are deposited into a
trust where the trustee holds legal title to trust assets for the benefit of the investors
who, by definition, hold a beneficial interest in trust assets.
137
It is an ancient and
universally accepted common law principal tested again and again on bar exams
across our country that trustees derive their power to control trust assets by a

131
Id. at 2551 (Roberts, C.J ., dissenting).
132
Id.
133
Id. at 2543 (majority opinion).
134
Landmark Natl Bank v. Kessler, X at *5 (labeling MERS as a party with no
beneficial interest [that] is outside the realm of necessary parties.)
135
Carpenter v. Longan, 83 U.S. 271, 274, (1872). (Where negotiable note is
secured by mortgage, the note and mortgage are inseparable, the assignment of
the note carries the mortgage with it, while an assignment of the latter alone is a
nullity.)
136
Carpenter, 83 U.S. at 274. See also In re Hwang, -- B.R--, 2008 WL 4200129 at
*6 (Bkrtcy.C.D.Cal. Sept. 4 2008) (holding Only the Holder of the Note is the
Real Party in Interest.).
137
Peterson, Predatory Structured Finance, supra note X, at 2209; Steven L.
Schwarcz, The Alchemy of Asset Securitization, 1 STAN. J .L. BUS. & FIN. 133,
135 (1994).

dividing equitable ownership and legal ownership of trust assets.
138
Prior to the
introduction of MERS to the mortgage markets, in the history of the Anglo-
American common law, there has been no case that holds that a debt collection
plaintiff that lacks any beneficial interest in the debt has standing to sue even
where legal title to that debt is held by a trustee. Nor has there ever been a case that
holds that there are two separate legal titles to the same property. Indeed, MERS
owns neither the beneficial interest in the debt that is owned by investors; nor does
it own legal title to the debt because that is held by the trustee. In order to
reconcile MERS claim to owning legal title to mortgage loans registered on its
system, with the trustees right to claim the same thing, one must hypothesize
some new form of meta legal title hitherto unknown in our system. To grant
MERS standing based on legal title held by someone else, is to treat the notion of
legal title as some magical nonsense where ownership means nothing other than a
willingness on the part of courts to let financiers seize homes however is most
convenient for them.
The case against MERS standing is only stronger where MERS acts as an
original mortgagee instead of an assignee. In these cases, MERS is not an
assignee at all, and therefore must base its claim to standing purely on its
economically fictitious claim of owning a borrowers home in title theory states, or
on owning a valuable lien in lien theory states.
139
Particularly in title theory states,
surely it is absurd to claim that MERS, rather than the trustee of the investors that
paid value, legally owns the hundreds of thousands of family homes with loans
registered on MERS record keeping system.
In at least one sense MERS argument that it has standing to bring foreclosure
lawsuits is fortuitous. Currently there is a growing split in authority on whether
MERS has standing to bring foreclosure actions against homeowners.
140
Generally,
courts that look beyond the formal labels affixed to MERS by the parties have been
reluctant to grant standing.
141
In contrast, courts granting standing have generally

138
Rest. 2d Trusts 2, cmnt. f. (In a trust there is a separation of interests in the
subject matter of the trust, the beneficiary having an equitable interest and the
trustee having an interest which is normally a legal interest.).
139
A majority of American jurisdictions adhere to a lien theory of mortgages that
holds the mortgagor retains legal title to the realty, while mortgagee holds only a
lien as security. Thompson on Real Property, supra note X at 101.01(b)(2). A
minority of jurisdictions continue to adhere to the English view that mortgages are
a conveyance of a defeasible interest. Id. at 101.01(b)(1). In this older, minority
view title shifts to the mortgagee, but the mortgagor retains a rights of possession
and redemption. Id.
140
See Baxter Dunaway, Statutory prerequisites--Standing and assignment of
mortgages to be of record, 5 L. Distressed Real Est. 73:15 (Updated 2008) (there
has been litigation over the standing of MERS, however the majority of the cases
have held MERS has standing); LaSalle Bank NA v. Lamy, 12 Misc.3d 1191, 824
N.Y.S.2d 796, at *2 (2006).
141
Compare LaSalle Bank NA v. Lamy, 12 Misc.3d 1191, 824 N.Y.S.2d 796, at *2
(2006) ([T]his court and others have repeatedly held that a nominee of the owner
of the note and mortgage, such as Mortgage Electronic Registration Systems, Inc.
MERS), may not prosecute a mortgage foreclosure action in its own name as

written conclusory opinions that refuse to look beyond MERS nominal claims of
ownership.
142
Perhaps the issue of whether MERS has standing to foreclose on
homeowners will present an ideal test case to erect a bulwark on the holding in
Sprint Communications. Chief Justice Roberts and the other Sprint dissenters were
concerned that allowing debt collectors with only naked legal title to bring
collection lawsuits would lead to the commoditization of standing. By holding that
MERS does not have standing to bring lawsuits courts would at least take the
position that assignees for purposes of debt collection lack standing where another
party, such as a trustee for a loan held in trust, already holds legal title to the debt.

C. MERS Foreclosure Efforts Implicate the Federal Fair Debt

The primary federal statute promoting civility, transparency, and accuracy in
debt collection is the federal Fair Debt Collection Practices Act (FDCPA).
143
This
statute, adopted in 1977, aims to provide minimum standards of public decency
and civilized behavior in the collection of debts.
144
For example, the statute forbids
harassment, false or misleading representations, and a variety of other unfair
collection tactics, including threatening foreclosure when not legally entitled to do
so.
145
The statute also includes disclosure provisions, such as a requirement that
debt collectors give consumers written validation and verification of the debt itself
as well as the identity of the creditor in order to prevent collection of debts or fees
not actually owed.
146
The statute is enforced by the Federal Trade Commission,
banking regulators, and a private right of action allowing consumers to sue for
statutory punitive damages, costs, and attorneys fees.
147
While there is a well
established tradition of robust judicial interpretation of the boundaries of this
important federal statute, its application to MERS, the countrys leading home
mortgage foreclosure specialist, remains unsettled. At least two important legal

nominee for the original lender because it lacks ownership of the note and
mortgage at the time of the prosecution of the action.) (unreported disposition)
with In re Sheridan, No. 08-20381-TLM, 2009 WL 631355 (Bkcrtcy.D.Idaho
March 12, 2009) (In homeowners bankrtupcy, MERS lacked standing to file a
motion for relief from the automatic stay that would facilitate foreclosure under
state law).
142
See, e.g., In re Sina, 2006 WL 2729544 (Minn.App. 2006) (Although the
record shows that ALS serviced the mortgage, the assignment of the mortgage was
recorded in MERSs name. And by agreement, MERS retained the power to
foreclose the mortgage in its name. Because MERS is the record assignee of the
mortgage, we conclude that MERS has standing to foreclose the property by
advertisement.).
143
Pub. L. No. 95-109, 91 Stat. 874, codified at 15 U.S.C. 1692 et seq.
144
Id.
145
15 U.S.C. 1692d-1692f.
146
15 U.S.C. 1692g(a); Hubbard v. Natl Bond & Collection Assocs., Inc., 126
B.R. 422, 427-28 (Bankr. Del. 1991).
147
15 U.S.C. 1692k, l.

conclusions are likely: first, MERS itself should be covered by the statute; and
second, servicers and foreclosure attorneys that use MERS name without actual
involvement of MERS itself should also be covered by the statute.

1. MERS is a Third Party Debt Collector Subject to the Fair Debt

While ambitious in its goals, the FDCPA is confined in scope. The statute only
governs the practices of debt collectors which are generally defined as any
person who regularly collects or attempts to collect, directly or indirectly, debts
owed or due or asserted to be owed or due another.
148
By contrast, creditorsthe
entity that originally extends credit creating a debtare generally not required to
comply with the statute.
149
The purpose behind this somewhat artificial distinction
was to focus enforcement independent third party debt collection agencies that
specialize in collecting loans and accounts in default.
150
In the late 70s Congress
believed that debt collection agencies accounted for the most serious and
widespread debt collection abuses.
151
This view was supported by the belief that
market forces would discipline abusive practices by creditors, since they could be
expected to fear the loss of repeat business and reputational harm. In contrast, third
party debt collectors are not selected by consumers in a market transaction. Since
creditors contract with third party debt collectors, consumers do not have the
ability to discipline collection agencies by refusing to do business with them.
Over the lifespan of the FDCPA, demarcating this important legal boundary
between a creditor and a debt collector has proven troublesome, particularly with
respect to residential mortgage markets. Thus, in an exception the statute directs
that the definition of debt collector does not include:
[A]ny person collecting or attempting to collect any debt owed or due
or asserted to be owed or due another to the extent such activity
(ii) concerns a debt which was originated by such person [or] (iii)
concerns a debt which was not in default at the time it was obtained
by such person.
152

Thus, in most cases, the FDCPA does not apply to servicers that collect monthly
payments on behalf of the securitization trustee because the servicer generally
obtains servicing rights prior to the borrowers default.
153
Indeed, Congress
designed the exception for third party collectors that obtain debts prior to default
with mortgage loan servicers primarily in mind.
154

148
15 U.S.C. 1692a(6).
149
15 U.S.C. 1692a(4), (6).
150
SENATE REPORT NO. 95-382, at 3-4(1977).
151
SENATE REPORT NO. 95-382, at 3-4(1977).
152
15 U.S.C. 1692a(6)(F).
153
Dawson v. Dovenmuehle Mortgage inc., No. 00-6171, 2002 WL 501499, at *5
(A loan servicer, someone who services but does not own the debt, is not a debt
collector if the servicer begins servicing of the loan before default.).
154
SENATE REPORT NO. 95-382, at 3-4(1977); Statements of General Policy or
Interpretation Staff Commentary on the Fair Debt Collection Practices Act, 53 Fed.
Reg. 50097, 50103 (Dec. 13, 1988) (The exception [in 1692a(6)(F)(iii)] for debts

Unlike mortgage loan servicers and actual mortgage creditors, there is a strong
argument that MERS should be treated as a debt collector under the FDCPA.
Certainly, by bringing foreclosure lawsuits is MERS is attempt[ing] to collect,
[either] directly or indirectly, debts within the meaning of the statute.
155
While
some earlier cases dissented, the overwhelming majority of state and federal courts
have concluded that bringing a foreclosure action is a debt collection activity
governed by the Act.
156
Moreover, whatever the mortgage closing documents say,
because MERS remits all proceeds of its collection activities to the actual owner of
the loan (usually a securitization trustee) MERS is clearly collecting a debt that is
owed to another business entity. MERS is also not a creditor as it is defined in
the statue since creditors offer or extend credit.
157
While MERS does keep track
of servicing rights on its database, and does allow actual creditors to use MERS
name in communicating with county government officials, MERS does not ever
extend credit by actually funding loans with its own capital. Similarly, unlike
mortgage brokers or mortgage origination companies, MERS does not originate
loans in any meaningful sense.
158
On the contrary, MERS is more akin to third
party debt collectors that are immune from shopping discipline since it is the
creditor that chooses to do business with MERS rather than the borrower.
MERS best argument that it is not merely a third party debt collector (that
also happens to maintain a database and communicate with county officials) is that,
like a mortgage loan servicer, MERS obtains its loans prior to those loans
entering into default.
159
Unfortunately, the FDCPA does not provide a definition of
the term obtain. Moreover, the words ordinary meaning, to gain or attain
usually by planned action or effort, is not particularly enlightening in this
commercial context.
160
Clearly if MERS obtains a mortgage loan by registering
it on its database and by listing itself as a mortgagee or assignee on loan documents
and with county officials, then the statute does not apply to the company.
However, the legislative history of this provision of the statute was intended to
provide an exception for mortgage loan servicers and assignees where servicing
rights or ownership of the debt were transferred prior to the loan falling into

not in default when obtained applies to parties such as mortgage service companies
whose business is servicing current accounts.); Wagner v. Am. Natl Educ. Corp.,
Clearinghouse No. 36,132 (D. Conn. 1983) (servicing company was not a debt
collector for purposes of the FDCPA).
155
15 U.S.C. 1692a(6). The Supreme Court has held that collection lawsuits are
debt collection within the FDCPA. Hientz v. Jenkins, 514 U.S. 291, 294 (1995).
156
Wilson v. Draper & Goldberg, 443 F.3d 373 (4
th
Cir. 2006); Kaltenbach v.
Richards, 464 F.3d 524 (5
th
Cir. 2006); Shapiro & Meinhold v. Zartman, 823 P.2d
120 (Colo. 1992); Galusk v. Blumenthal, 1994 WL 323121 (N.D.Ill. J une 26,
1994). Cf Bergs v. Hoover, Bax, & Slovacek, LL.P., 2003 WL 22255679 (N.D.
Tex. Sept. 24, 2003).
157
15 U.S.C. 1692a(4).
158
15 U.S.C. 1692a(6)(F)(ii).
159
15 U.S.C. 1692a(6)(F)(iii).
160
MERRIAM-WEBSTER ONLINE DICTIONARY. 2009

arrears.
161
MERS is not a servicing company because, prior to default, it does not
actually collect any payments nor communicate with debtors regarding loan
repayment terms. Nor does MERS obtain a loan in the same way a traditional
assignee would, sinceat bestit only has a highly dubious claim of owning
some form of nominal legal title.
162
The Senate Report accompanying passage of
the original Act, explains that a loan is obtained by a servicer when taken for
servicing.
163
In this more meaningful and contextually relevant sense, MERS
obtains an account to collect through foreclosure action once the loan servicer or
trustee makes the effort of bringing a foreclosure suit in MERS name. Indeed, the
only time MERS ever has any actual responsibility with respect to any mortgage
loan collection or servicing is whenafter defaultthe actual parities in interest
turn to MERS legal identity to bring a foreclosure action. If, for a moment, one
disregards the ink on paper and instead looks at the actual economic activity
engaged in by the various parities, MERS looks much less like a servicer or
creditor than it does a third party foreclosure specialist. Unlike servicers, whose
business is servicing current accounts, MERS collection activities are focused
exclusively and completely on collecting loans on the eve of foreclosure.
As FDCPA jurisprudence goes forward, failing to treat MERS as a debt
collector risks opening up a gaping loophole in the FDCPA. If MERS is not a debt
collector, third party debt collection mills may attempt to circumvent the statute by
instructing doctors, hospitals, landlords, credit card lenders, and others to list
MERS, or some similar company, as an obligee of record in nominee capacity in
the loan or account origination documents. Even if the actual creditor only calls on
the debt collector to collect the account or loan in the event that it falls into arrears,
the debt collectors argument for a statutory exemption would be functionally
indistinguishable from that currently asserted by MERS in foreclosure cases. Debt
collection mills must not be allowed to insulate themselves from the FDCPA by
including an economically meaningless claim of ownership in loan origination
documents. Indeed, it was the possibility of just this type of circumvention that
grounds the universally accepted rule that as a remedial consumer protection
statute, the FDCPA must be construed broadly in favor of debtors.
164

161
S. Rep. No. 95-382, at 3 (1977) ( X- quote ). The Federal Trade Commissions
Staff Commentary also reflects this policy by explaining that: The exception (iii)
for debts not in default when obtained applies to parties such as mortgage service
companies whose business is servicing current accounts.). 53 Fed. Reg. 500097,
50103 (Dec. 13, 1988).
162
163
SENATE REPORT NO. 95-382, at 3-4(1977) ([T]he committee does not intend
the definition [of debt collector] to cover the activities of . . . mortgage service
companies and others who service outstanding debts for others, so long as the
debts were not in default when taken for servicing.) (emphasis added);
164
See, e.g., Brown v. Card Service Center. 464 F.3d 450, 453 (Because the
FDCPA is a remedial statute, we construe its language broadly, so as to effect its
purpose. Accordingly, . . . we have held that certain communications from lenders
to debtors should be analyzed from the perspective of the least sophisticated
debtor.).

2. Mortgage Servicers that Cloak Themselves in MERS Name should be as
Construed as Debt Collectors

One of the puzzling, and arguably suspicious, ironies behind the MERS
business model is the combination of its remarkable breadth in market share with
translucent depth in market participation. Because MERS itself is a relatively
small company, it does not have the resources to use its own employees to bring
the hundreds of thousands of foreclosures in which it is a named party.
165
For
MERS itself to participate in all of these foreclosures, the company would need
loafers (as opposed to boots) on the ground in virtually every county courthouse in
the nation. That would entail a large human resources operation, regional middle
management, scores of leases on local office spaces, secretarial support, and many
more costly expenses and managerial headaches.
MERS has solved this problem with characteristically novel and arguably
flawed legal mumbo jumbo. MERS, and the mortgage servicers and foreclosure
attorneys it works with, simply tell the court or anyone else that asks that the
servicers employee or the foreclosure attorney is an employee of MERS, even
though MERS does not pay the individual a salary or any other compensation.
166

Indeed, MERS has adopted a company policy of naming thousands of individual
employees of other companies and law firms certifying officers of MERS.
167

Employees of lenders, loan servicers, or foreclosure attorneys do not become

165
MERS web page lists the contact information for only five attorneys and two
paralegals. MERS Departments,
http://www.mersinc.org/about/departments.aspx?id=2 (viewed Sept. 5, 2009).
166
Mortgage Electronic Registration System, Inc., MERS Law Seminar for USFN
Conference, 15 (April 21, 2002) (document on file with author) (Question : Who
should be named as a certifying officer? [Answer:] Anyone that signs 'documents
for the Lender currently should be named as a certifying officer. This way, the
Lender's procedures will not need to be changed and the same people will continue
to execute the documents.).
167
Question and Answer document produced by MERS for a training conference
explains:
Question: What is a Certifying Officer?
A certifying officer is an employee of the Lender who is appointed a
MERS officer by a MERS Corporate Resolution. The Resolution
allows the certifying officer to execute documents as a MERS officer.
Question: Does the title that the employee holds as an employee of the
Lender correspond to the title that the employee holds as a MERS
Certifying Officer?
No. All MERS Certifying Officers are appointed assistant secretaries
and vice presidents of Mortgage Electronic Registration Systems, Inc.
That means that if an employee is a Senior Vice President of the
Lender, that employee is not a Senior Vice President of MERS. The
employee is an assistant secretary and vice president of MERS.
Conference, 15 (April 21, 2002) (document on file with author).
eb page.
,
uld
eds
stretch.

officers of MERS through an actual, individually considered action on the part of
the MERS board of directors.
168
Rather, the employees of other companies and
firms simply fill in a Corporate Resolution Request Form on MERS web
page.
169
The webpage, which includes fields for the employees name, address,
and the date, then automatically regurgitates a boilerplate document listing the
names just entered on the electronic form.
170
The company even provides
telephone customer support service by a paralegal for those who have trouble
getting their corporate resolutions off of the w
171
Courts and homeowners often actually believe servicer employees and
foreclosure attorneys are employees of MERS because MERS makes an effort to
give this relationship the appearance of a traditional employment. For example,
certifying officers are given a job title.
172
In states where courts have not
demanded greater authority certifying officers describe themselves as an
assistant secretary of MERS.
173
For more chary states, a MERS letter to
servicers and foreclosure specialists explains further: However, in a few states it
has been brought to our attention that it is required that the signatory hold the
office of vice president or above. No problem, explains the letter: Therefore it is
acceptable to use the title of vice president in Maryland, Mississippi, Nebraska
Oklahoma, Kansas, North Carolina, South Carolina and Pennsylvania.
174
For
good measure the web page corporate resolution request form allows servicers
and foreclosure specialists to order as many MERS corporate seals as they wo
likefor a convenient, reasonable fee of $25.00 each.
175
Perhaps, for a company
that pretends to own half of the nations mortgages, pretending to have hundr
of vice presidents all over the country is not much of a
However, for adjudicators hoping to faithfully implement the federal Fair Debt
Collection Practices Act, the substance, rather than the form, of employment
relationships of those that collect debts is meaningful. The FDCPA demands that
courts look past the nominal labels debt collectors give themselves and determine
who is actually engaging in what type of economic activity. For example, debt
collectors that pretend to send letters from an attorney, where an attorney has not

168
Conference, 15 (April 21, 2002) (document on file with author) (Question: How
do we update our officer list? [Answer:] Go to the MERS web site
www:mersinc.org, and under MERS ProductPMERS Online>Foms, click on the
Corporate Resolution Request Form and follow the instructions.).
169
MERS, Corporate Resolution Request Form,
www.mersinc.org/MersProducts/forms/crrf/crrf.aspx (last viewed: April 6, 2009).
170
Id. See also Mortgage Electronic Registration System, Inc., MERS Law
Seminar for USFN Conference, 15-16 (April 21, 2002) (document on file with
author) (providing a sample certifying officer resolution).
171
Id.
172
Conference, 14-15 (April 21, 2002).
173
MERS, Corporate Resolution Request Form,
www.mersinc.org/MersProducts/forms/crrf/crrf.aspx (last viewed: April 6, 2009).
174
Id.
175
Id.

actually reviewed the file in question, commit an actionable deception under the
statute.
176
Similarly, third party debt collectors cannot obtain an exemption from
the statute simply by pretending to be the original creditor.
177
And, importantly,
creditors that pretend to be debt collectors are explicitly regarded as such under the
statute.
178

If the courts ratify MERS claim to have hundreds or even thousands of vice
presidents around the country (without paying a single cent in compensation to
any of them) ejecting people from their homes, what is to prevent any credit card
lender, hospital, or land lord from adopting corporate resolutions naming their
third party debt collectors vice presidents of their own companies? Presumably,
under MERS rationale, the FDCPA could be circumvented simply by including a
corporate resolution purporting give the debt collector a job title along with any
assignment of a debt for collection.
Furthermore, courts have an obligation to take a step back for a moment to
look at these relationships from the perspective of a confused, frightened
homeowner teetering on the brink of foreclosure and possibly even
homelessness.
179
How is a homeowner to understand with whom they can
negotiate a settlement, or from whom to obtain additional information, or how to
distinguish a legitimate employee of a legitimate company from the thousands of
mortgage related con artists and charlatans currently swirling around American
families?
180
The Consumer Credit Protection Act in general, and the Fair Debt
Collection Practices title of that Act in particular, took the position that even
misleading (as opposed to false) representations had no place in the debt collection
industry because of the great potential for consumer abuse and the threat to the
American economy from undermining our collective faith in financial markets and
institutions.
181
To effectuate this policy of transparency and honesty,

176
Clomon v. J ackson, 988 F.2d 1314 (2d. Cir. 1993).
177
15 U.S.C. 1692e(11) .
178
15 U.S.C. 1692a(6) (The term debt collector . . . includes any creditor who,
in the process of collecting his own debts, uses any name other than his own which
would indicate that a third person is collecting or attempting to collect such debts,
such term includes any person who uses any instrumentality of interstate
commerce or the mails in any business the principal purpose of which is the
enforcement of security interests.).
179
Clommon, 988 F.2d at 1318 (The basic purpose of the least-sophisticated-
consumer standard is to ensure that the FDCPA protects all consumers, the gullible
as well as the shrewd. This standard is consistent with the norms that courts have
traditionally applied in consumer-protection law.).
180
J ohn Leland, Swindlers Find Growing Market in Foreclosures, N.Y. TIMES,
J anuary 15, 2009, at A1; Vivian S. Toy, Penetrating the Maze of Mortgage Relief,
N.Y. TIMES, J une 14, 2009, at RE1; Riva Richmond, Online Scammers Target the
Jobless, N.Y. TIMES, August 6, 2009, at B6.
181
15 U.S.C. 1692(a), (c) (There is abundant evidence of the use of abusive,
deceptive, and unfair debt collection practices by many debt collectors. Abusive
debt collection practices contribute to the number of personal bankruptcies, to
marital instability, to the loss of jobs, and to invasions of privacy. Means other
he

misrepresentations and misleading statements are evaluated from the perspective of
the least sophisticated consumer standard.
182
Unsophisticated consumers that
receive communications from a MERS vice president or assistant secretary are
likely to believe that this individual serves a different role in the foreclosure
process than he or she actually does. Having foreclosure communications
conducted in MERS name may lead consumers to believe that the servicer has
turned the case over to a quasi-official entity that lacks the authority to negotiate
loan modifications, short sales, or settlements. The effect could be to pacify the
consumer at the point they are most likely to resist through actively litigating
(often in a pro se capacity) their all too often legitimate counter claims and
defenses. Indeed, this is precisely the sort of deception targeted by the federal
statute promoting fair debt collection.

D. Loans Recorded in MERS Name May Lack Priority against Subsequent
Purchasers for Value and Bankruptcy Trustees

Perhaps the single most troubling legal question that remains unanswered with
respect to MERS legal foundation is whether recording assignments or mortgages
in MERS name is sufficient protect lienors against subsequent purchasers,
including especially a bankruptcy trustee. A primary objective of rules requiring
recording mortgages in county recording systems is to provide a rough form of
notice to subsequent purchasers of pre-existing ownership claims. To create an
incentive to promptly and accurately record mortgages, state recording statutes
often depart from the customary first in time, first in right priority rule when a
mortgagee fails to properly record.
183
Under state law, if a mortgagee fails to
properly record its mortgage, and then someone subsequently buys or lends against
the home, the subsequent purchaser can often take priority over the first.
184
In
jurisdictions stylized as notice states, a subsequent purchaser for value takes
priority over an earlier mortgagee if the purchaser had no actual or constructive
notice at the time of the conveyance.
185
A purchaser is generally thought to have
constructive notice if the original mortgagee successfully recorded her mortgage
with the appropriate county recording office.
186
In some states, a purchaser also
has inquiry notice if there are facts, such as possession, that would alert t
purchaser of the prior interest.
187
In race-notice states, the subsequent purchaser
takes free of the prior mortgage only if she took without actual or constructive
notice and successfully records before the prior mortgagee.
188
In all fifty states, if

than misrepresentation or other abusive debt collection practices are available for
the effective collection of debts.)
182
Clomon v. J ackson, 988 F.2d 1314 (2d. Cir. 1993); Gammon v. GC Services
Ltd. Partnership, 27 F.3d 1254 (7
th
Cir. 1996).
183
POWELL ON REAL PROPERTY 82.01[3].
184
Id. at 82.02[1][a].
185
Id.
186
Id. at 82.02[1][d][ii].
187
Id. at 82.02[1][d][iii].
188
Id. at 82.02[1][a].
f

the original debtor files for bankruptcy, a chapter 7 trustee can avoid the mortgage
loan if under state law a hypothetical bona fide purchaser would have had
priority.
189
In such cases, the result is that mortgage lenders are treated as
unsecured creditors and are likely to receive only pennies on the dollar, rather than
the full fair market value of the home at the time of the bankruptcy petition.
190

Indeed, state recording statutes and the federal bankruptcy code, place severe
financial penalties on mortgage lenders that make even minor clerical errors in
recording their home mortgage liens. Taking only few examples from the many
possible is sufficiently illustrative. Courts have invalidated recorded mortgages
because a notary acknowledgment form, although signed by a mortgagor and a
witness, did not clearly indicate who was physically present before the notary at
the time of signingeven when there was no actual dispute over the identity of the
individuals in question.
191
Merely forgetting to affix a notarys seal can lead to
avoidance.
192
The lack of a second witness signature rendered a mortgage
avoidable by a bankruptcy trustee, even though the mortgage was physically
registered with the town clerk and fully searchable in the title records.
193
There are
many cases where incorrect property descriptions rendered mortgages
avoidable.
194
Even omission of the amount t of a mortgage debt has led to
invalidation of a mortgage record.
195
In all of these cases, the result of the minor
variation from the norm contemplated by the state legislature was the avoidance o

189
11 USC 544(a)(3); In re Seaway Exp. Corp., 912 F.2d 1125, 1128 (9
th
Cir.
1990) ([A] bona fide purchaser prevails over a prior unrecorded conveyance.).
190
David Lloyd & Ariane Holtschlag, Chapter 13 Strip-Off of Junior Mortgages:
Not Whether, But How Under Current Law, 28 AM. BANKR. INST. J . 12, 12 (2009).
191
In re Stubbs, 330 B.R. 717, 726-30 (N.D. Ind. 2005). See also In re
Cocanougher, 378 B.R. 518 (Ky 2007) (omission of debtors names on
acknowledgement rendered mortgage avoidable).
192
In re Marsh, 12 S.W.3d 449 (Tenn. 2000) (notary publics accidental failure to
affix his seal on acknowledgement of deed of trust rendered instrument null and
void as to subsequent bona fide purchaser).
193
In re Ryan, 851 F.2d 502, 505 (1st Cir. 1988) (Although recorded in the
sense it was physically placed in the records of the town clerk, the original
mortgage deed was not an effectual or valid recording under Vermont law
because it was signed by only one witness. It was as if never recorded.) (citations
omitted). See also In re Cornelius, 2009 WL 2179128 (Bank. Ohio 2009) (Chapter
7 trustee had priority over mortgagee because of improperly acknowledged
mortgage).
194
Poncelet v. English, 795 P.2d 436 (Mont. 1990); O'Neill v. Lola Realty Corp.,
264 A.D. 60 (N.Y. 1942); Norton v. Fuller, 251 P. 29 (Utah 1926).
195
Bullock v. Battenhousen, 108 Ill. 28, 1883 WL 10352, *5 (Ill. 1883) (The
spirit of our recording system requires that the record of a mortgage should
disclose, with as much certainty as the nature of the case will admit, the real state
of the incumbrance. If a mortgage is given to secure an ascertained debt, the
amount of such debt should be stated. By omitting to so state the debt the widest
door is opened for fraud of every description, and to prevent the same the law
declares such a mortgage fraudulent and void as to creditors and subsequent
purchasers.).
red credit card.

the mortgagors lienin effect reducing a home mortgage loan to a debt no
different than an unsecu
While the results in these cases are easily criticized as harshly formalistic and
unbridled from the parties original contractual intentions, courts defend with stern
sermons on the importance of maintaining transparent records of ownership
interests in land. A federal bankruptcy judges recent defense of these cases is
worth quoting at length:
Lest one think that the . . . Courts have exalted form over substance,
it is critical to note several concepts. . . . [W]we are dealing with
interests in landnot a security interest in an inventory of plumbing
fixtures, in chinchillas, in canned corn, or in a lawn and garden
tractor. Land. Land is certainly the asset which people deem to be
their most important possession: There is no other thing more
important historically in our culture than an interest in land, whether
that interest be in a condominium, in a house, or in farm. Land. The
transferring of interests in land has been entrusted to a system of
records that allows people to be certain that this single most
important asset in their lives is indeed going to be theirs, and that the
encumbrances recorded with respect to this asset are in fact accurate
and valid. It is therefore absolutely imperative that transactions in
land be guaranteed to vest title in the people who invested in those
transactions, and that the investors know definitively the interests in
the land in which they invest which may affect their interests in this
singularly important asset. The record of land transactions in the
Recorder's Office provides this critical assurance. Perhaps the most
critical aspect of this chain of assurance is to guarantee as much as
possible on the face of an instrument that a person purported to have
signed a document which affects interests in land actually did sign
that document.
196

Financiers decisions to record their mortgages and mortgage assignments
in MERS name, rather than their own, must be judged within this
contextual tradition.
Historically, virtually no state recording statutes have explicitly authorized
mortgagees or mortgage assignees to vicariously record using the name of an agent
or nominee. Nevertheless, in its landmark legal opinion that does not cite cases or
statutes, Moodys Investor Service asserted that [t]he recording system has been
set up to provide notice of security interests, but not necessarily the identity of
secured parties.
197
This would be a more persuasive argument if virtually every
recording act ever adopted did not, in fact, require record keeping for both the
name of mortgagors and mortgageesthus the use of grantor-grantee indexes in
the vast majority of states.
198
Indeed, the very first American recording statute,
adopted by Massachusetts Bay Colony in 1640, required recording of the names of

196
Stubbs, 330 B.R. at 730.
197
Moodys, supra note X, at 3.
198
14 POWELL ON REAL PROPERTY 82.03[2][b].

the partiesincluding both the names of the grauntor and grauntee.
199
Under its
most plain and simple reading, that statute does not contemplate nor allow
obscuring actual ownership through naming only a mortgagee of record in
nominee capacity. Indeed there are many cases, and compelling secondary
authority, suggesting that errors in or omission of the name of a mortgagee
invalidate either the recording or even the mortgage agreement itself, rendering the
mortgage avoidable.
200
The policy of requiring the recordation of the actual
mortgagees name sounds in the longstanding title recordation act goal of
prevent[ing] secret conspiracies between mortgagors and mortgagees as to the
fact and amount of indebtedness to the prejudice of subsequent purchasers and
creditors, by compelling them to at once make known the real claim.
201
If the
identity of mortgagees were unimportant, legislatures could easily have drafted
recording statutes, and record keeping systems, to merely require disclosure of the
existence of a lien, with no reference to who owns it. Moreover, rather than using a
grantor-grantee index, real property records could have been designed to only use
tract indexes. But, by and large, legislatures did not do this. And as much as MERS
and the mortgage lending industry may wish it were otherwise, recording acts
specify that the name of the mortgagee or assignee must be included and that
records and indexes be drawn up from the names of both parties.
202
Surely MERS
executives knew this and that fact more than any other explains why the company
would so frequently engage in the contortioned linguistic gymnastics of claiming

199
14 POWELL ON REAL PROPERTY 82.01[1][b] (quoting 1 RECORDS OF THE
GOVERNOR AND COMPANY OF THE MASSACHUSETTS BAY IN NEW ENGLAND 306
(N. Shurtleff ed. 1853)).
200
Disque v. Wright, 49 Iowa 538, 1878 WL 623 (Iowa 1878) (It has been
frequently held that slight omissions in the acknowledgment of a deed destroy the
effect of the record as constructive notice. A fortiori, it seems to us, should so
important and vital an omission as that of the name of the grantee have that
effect.); Chauncey v. Arnold, 24 N.Y. 330 (N.Y. 1862) (No mortgagee or
obligee was named in [a mortgage], and no right to maintain an action thereon, or
to enforce the same, was given therein to the plaintiff or any other person. It was,
per se, of no more legal force than a simple piece of blank paper.); Richey v.
Sinclair, 67 Ill. App. 580 (Ill. App. 1896) (mortgage that did not name mortgagee,
though it described note secured thereby as payable "to the order of" named
person, was void for failure to name mortgagee); Allen v. Allen, 51 N.W. 473, 474
(1892) (omission of name of grantee invalidated conveyance because A legal title
to real property cannot be established by parol.) See also 2 PATTON AND
PALOMAR ON LAND TITLES 338 (3d ed. 2009) (It is axiomatic that a deed will be
inoperative as a conveyance unless it designates someone to whom the title passes.
A grantee is as necessary to the validity of a grant as that there should be a grantor
or a property granted.); 59 CJ S MORTGAGES 306 (Notice may be deemed not
present in cases of insufficient attestation or where the instrument itself is so
defective as to be void as a matter of law, as where it wholly omits the name of the
mortgagee.) (citations omitted).
201
Bullock, 108 Ill. 28, at *5.
202
14 POWELL ON REAL PROPERTY 82.03[2][b].

that it is simultaneously both an agent and a principal with respect to the mortgages
it owns.

IV. ANALYZING MERS ROLE IN THE RESIDENTIAL MORTGAGE MARKET

Looking beyond the problematic legal doctrine associated with MERS, an
analysis of the role the company plays holds at least three important insights: (1)
the MERS system was one additional contributing factor in the genesis of the
mortgage foreclosure crisis; (2) the companys private, for profit, database and tax
evasion services are causing atrophy in the nations public real property
information infrastructure; and (3), the financial industrys sponsorship and
embrace of MERS in the absence of legislation or meaningful judicial precedent
reflects a troubling anti-democratic shift in housing policy.

A. MERS and the Subprime Mortgage Lending Foreclosure Crisis

While there is plenty of blame to go around, the MERS recording and
foreclosure system was yet one additional contributing cause of the American
mortgage foreclosure crisis. MERS facilitates predatory structured finance by
decreasing the exit costs of originators. As investment banks, hedge funds,
institutional investors, and the credit rating agencies weighed the risks of dumping
billions upon billions of dollars into mortgage securities drawn out of the balance
sheets of thinly capitalized, bankruptcy-prone mortgage lenders, MERS provided
an important additional inducement. In previous research I have argued that in the
run-up to the foreclosure crisis mortgage origination companies were used as
disposable liability filters.
203
When thinly capitalized originators churned out more
and more securitized loans, claims against those lenders accumulated, while their
assets did not.
204
Once the projected costs of disgruntled investor recourse
demands and borrower predatory lending lawsuits exceeded the projected costs of
bankruptcy and reformation under a new corporate guise, originator management
would predictably discard their corporate identity.
205
MERS made this easier by
offering a super-generic placeholder that transcended the aborted life of lenders.
MERS reassured investors that even when an originator goes bankrupt, county
property records would remain unaffected and foreclosure could proceed apace. By
serving as the true mortgagees proxy in recording and foreclosure, MERS abetted
a fly-by-night, pump-and-dump, no-accountability model of structured mortgage
finance.
Moreover, the use of MERS corporate identity facilitates separation of
foreclosure actions and litigation of predatory lending and servicing claims. When
MERS (or more accurately servicers or foreclosure specialists acting in MERS
name) brings foreclosure actions, it justifies this entitlement based on a claim of
legal ownership of mortgage liens. But, when borrowers attempt to assert counter
claims challenging the legality of mortgage brokers, lenders, trusts, or servicers,

203
Peterson, Predatory Structured Finance, supra note X, at 2275.
204
Id.
205
Id.
it

MERS hides behind its claim of nominee status. One former mortgage lender has
estimated that in the mid-2000s approximately 70 percent of brokered loan
applications submitted to mortgage lenders involved some form of broker
encouraged fraud.
206
Similarly, Professor Porters study of mortgage loans in
Chapter 13 bankruptcy found that residential mortgage creditors did not supply a
promissory note in 41.1% of cases involving a home mortgage.
207
Because
promissory notes are not recorded, nor where MERS is involved, is the actual
identity of the note holder revealed, consumers and their counsel can verify neither
the identity of the parties involved, nor even the amount of the debt in question. In
an ordinary foreclosure, using MERS name erects a tactical barrier to judicial
resolution of these types of problems. MERS confuses and pacifies borrowers (and
sometimes courts) at precisely the crucial moment: on the eve of foreclosure. Once
a family looses their home, their leverage and appetite for litigation dissipate. The
separation of predatory lending litigation from foreclosure litigation facilitated by
bringing foreclosure in MERS name decreases the costs of foreclosure and dulls
the deterrent force of consumer protection law. MERS represents the mortgage
finance industrys best effort to create a single, national foreclosure plaintiff that
always has foreclosure standing, but never has foreclosure accountability.
Obviously MERS is not responsible for the failed monetary and regulatory
policy of the Federal Reserve Board.
208
The President and Congress could have
intervened in the troubling trends toward unrealistic mortgage loans.
209
Mortgage
brokers and lenders systematically strove for volume and commissions, rather than
sustainable home ownership.
210
Federal banking regulators obstructed the efforts
of state legislators and attorneys general to bring the market to heel.
211
The cred
rating agencies rashly gave their seal of approval to the risky, complex packaged
and repackaged mortgage loans securities.
212
While MERS may have reassured
investors of the viability of churned residential mortgage backed securities, it had
little to do with the over-leveraging of hedge funds, bond insurers, or the
government sponsored housing enterprises.
213
The recognition of MERS role in

206
RICHARD BITNER, CONFESSIONS OF A SUBPRIME LENDER: AN INSIDERS TALE
OF GREED, FRAUD, AND IGNORANCE 45 (2008).
207
Katherine Porter, Misbehavior and Mistake in Bankruptcy Mortgage Claims, 87
TEX. L. REV. 121, 147(2008).
208
Paul Krugman, How Did Economists Get it So Wrong?, N.Y. TIMES, Sept. 6,
2009, MM36.
209
J o Becker, Sheryl Gay Stolberg, & Stephen Labaton, White House Philosophy
Stoked Mortgage Bonfire, N.Y. TIMES, December 21, 2008, at A1.
210
Bitner, supra note X, at 181-82.
211
Christopher L. Peterson, Federalism and Predatory Lending: Unmasking the
Deregulatory Agenda, 78 TEMPLE L. REV. 1, 96-97 (2005); Christopher L.
Peterson, Preemption, Agency Cost Theory, and Predatory Lending by Banking
Agents: Are Federal Regulators Biting Off More than they Can Chew?, 56 AM. U.
L. REV. 515, 549-551 (2007).
212
Steven L. Schwarcz, Understanding the Subprime Financial Crisis, 60 S.C. L
REV. 549, 550-52 (2009).
213
Frederick Tung, The Great Bailout of 2008-09, 25 EMORY BANKR. DEV. J . 333,
336 (2009); Binyamin Appelbaum, Carol D. Leonning & David S. Hilzenrath,

facilitating the foreclosure crisis is not to ignore nor excuse these other causal
factors. Nevertheless, it is a mistake to list the contribute factors associated with
the crisis and omit MERS.

B. MERS and Atrophy of the Land Title Information Infrastructure

Over time, the widespread recording of loans and loan assignments in MERS
name will assist fraudsters and cause decay in the accuracy of public real property
records. Suppose, for example, in a transaction where MERS is recorded as the
original mortgagee, a mortgage broker or originator convinces a homeowner to
sign a renewal note and mortgage after the original note and mortgage have been
assigned. (This is imminently plausible when many homeowners sign anything put
in front of them.
214
) Then, further suppose the broker or originator attempts to sell
the subsequent renewal note and mortgage to a bona fide purchaser for value. If
the prospective purchaser wanted to rely on public records, it would search with
the county and discover the original mortgage listed in MERS name. If the
originator acted quickly so that the date of the original loan was proximate in time
to the subsequent loan, then the purchaser would naturally assume that the loan
recorded in MERS name was the self-same loan they planned to purchase.
Because the original mortgage is recorded in the name of MERS, and because
there is no public record of the assignment of the original note, the subsequent
bona fide purchaser would have no publically available way to discover the
fraudand the entire transaction could be completed without recording a single
fraudulent document. In the ironic and inevitable litigation both purchasers would
claim that in MERS original recording MERS was acting as their agent, leaving
the court to award priority where both lenders have a essentially the same claim
based on the same recording. Two or more mortgages against the same property
could easily end up in different (or even the same) pool of mortgages that are
securitized for investors. Recording real property ownership interests in the name
of an agent, rather than the actual owner, opens the door to unscrupulous agents
using the same record to fool multiple principals. And our long standing case law
and statutes will have little advice on how to equitably resolve competing claims of
priority since this body of authority assumes that purchasers will record their own,
rather than their agents name. Envy not the judges and law clerks assigned to
write these forthcoming opinions.
Similarly, MERS may also spawn fraud, confusion, and litigation by
facilitating fraudulent mortgage loan releases. One reason recording statutes
require that the actual mortgagees or mortgage assignees name be kept in the

How Washington Failed to Rein in Fannie, Freddie, WASH. POST., Sept. 14, 2008,
Bus. Sec.
214
J AMES M. LACKO & J ANIS K. PAPPALARDO, FED. TRADE COMM'N, IMPROVING
CONSUMER MORTGAGE DISCLOSURES: AN EMPIRICAL ASSESSMENT OF CURRENT
AND PROTOTYPE DISCLOSURE FORMS 26-29 (2007), http://
www.ftc.gov/os/2007/06/P025505MortgageDisclosureReport.pdf; Todd J. Zywicki
& Joseph D. Adamson, The Law and Economics of Subprime Lending, 80 U.
COLO. L. REV. 1, 72-73(2009).

records is to help ensure that liens can only be released by the party entitled to do
so. For example, recording statutes attempt to prevent unscrupulous land owners
from recording a false mortgage satisfaction and then obtaining another loan under
false pretenses. Any of MERS thousands of unmonitored, unpaid, and
unsupervised vice presidents and assistant secretaries can file fraudulent
satisfactions that are indistinguishable from authentic records. Homeowners that
happen to be a MERS vice president (or have a coconspirator that is or posses as a
MERS vice president) could record mortgage satisfactions, then sell the home or
obtain a new loan and all-the-while the public real property records would not
reveal the previous unpaid debt.
In the wake of the subprime crisis, this decline in the value of the public
records is already occurring.
215
For example, in loans where MERS is listed as the
mortgagee, virtually any company can show up, claim to own the note, and
proceed to foreclose on a family that is in arrears. Because MERS has so many
certifying officers a court cannot easily verify whether the individual acting in
MERS name is actually representing the real party in interest given that the public
records do not reveal who that party is. One can imagine an original mortgagee,
either through error or fraud, foreclosing on a defaulting family despite having
assigned the loan into a structured finance deal. In a MERS as original mortgagee
transaction, the assignment would not be recorded, and the only name on the public
records would be MERS. Neither the courts nor a purchaser at a judicial or non-
judicial foreclosure sale could use the public records to discover that someone
other than the company or individual bringing foreclosure action actually owns the
proceeds of the sale.
Moreover, in recent years, many courts have been indulgent in dispensing with
normal the requirement that a foreclosure plaintiff produce the original promissory
note. Not wanting investors to suffer forfeiture because of a record keeping
problem, many courts have instead accepted affidavits claiming that original note
was lost or even a copy of the pooling and servicing agreement naming the
servicer.
216
Conversely, because in structured finance deals, originators,

215
Creola J ohnson, Fight Blight: Cities Sue to Hold Lenders Responsible for the
Rise in Foreclosures and Abandoned Properties, 2008 UTAH L. REV. 1169, 1185.
216
Porter, supra note X, at 172-74;Raymond H. Brescia, Beyond Balls and Strikes:
Towards a Problem Solving Ethic in Foreclosure Proceedings, CASE W.R. L. REV.
305, 345 (2009); Chris Markus, Ron Taylor, & Blak Bogt, From Main Street to
Wall Street: Mortgage Loan Securitization and New Challenges Facing
Foreclosure Plaintiffs in Kentucky, 36 N. KY. L. REV. 395, 406 (2009). A few
courts have begun insisting on more accurate documentation form foreclosure
plaintiffs. , In re Foreclosure Cases, Nos. 1:07CV2282 (N.D. Ohio Oct. 31, 2007)
(dismissing consolidated foreclosure cases for failure to produce evidence
demonstrating ownership or assignment of promissory notes); Bank of New York
v. Williams, 979 So. 2d 347 (Fla. Dist. Ct. App. 2008) (affirming dismissal of the
foreclosure complaint for failure to show ownership interest in mortgage and note);
HSBC Bank USA, Nat'l Ass'n v. Perboo, No. 38167/07, 2008 WL 2714686 (N.Y.
Sup. Ct. J uly 11, 2008) (denying foreclosure plaintiff's application for default
judgment); Wells Fargo Bank, Nat'l Ass'n v. Reyes, No. 5516/08, 2008 WL
f the

securitizers, and trustees have been notoriously lax in keeping track of promissory
notes, it is possible that an employee of an original lender or a broker (either of
whom could credibly claim to represent MERS) could conceivably still retain
possession of the actual original promissory note, despite having received funds
from the assignment of the loan.
217
A court could easily order a foreclosure, sell
the home, give the funds to someone not entitled to them, and the actual owner
would never be the wiser. The clever thief would make payments on behalf o
defaulting borrower during the pendency of the foreclosure (the unwitting family
would certainly not complain) to keep the actual loan assignee from
investigating.
218
Because so many finance professional have lost their jobs, and
some were not especially reliable in the best of times, one should think that the risk
of such schemes is now acute.
219
Moreover, given the empirical and anecdotal
evidence of shoddy record keeping in this industry, it is entirely possible that an
originator or servicer could unintentionally foreclose on a loan that it does not
actually own.
220
The ubiquitous use of the MERS label in our public real property
records along with our new casual flexibility in notions of corporate identity
facilitates this sort of fraud and mistake.
When half of the nations mortgages are all recorded under the name of one
company that does not publish its own records, the ability of the public (including
both consumers and lenders) to use public records to evaluate who owns real
property interests will inevitably decline. In county recording officers around the
country, real property records increasingly repeated MERS name over and over
again. In an often repeated Irish fable a boy marks a leprechauns gold with red
handkerchief tied around a tree.
221
He returns only to find that the leprechaun has
tied red handkerchiefs tied around every tree in the forest. Recording mortgages in
MERS name leaves a message signaling the existence of a lien. But it does not
reveal who owns the lien or who has the right to release it. If present trends and the
MERS agenda continue apace, we should expect that eventually virtually every
home in the country will, at one point or another, have a MERS recording against
it. Viewed alone, county real property records will become a forest where each tree
has its own handkerchief. To discover a more accurate picture of the title status of

2466257 (N.Y. Sup. Ct. June 19, 2008) (dismissing complaint for plaintiff's failure
to establish ownership of mortgage).
217
J ohnson v. Melnikoff, Slip op., 20 Misc.3d 1142, 2008 WL 4182397, *1 (N.Y.
Supp Sept. 11, 2008)
218
An especially clever strategist would continue to make the payments for a year
or more while concealing the proceeds and running the same scheme several times
over.
219
See, e.g., Cary Spivak, Criminal Past No Barrier to Mortgage Field: Ex-Cons
Who Got Loan-Originating Licenses Commit Scores of Frauds that Cost
Customers Millions, MILWAUKEE J . SENT., March 14, 2009, A1.
220
Cf Nosek v. Ameriquest Mortgage Company, 386 B.R. 374, 379 (2008)
(attorneys sanctioned for defending Ameriquest in an eight day trial while never
advising the Court that Ameriquest was neither the note holder nor the mortgagee).
221
AMY T. PETERSON & DAVID J . DUNWORTH, MYTHOLOGY IN OUR MIDST: A
GUIDE TO CULTURAL REFERENCES 93 (2004).

a home, the public will be forced to turn to MERS, Inc. This will makes the public
records derivative of and subordinate to the MERS system.
222

Moreover, this decline in the usefulness of public records is exacerbated
financially because MERS is usurping the recording fees that once funded
maintenance, innovation, and vigilance in public record keeping systems.
Proponents of MERS often cite figures on how much money the mortgage finance
industry saves by recording under MERS name rather than real parties in
interest. In some sense, this notion of savings is a misnomer. One could just as
easily characterize the commercial pattern as crippling budget cuts in public
information infrastructure designed to create transparency in ownership of real
property. By allowing the mortgage lending industry to circumvent their traditional
obligation to maintain fraud resistant public records, in the long run, the courts will
facilitate commercial uncertainty, inefficient litigation, and disappointed
expectations.
Recording mortgages in the name of MERS and subsequent refusal to record
assignments is not a technological innovation. On the contrary, it is an example of
atrophy in the mortgage markets legal infrastructure. Companies that specialize in
shipping goods need highways, bridges, and portsphysical infrastructure
completely indispensible to commerce. But despite the importance of creating and
maintaining such infrastructure, collective action problems make the hard work of
facilitating infrastructure impossible for individual market actors. These companies
and the consumers they serve need the firm hand of government to organize the
leadership and extract the resources necessary to facilitate infrastructure for the
benefit of all. Commerce in shared human obligationloansis not so terribly
different. Profit-seeking individual companies are not well suited to maintaining a
platform of transparent information systems easily accessible to our communities.
MERS and its proponents are no doubt sincere in their belief that their private,
undemocratic information system is a boon to business. However, this belief is
premised on a short term view of maximizing profit at the expense of maintaining
a public information system. It is certainly true that county recording systems are
technologically outdated. However, the solution to outdated infrastructure is to
modernize that infrastructure, not abandon it. If MERS is allowed to continue to
plot its own course as the national residential property ownership oracle and
foreclosure plaintiff, the burden of reconstructing chains of real property
ownership in cases of fraudulent or erroneous conveyance will increasingly shift
from county recorders to litigation.
223
The national system of public land title
record keeping will become derivative and its usefulness will decay.

222
MERSCorp, Inc. v. Romaine, 861 N.E.2d 81, 88 (N.Y. 2006) (Kaye, J .
dissenting in part) ([T]he MERS system will render the public record useless by
masking beneficial ownership of mortgages and eliminating records of assignments
altogether. Not only will this information deficit detract from the amount of public
data accessible for research and monitoring of industry trends, but it may also
function, perhaps unintentionally, to insulate a noteholder from liability, mask
lender error and hide predatory lending practices.)
223
It is likely that this litigation will often be pro se or will be handled by
consumer attorneys that are not paid enough to assemble and wade through the
factually complex private land title evidence. Cases where courts maledict pro se

C. Title Recording Law and Democratic Governance

A fair critique of MERS must include recognition of the dated, expensive, and
cumbersome nature of county real property records and state recording statutes.
Unlike the relatively homogenous personal property lien recording systems
governed by Article 9 of the Uniform Commercial Code, the National Conference
of Commissioners on Uniform State Laws and the American Law Institute have
not been able to prevail on state legislatures to standardize real property mortgage
and recording laws. Moreover, unlike personal property lien records, which are
usually maintained by a Secretary of State, real property records are generally
maintained by each county. This further diversifies record keeping standards and
operating procedures. It is only fair to say that, even with the use of title insurer
plant copies, recording and searching in county property records is time
consuming, expensive, and often not especially reliable.
224
In contrast, MERS
gives each loan a unique identifier, is accessible through the internet, and is
organized n one nationwide system.
225

Still, the consumer protection critique of MERS is not just about what MERS
does wrong, but also what the process of creating MERS prevented. By taking
upon itself the reformation of the county recording systems created by state law,
MERS and the mortgage finance industry circumvented the state and national
debate that normally precedes significant legislative change. The MERS system,
while digital and nationwide in scope, is not equally available to all. It has given a
single corporation the opportunity to grant special vice president status to its
favored side in foreclosure disputes. It has been manipulated into a device to make
foreclosure easier and more anonymous for financiers. The financial industry could
have channeled its dissatisfaction with county property records into a campaign for
legal reform. This would have necessitated a debate where consumers, county
officials, researchers, poverty advocates, and anyone else could have participated.
Fifteen years ago, if the finance industry put its formidable legislative muscle
behind a public reformation of county recording systems, perhaps today we would
have a national system maintained by a federal regulator, or a statewide systems
supported by a new Article of the Uniform Commercial Code. Instead financiers
chose to act alone, creating an entirely new system that competes financially with
public records, undermines the accuracy of public records, and was never
authorized by the elected leaders that guide a republican system of law.
In a moment of refreshing candor, not long ago a MERS senior vice president
concluded an extolling public relations piece with the explanation that MERS is

foreclosure defendants and underpaid consumer counsel are illustrative of the
MERS led trend toward erosion of clear, public mortgage records. See, e.g., Lumzy
v. Mortgage Electronic Registration Systems, Inc., Slip op., 2008 WL 3992671
(S.D. Miss. Aug. 21, 2008) (dismissing Fair Debt Collection Practices Act suit
against MERS because her conclusory and convoluted allegations do not pass
muster.) .
224
14 POWELL ON REAL PROPERTY 82.03[2].
225
Arnold, supra note X, at 35.

owned and operated by and for the mortgage industry.
226
It is ironic and perhaps
not coincidental that the syntactical form of the sentence bears such close
resemblance to President Lincolns Gettysburg address. One will no doubt recall
that Americans have generally aspired to government of the people, by the
people, for the people, rather than of, by, and for the mortgage bankers.
227
MERS
attempt to capture every mortgage loan in the country
228
is an effort to supplant
the public land title recording systems lien records, many of which predate the
Constitution itself, with a purely private system. Perhaps MERS, Inc. is correct that
doing so is more efficient; is more modern; and, maybe they are right that it is even
be better for the American people at the margin. But, this effort is without question
a surrender of the messy compromises inherent in representative democracy to the
seductively easy lure of mercantile oligarchy. Bankers just complain so much less
when courts, regulators, and legislators let them do whatever they want. Still,
perhaps those of us with romantic attachments to our Republic and the rule of law
will be excused for supposing that if the mortgage bankers wanted a newer, more
efficient, national land title recording system, they should have asked Congress or
the legislatures first.

VI. CONCLUSION

This Article has explored the legal and public policy foundations of the
Mortgage Electronic Registration System. MERS maintains a central national
database tracking mortgage servicing rights for loans registered on its system. In
addition to its database, MERS has taken on two related but distinct roles in the
American home mortgage market. First, mortgage finance companies use MERS
name as a proxy in county land title records in order to avoid paying taxes to local
governments for recording assignments during the life of a loan. Second, where
local courts have allowed it, MERS creates something of a foreclosure
doppelganger by allowing the actual parties in interest to bring residential
foreclosures under MERS corporate identity instead of their own. Recording
loans in the name MERS, rather than the actual parities in interest, has generally
not been explicitly authorized under the state title recording acts that trace their
lineage back to the earliest years of the American republic. By adopting such a
radical shift in how mortgages are recorded and foreclosed without legislative
change, the mortgage finance companies have rebuilt their industry on a legal
foundation of sand. MERS claim to own legal title to a mortgage loans security
interest, divorced from the promissory note and entitlement to receive loan
payments, is in direct tension with precedent that has been well settled for over a
hundred years. MERS role in prosecuting home mortgage foreclosures should
bring it within the scope of the federal Fair Debt Collection Acta statute that
MERS has generally made little attempt to comply with. And it is unclear whether
recording a mortgage or mortgage assignment in the name of someone other than
that actual mortgagee and assignee should be sufficient to protect those actual

226
Arnold, supra note X, at 36.
227
GARRY WILLS, LINCOLN AT GETTYSBURG: THE WORDS THAT REMADE
AMERICA 145-47 (1992) .

228
MERS Registers 20 Million Loans, supra note X, at 1.

parties in interest from subsequent purchasers. Indeed there is a compelling
argument that loans where MERS is recorded as the original mortgagee should be
avoidable by bankruptcy trustees in many states.
The shift away from recording loans in the name of actual mortgagees and
assignees represents an important policy change that erodes not only the tax base
of local governments, but also the usefulness of the public land title information
infrastructure. MERS did not, by itself, cause the mortgage finance crisis and its
ensuing aftermath. However, it was an important cog in the machine that churned
out the millions of unsuitable, poorly underwritten, and incompletely documented
mortgages that were destined for foreclosure. In the aftermath of the mortgage
finance crisis that has crippled the American economy, necessitated massive
taxpayer bailouts of financial institutions, and left millions of American families
ejected from their homes, the judiciary has an obligation to aggressively reexamine
our financiers cut corners, false assumptions, and jaundiced legal theory.

Your Clients Securitized Mortgage: A Basic Roadmap.

The Parties and Their Roles

The first issue in reviewing a structured residential mortgage
transaction is to differentiate between a private deal and an Agency
(or GSE) deal. An Agency (or GSE) deal is one involving Fannie Mae,
Freddie Mac, or Ginnie Mae, the three Government Sponsored
Enterprises (also known as the GSEs). This paper will review the
parties, documents, and laws involved in a typical private
securitization. We also address frequently-occurring practical
considerations for counsel dealing with securitized mortgage loans that
are applicable across-the-board to mortgages into both private and
Agency securitizations.
The parties, in the order of their appearance are: are:

Originator. The originator is the lender that provided the
funds to the borrower at the loan closing or close of escrow. The
originator probably borrowed the funds on a line of credit from a short-
term revolving warehouse credit facility (commonly referred to as a
warehouse lender); nevertheless the money used to close the loan
were technically and legally the originators funds. Warehouse lenders
are either wet funders or dry funders. A wet funder will advance
the funds to close the loan upon the receipt of an electronic request
from the originator. A dry funder, on the other hand, will not advance
funds until it actually receives the original loan documents duly
executed by the borrower. Usually the originator is the lender named
as Lender in the mortgage Note. Many originators securitize loans;
many do not. The decision not to securitize loans may be due to lack
of access to Wall Street capital markets, or this may simply reflect a
business decision not to run the risks associated with future
performance that necessarily go with sponsoring a securitization.

Sponsor. The Sponsor is the lender that securitizes the pool of
mortgage loans. This means that it was the final aggregator of the
loan pool and then sold the loans directly to the Depositor, which it
turn sold them to the securitization Trust. in order to obtain the
desired ratings from the ratings agencies such as Moodys, Fitch and
S&P, the Sponsor normally is required to retain some exposure to the
future value and performance of the loans in the form of purchase of
the most deeply subordinated classes of the securities issued by the
Trust, i.e. the classes last in line for distributions and first in line to
absorb losses (commonly referred to as the first loss pieces of the
deal).

Depositor. The Depositor exists for the sole purpose of enabling
the transaction to have the key elements that make it a securitization
in the first place: a true sale of the mortgage loans to a bankruptcy-
remote and FDIC-remote purchaser. The Depositor purchases the
loans from the Sponsor, sells the loans to the Trustee of the
securitization Trust, and uses the proceeds received from the Trust to
pay the Sponsor for the Depositors own purchase of the loans. It all
happens simultaneously, or as nearly so as theoretically possible. The
length of time that the Depositor owns the loans has been described as
one nanosecond. The Depositor has no other functions, so it needs
no more than a handful of employees and officers. Nevertheless it is
essential for the true sale and bankruptcy-remote/ FDIC-remote
analysis that the Depositor maintains its own corporate existence
separate from the Sponsor and the Trust and observes the formalities
of this corporate separateness at all times. The so-called Elephant in
the Room in all structured financial transactions is the mandatory
requirement to create at least two true sales of the notes and
mortgages between the Originator and the Trustee for the Trust so as
to make the assets of the Trust both bankruptcy and FDIC remote
from the originator. And, these true sales will be documented by
representations and attestations signed by the parties; by attorney
opinion letters; by asset purchase and sale agreements; by proof of
adequate and reasonably equivalent consideration for each purchase;
by true sale reports from the three major Rating Agencies, and by
transfer and delivery receipts for mortgage notes endorsed in blank.

Trustee. The Trustee is the owner of the loans at the end of the
securitization transaction process. Like any trust, the Trustees powers,
rights, and duties are defined by the terms of the transactional
documents that create the trust, and are subject to the terms of the
trust laws of some particular state, as specified by the Governing
Law provisions of the transaction document that created the trust.
The vast majority of the residential mortgage backed securitized trust
are subject to the applicable trust laws of Delaware or New York. The
Pooling and Servicing Agreement is the actual legal document that
creates these common law trusts and the rights and legal authority
granted to the Trustee is no greater than the rights and duties
specified in this Agreement.

Indentured Trustee and Owner Trustee. Most private
securitizations are structured to meet the Internal Revenue Code
requirements for tax treatment as a Real Estate Mortgage Investment
Conduit (REMIC). However some securitizations (both private and
GSE) have a different, non-REMIC structure usually called an Owner
Trust. In an Owner Trust structure the Trustee roles are divided
between an Owner Trustee and an Indenture Trustee. As the names
suggest the Owner Trustee owns the loans; the Indenture Trustee has
the responsibility of making sure that all of the funds received by the
Trust are properly disbursed to the investors (bond holders) and all
other parties who have a financial interest in the securitized structure.

The Primary Servicer. The Primary Servicer services the loans
of behalf of the Trust. Its rights and obligations are defined by a loan
servicing contract, usually located in the Pooling and Servicing
Agreement in a private (non-GSE) deal. The trust may have more than
one servicer servicing portions of the total pool, or there may be
Secondary Servicers, Default Servicers, and/or Sub-Servicers
that service loans in particular categories (e.g., loans in default). Any
or all of the Primary, Secondary, or Sub-Servicers may be a division or
affiliate of the Sponsor; however under the servicing contract the
Servicer is solely responsible to the Trust and the Master Servicer (see
next paragraph). The Servicers are the legal entities that do all the
day-to-day heavy lifting for the Trustee such as sending monthly
bills to borrowers, collecting payments, keeping records of payments,
liquidating assets for the Trustee, and remitting net payments to the
Trustee. The Servicers are normally paid based on the type of loans in
the Trust. For example, a typical servicing fee structure may be: for a
prime mortgage is .25 basis points; for an Alt-A or Option ARM .35
basis points; and for subprime loan is .50 basis points. The points are
multiplied by the principal balance as of each month-end to compute
the fee. For example, a subprime loan with an average balance over a
given year of $120,000 would generate a servicing fee of $600.00 for
that year. The Servicers are normally permitted to retain all ancillary
fees such as late charges, check by phone fees, and the interest
earned from investing all funds on hand in overnight US Treasury
certificates (normally referred to as interest earned on the float).

Master Servicer. The Master Servicer is the Trustees
representative for assuring that the Servicer(s) abide by the terms of
the servicing contracts. For trusts with more than one servicer, the
Master Servicer has an important administrative role in consolidating
the monthly reports and remittances of funds from the individual
servicers into a single data package for the Trustee. If a Servicer fails
to perform or goes out of business or suffers a major downgrade in its
servicer rating, then the Master Servicer must step in, find a
replacement and assure that in all events no interruption of essential
servicing functions occurs. Like all servicers, the Master Servicer may
be a division or affiliate of the Sponsor but is solely responsible to the
Trustee. The Master Servicer receives a fee, 100 basis points per
year in many cases, based on the average balance of all loans in the
Trust.

Custodian. The Master Document Custodian takes and
maintains physical possession of the original hard-copy Mortgage
Notes, Mortgages, Deeds of Trust and certain other key loan
documents that the parties deem essential for the enforcement of the
mortgage loan in the event of default. This is done for safekeeping and
also to accomplish the transfer and due negotiation of possession of
the Notes that is essential under the Uniform Commercial Code for a
valid transfer to the Trustee to occur. Like the Master Servicer, the
Master Document Custodian is responsible by contract solely to the
Trustee (e.g., the Master Document Custodial Agreement). However
unlike the Master Servicer, the Master Document Custodian is an
institution wholly independent from the Servicer and the Sponsor.
There are exceptions to this rule in the world of Fannie Mae/ Freddie
Mac (GSE) securitizations. The GSEs may allow selected large
originators with great secure storage capabilities (in other words, large
banks) to act as their own Master Document Custodians. But even in
those cases, contracts make clear that the GSE Trustee, not the
originator, is the owner of the Note and the mortgage loan. The
Master Document Custodian must also review all original documents
submitted into its custody for full compliance with the conveyancing
rules of the trust (normally set-forth in Section 2.01 of the Pooling and
Servicing Agreement) and file numerous compliance and exception
reports with the Trustee. One of the most important functions of the
Custodian is to confirm that for each loan in the Trust there is a
complete and unbroken chain of transfers and assignments of the
Notes and Mortgages, although this function is often undercut by
wording in the Master Document Custodial Agreement (often, by
defining an ingenious term Last Endorsee) designed to excuse the
parties from providing endorsements and assignment from the
Sponsor to the Depositor, and from the Depositor to the Trustee for
the Trust. In many private securitizations a single institution fulfills all
of the functions related to document custody for the entire pool of
loans. In these cases, the institution might be referred to simply as the
Custodian and the governing document as the Custodial
Agreement.

Typical transaction steps and documents (in private, non-GSE
securitizations)

1. The Originator sells loans (one-by-one or in bundles) to the
Securitizer (a/k/a the Sponsor) pursuant to a Mortgage Loan
Purchase and Sale Agreement (MLPSA) or similarly-named
document. The purpose of the MLPSA is to sell all right, title,
claims, legal, equitable and any and all other interest in the
loans to the Securitizer-Sponsor. For Notes endorsed in blank
which are bearer instruments under the UCC, the MLPSA
normally requires acceptance and delivery receipts for all such
Notes in order to fully document the true sale. Frequently a
form is prescribed for the acceptance and delivery receipt and
attached as an exhibit to the MLPSA. The MLPSA will contain
representations, attestations and warranties as to the
enforceability and marketability of each loan, and specify the
purchasers remedies for a breach of any rep or warrant. The
primary remedy is the purchasers right to require the seller to
repurchase any loan materially and adversely affected by a
breach. The most common reps and warranties related to
those notes that suffer Early Payment Defaults, commonly
referred to as EPDs. An EDP may occur if a loan becomes 60+
days delinquent within a specified period of time after it has
been sold up the line to the Trust. The EDP covenants are
always limited in time and normally only cover EDPs that occur
with 12 to 18 months of the original sale. If an EDP occurs, then
the Trust can force the originator to repurchase the EPD note
and replace it with a note of similar static qualities (amount,
term, type, etc.).

2. The Securitizer-Sponsor sells the loans to the Depositor. This
takes place in another MLPSA very similar to the first one and
the same documents are created and exchange with the same or
similar terms.

3. Depositor, Trustee, Master Servicer and Servicer enter into a
Pooling and Servicing Agreement (PSA) in which:

--- the Depositor sells all right, title, legal, equitable and any other
interest in the mortgage loans to the Trustee, with requirements for
acceptance and delivery receipts, often including the prescribed form
as an exhibit, in similar fashion to the MLPSAs;

--- the PSA enables the Trustee to create the trust and defines the
classes of securities (often called Certificates) that the trust will issue
to investors and establishes the order of priority between classes of
Certificates as to distributions of cash collected and losses realized
with respect to the underlying loans (the highest rated certificates are
paid first and the lowest rated certificates suffer the first losses-thus
the basis for the term structured finance); and

--- the Servicer, Master Servicer and Trustee establish the Servicers
rights and duties, including limits and extent of Servicers right to deal
with default, foreclosure, and Note modifications. Some of the PSA
agreements include detailed Loss Mitigation or Modification Rules and
others limit any substantive modifications (such as changing the
interest rate, reducing the principal debt, waiving default debt,
extending the repayment term, etc.).

4. All parties including the Custodian enter into the Custodial
Agreement in which:

--- the Depositor agrees to cause the Notes and other specified key
loan documents (usually including an unrecorded, recordable
Assignment in blank)(NB that several recent courts have raised
serious legal questions about the assignment of a real estate
instrument in blank under such theories as the statute of frauds and
whether or not an assignment in blank is in fact a recordable legal
real estate document) to be delivered to the Custodian (with the
Securitizer to do the actual physical shipment);

--- the Custodian agrees to inspect the Notes and other documents
and to certify in designated written documents to the Trustee that the
documents meet the required specifications and are in the Custodians
possession; and

---establishes a (supposedly exclusive) procedure and specified forms
whereby the Servicer can obtain possession of any Note, Mortgage,
Deed of Trust or other custodial document for foreclosure or payoff
purposes.

Finding Documents on the S.E.C.s website (the EDGAR filing
system):

If you know the name of the Depositor and the name of the trust
(e.g. Time Bomb Mortgage Trust 2006-2) that contains the loan in
question, then the PSA and Custodial Agreement probably can be
found on the SECs website (www.sec.gov). On the SEC home page
look for a link to Search for Company Filings and then choose to
search by Company Name, using the name of the Depositor.
Hopefully, this will enable you to find the Trust in question. If so, the
PSA and the Custodial Agreement should be available as attachments
to one or more of the earliest-filed Forms (normally the 8-K) shown on
the list of available documents. Sometimes the PSA is listed as a
named document but other times you just look for the largest
document in terms of megabytes filed with the 8-K form. The
available documents also should include the Prospectus and/or
Prospectus Supplement and the Free Writing Prospectus or
FWP. The latter documents (at least the sections written in English, as
opposed to the many tables of financial data) can be very helpful in
providing a concise and straightforward description of the parties,
documents, and transaction steps and detailed transactional graphs
and charts in the particular deal. And because these are SEC
documents, the information serves as highly credible evidence on
these points, and the Court can take judicial notice of any document
filed with the SEC.

Also, it is important to note that for all securitized trusts created
after January 1, 2006, Regulation AB of the SEC Rules requires a
detailed list of all notes or contracts to be filed with the SEC. This
document is normally filed as an Exhibit to the PSA and may or may
not be named. Some of these documents are very detailed and
include such data as the loan numbers, house and street addresses
with zip codes, etc. These documents are very important in that they
will serve to verify that a specific Note has been included in a
particular securitized Trust pool.

Dealing with Notes and Assignments:

There are two basic documents involved in a residential mortgage
loan: the promissory note and the mortgage (or deed of trust). For
brevitys sake these are referred to simply as the Note and the
Mortgage. Lets start by touching base with those basic law school-
type distinctions:

A Note is: a contract to repay borrowed money. It is a negotiable
instrument governed by the Article 3 of the Uniform Commercial Code
(UCC). The Note, by itself, is an unsecured debt. Notes are personal
property. Notes are negotiated by endorsement or by transfer and
delivery as provided for by the UCC. Notes are NOT assigned and
must be viewed as separate legal documents from the real estate
instruments that secure the loans evidenced by the Notes by liens on
real property.

A Mortgage is: a lien on, and an interest in, real estate. It is a
security agreement. It creates a lien on the real estate as collateral for
a debt, but it does not create the debt itself. The rights created by a
Mortgage are classified as real property and these instruments are
governed by local real estate law in each jurisdiction. The UCC has
nothing to do with the creation, drafting, recording or assignment of
these real estate instruments.

A Note can only be transferred by: an Endorsement if the Note is
payable to a particular party; or by transfer of possession of the Note,
if the Note is endorsed in blank. Endorsements must be written or
stamped on the face of the Note or on a piece of paper physically
attached to the Note (the Allonge). See UCC 3-210 through 3-205.
In most states, an Allonge cannot be used to endorse a note if there is
sufficient room at the foot of the note for such endorsements. The
foot of the note refers to the space immediately below the signatures
of the borrowers. Also, if an Allonge is properly used, then it must
describe the terms of the note and most importantly must be
permanently affixed to the Note. Most jurisdictions hold that
staples and tape do not constitute a permanent attachment.
And, the Master Document Custodial Agreement will almost always
specify when an Allonge can be used and how it must be attached to
the original Note. Therefore, an Assignment cannot serve to transfer a
Note.

Mortgage rights can only be transferred by: an Assignment
recorded in the local land records. Mortgage rights are estates in
land and therefore governed by the states real property laws. These
vary from state to state but in general Mortgage rights can only be
transferred by a recorded instrument (the Assignment) in order to be
effective against third parties without notice. When individuals talk
about sales, transfers or assignments of a mortgage loan it is time to
look out, because there is a high likelihood that confusion is on the
way. Frequently the first question is has there been a valid transfer
from Party A to Party B? And the second question is, to prove that a
valid transfer has occurred, what documents does Party B need to
produce- proof of transfer of the Note per the UCC (endorsement
and/or properly transfer by delivery and possession)? An Assignment?
Both? The short answer is it depends on what Party B is trying to do.
Is Party B simply trying to prove that true sales occurred at each
step of the securitization process, as required by the PSA and as
represented in the Prospectus Supplement?
Answer for issue 1, Did actual sales occur at each step of the
securitization transaction?: This is answered under the UCC and by
examining the securitization documents- the MLPSAs, the transfer and
delivery receipts, the cash receipt and disbursement reports, the
canceled checks or money transfer orders, the conveyancing Rules of
the PSA, and Master Document Custodial Agreement, the Compliance
and Exception Reports and Documents created by the Custodian and
filed with the Trustee, the True Sale Legal Opinion letters, the
reports filed by the Rating Agencies (Fitch, Moodys and Standard &
Poors) and through discovery if necessary determining whether or not
the documents and money and records that the securitization
documents say were supposed to change hands did in fact change
hands in the manner and within the time frames specified. Frequently
the only endorsement on the Note is from the Securitizer-
Sponsor in blank and the only Assignment that exists, pre-
foreclosure, is from the Securitizer-Sponsor in blank (in other
words the name of the Transferee is not inserted in the
instrument and this space is blank). The concept generally
accepted in the securitization world (the issuers, ratings agencies, and
law firms advising them) is that this form of documentation was
sufficient for a valid and unbroken chain of transfers of the Note and
assignments of the Mortgages as long as everything was done
consistently with the terms of the securitization documents. This
article is not intended to validate or defend either this concept or this
practice, nor is it intended to represent in any way that the terms of
the securitization documents were actually followed to the letter in
every real-world case. In fact, and unfortunately for the certificate
holders and the securitized mortgage markets, there are many
instances in many reported cases where these mandatory rules of the
securitization documents have not been followed and in fact
completely ignored.
Answer for issue 2: Is the Party we are talking about claiming
to have standing to foreclose or to appear in court with the
rights of a secured creditor under the Bankruptcy Code? OK,
granted the UCC (3-301) does provide that a negotiable instrument
can be enforced either by (i) the holder of the instrument, [or] (ii) a
non-holder in possession of the instrument who has the rights of a
holder. Servicers and foreclosure counsel have been known to
contend that this is the end of the story and that the servicer can
therefore do anything that the holder of the Note could do, anywhere,
anytime. The Fannie Mae and Freddie Mae Guides contain many
sections that appear to lend superficial support to this contention and
frequently will be cited by Servicers and foreclosure counsel as though
the Guides have the force of law, which of course they do not. Lawyers
for Servicers have made this argument many times and to the
knowledge of these writers have lost every such argument. There are
many serious problems with this legal position or these legal
arguments. . Servicers and foreclosure firms are either wrong, or at
least not being cautious, if they attempt to foreclose, or appear in
court, without having a valid pre-complaint or pre-motion Assignment
of the Mortgage. In addition any Servicer, Lender, or Securitization
Trustee is either wrong, or at least not being cautious, if it ever: (1)
claims in any communications to a consumer or to the Court in a
judicial proceeding that it is the Note holder unless they are, at the
relevant point in time, actually the holder and owner of the Note as
determined under UCC law; or (2) undertakes to enforce rights under
a Mortgage without having and recording a valid Assignment. It is
also important to note that in the context of a Title 11 case filed by the
consumer that such transfers and assignments could raise serious
issues about 362, 548 and 549 avoidable transfers that could render
the Trust to the status of an unsecured creditor in the consumers
bankruptcy case.

In support of those generalizations consider the following points:

---The UCC deals only with enforcing the Note. Enforcing the
Mortgage on the other hand is governed by the states real property
and foreclosure laws, which generally contain crucial provisions
regarding actions required to be taken by the note holder or
beneficiary. State law may or may not authorize particular actions to
be taken by servicers or agents of the holder of the Note.

---For the Servicer to have the rights of the holder under the
UCC it must be acting in accordance with its contract. For
example, if the Servicer claims to have possession of the Note, did it
follow the procedures contained in the Release of Documents section
of the Custodial Agreement in obtaining possession? Does the
Servicer really have constitutional standing under either Federal or
State law to enforce the Note even if it is a holder if it does not have
any pecuniary interest in the Note? In short, the concept of
constitutional standing involves some injury in fact and it is hard to
see how a mere place-holder of Nominee could ever over-come
such a hurdle unless it actually owned the Note or some real interest
in the same.

---The Servicer should have the burden of explaining the legal
reasons supporting its standing and authority to act. Sometimes
Servicers have difficulty maintaining a consistent story in this regard.
Is the Servicer claiming to be the actual holder, or the holder and the
owner, or merely an authorized agent of the true holder? If it is
claiming some agency, what proof does it have to support such a
claim? What proof is required? Sometimes this is just academic legal
hair-splitting but many times it involves serious issues of fact. For
example, what if the attorney for the Servicer asserts to the court that
his or her client actually owns the Note but the Fannie Mae website
reports that Fannie is the holder and owner? What if the MERS
website reports that the Plaintiff is just the Servicer? What if the
pre-complaint correspondence to the borrower showed that another
party was the holder or the current plaintiff was only the Servicer?

--Finally, the Servicer always has an obligation to be factually
accurate in borrower communications and legal proceedings, and to
supervise employees and vendors and attorneys to assure that Note
endorsements, Assignments of Mortgage, and affidavits are executed
by persons with valid corporate authority, and not falsified nor offered
for any improper purpose. The focus of the default servicing industry
must move from how fast we can get things done to how honestly
and accurately can we be in presenting the proper documentation to
the courts and to the borrowers. Judicial proceedings are not like
NASCAR races where the fastest lawyer always wins. Judicial
proceedings are all about finding the truth no matter how long that
takes and regardless of the time and difficulties involved.

October 31, 2009

Richard D. Shepherd
The Law Office of Richard Shepherd
Troy, Virginia (W.D.VA)
richard@CentralVaLaw.com
www.CentralVaLaw.com

O. Max Gardner III
Gardner & Gardner PLLC
PO Box 1000
Shelby NC 238150
www.maxgardnerlaw.com
www.maxbankruptcybootcamp.com
maxgardner@maxgardner.com
704.418.2628.

2009 Max Gardners Bankruptcy Boot Camp

IN THE UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF NORTH CAROLINA
SHELBY DIVISION

IN THE MATTER OF: )
)
Matt Brown, ) CHAPTER 13 CASE NO.
) OUR FILE NO.
Debtor. )
______________________________ )
)
Matt Brown, ) ADV. PROC. NO.
)
Plaintiff, )
)
vs. )
)
Ameriquest Funding II, LLC; )
Citi Residential Lending, Inc; )
Deutsche Bank, as trustee of )
Ameriquest Mortgage Securities Inc. )
Asset Backed Pass Through )
Certificates, Series 2006-M3 under )
The Pooling and Servicing Agreement )
Dated as of September 1, 2006; )
Argent Mortgage Company LLC; and )
AMC Mortgage Services, Inc., )
)
Defendants. )

COMPLAINT

NOW COMES Matt Brown, debtor, and for his complaint states as follows:
Jurisdictional Statements and Parties

1. Plaintiff Matt Brown is the debtor in the above captioned bankruptcy case.

2. He commenced the case on May 2, 2007.

3. Venue of the bankruptcy case is appropriate in this court pursuant to 28 USC 1408.
Venue of the instant complaint is appropriate pursuant to 28 USC 1409.

4. This court has jurisdiction of the bankruptcy case and this complaint pursuant to 28
USC 1334.

5. Pursuant to 28 USC 157, the district court has referred all bankruptcy cases and
related proceedings to the bankruptcy judges of this district.


6. This is a core proceeding within the meaning of that statute, and the court has
jurisdiction to enter a final judgment.

7. Upon information and belief, defendant Ameriquest Funding II, LLC, has an address
at 505 City Parkway West, Ste. 100; Orange, CA 928868.

8. Upon information and belief, defendant Citi Residential Lending, Inc., has a principal
office at 390 Greenwich Street; New York, NY 10013.

9. Upon information and belief, defendant Deutsche Bank is the trustee of a securitized
real estate trust, further identified hereinafter, with an address at 1761 East Street,
Andrews Place, Santa Ana, CA 92705.

10. Upon information and belief, Argent Mortgage Company, LLC, has an address at 3
Park Plaza, 10
th
Floor; Irvine, CA 92614.

11. AMC Mortgage Company filed proofs of claim in this case. According to the Proofs of
Claim, it has an address at PO Box 5926; Carol Stream, IL 60197
Factual Allegations

12. Brown is the sole owner, in fee simple, of the real property, with the buildings
thereon, located at 2901 Woodbridge Drive, Shelby, North Carolina. His deed was recorded
at book 4001, page 78, in the Cleveland County Register of Deeds on July 14, 2006.
Hereinafter, references to the property mean 2901 Woodbridge Drive, Shelby, North
Carolina.

13. The purchase price was paid by way of two mortgages, both of which were given to
Argent Mortgage Company, LLC.

14. On April 19, 2007, a third mortgage was recorded, which Brown had given to the
City of Shelby Department of Neighborhood Development for the purpose of securing a loan
in the amount of $12,500, obtained in order to rehabilitate the property. This mortgage is
recorded at book 41649, page 99. Upon information and belief, no payments are required
on this obligation so long as Brown continues to own the property, and if he continues to
own it for a period of years, he will be excused from repaying the loan altogether.

The First Mortgage:

15. The document that purports to be the first mortgage was recorded at book 4001,
page 80, in the same registry on the same date as the deed, and allegedly secured a note in
the amount of $336,000.


16. On February 26, 2008, a document that purports to be an assignment of this
mortgage was recorded in the registry at book 4315, page 34, purporting to assign the
mortgage from Argent Mortgage Company to Deutsche Bank National Trust Company, as
Trustee of Ameriquest Mortgage Securities Inc. Asset Backed Pass Through Certificates,
Series 2006-M3 under the Pooling and Servicing agreement dated as of September 1, 2006.

17. The alleged assignment was signed by Tamara Price, claiming to be Vice President of
Citi Residential Lending Inc. As Attorney in Fact for Argent Mortgage Company.

18. The alleged assignment, which was recorded in 2008, purports to be effective as of
July 23, 2007.

19. The alleged assignment does not reference any recorded Power of Attorney or the
Conveyancing Rule as established under the Pooling and Servicing Agreement referred to in
paragraph number 16. The Plaintiff is informed and believes and therefore alleges that
under the terms of the said Pooling and Servicing Agreement all assets must be conveyed to
the Trust on or before a fixed date or said assets will not be deemed property assets of the
Trust.

20. No further assignment of this mortgage appears in the Registry of Deeds pursuant to
an internet search of the records of the Register of Deeds office.

The Second Mortgage:

21. The document that purports to be the second mortgage was recorded at book 4001,
page 98, on the same date in the same registry, and allegedly secured a note in the amount
of $84,000.

22. On February 26, 2008, a document that purports to be an assignment of this
mortgage was recorded at book 4315, page 35, by which Argent Mortgage Company
purported to assign this mortgage to Ameriquest Funding II, LLC.

23. The alleged assignment was signed by Tamara Price, claiming to be Vice President of
Citi Residential Lending Inc. There is nothing in this assignment indicating that Citi
Residential Lending claims to be Attorney in Fact for Argent Mortgage Company.

24. A second, virtually identical alleged assignment was recorded on May 28, 2008, at
book 4358, page 3, in the registry.

25. Both assignments, although recorded in 2008, purport to be effective as of July 24,
2007.


26. Neither assignment references any recorded Power of Attorney by which Citi
Residential Lending, Inc., obtained authority to sign the assignments or the Conveyancing
Rule as established under the Pooling and Servicing Agreement referred to in paragraph
number 16. The Plaintiff is informed and believes and therefore alleges that under the
terms of the said Pooling and Servicing Agreement all assets must be conveyed to the Trust
on or before a fixed date or said assets will not be deemed property assets of the Trust.

27. No further assignment of this mortgage appears in the Registry of Deeds, so far as
can be ascertained in an internet-based search of the records.

The Bankruptcy Case Proofs of Claim
Claim Number 10

28. On or about August 23, 2007, a proof of claim was filed with the Clerk of this Court
in which AMC Mortgage Services Inc. claimed to be loan servicer for Secured Creditor
Argent Mortgage Company, LLC.

29. The proof of claim appears as number 10 on the claims register maintained by the
Clerk of Court.

30. The total amount of the claim is $354,425.38

31. A copy of the promissory note and the mortgage were not attached to the proof of
claim, in violation of the mandatory Federal Rule of Bankruptcy Procedure 3001 and the
written instructions on the Official Proof of Claim form.

32. Nonetheless, based on the amount of the claim, it appears that this claim could
relate to the first mortgage.

Claim Number 11

33. On or about August 23, 2007, another proof of claim was filed with the Clerk of this
Court by AMC Mortgage Services, Inc. In this document, AMC once again claimed to be
loan servicer for Secured Creditor Argent Mortgage Company, LLC.

34. The proof of claim appears as number 11 on the claims register maintained by the
clerk of the court.

35. The total amount of the claim is $89,137.68.

36. A copy of the promissory note and the mortgage were not attached to the proof of
claim, in violation of the mandatory provisions of Federal Rule of Bankruptcy Procedure

3001 and the written instructions on the Official Proof of Claim form.

37. Nonetheless, based on the amount of the claim, it appears that this claim may relate
to the second mortgage.

Other Filings
The First Motion for Relief from Stay

38. On or about August 13, 2007, a motion for relief from the automatic stay was filed
by defendant Deutsche Bank, in which it claimed to be the holder of the mortgage recorded
at book 4001, page 98 i.e., the second mortgage.

39. However, the amount claimed as due was estimated at $359,000, which apparently
would be somehow related to what might be the amount due on the first mortgage. This
amount certainly has no relation to any amount allegedly due on the second mortgage.

40. The allegation that Deutsche Bank was the holder appears to have been a false
allegation for two independent reasons based on judicial admissions in this case: 1) the
second mortgage had not been allegedly assigned to any third party until February 26,
2008, that being the date the assignment was signed and which is approximately six
months after the motion was filed; and 2) the second mortgage was allegedly assigned to
Ameriquest Funding II, LLC, not Deutsche Bank.

41. Brown filed an objection to the motion which noted the lack of an assignment and
questioned the standing of Deutsche Bank to either file or prosecute the motion.

42. At that point in the case, Brown was having difficulty maintaining the direct
payments on this mortgage, and decided to assent to the motion, i.e., to surrender the
collateral. Thus an order was entered on October 9, 2007, granting the motion as of
December 4, 2007.

The Second Motion for Relief from Stay

43. On or about October 10, 2007, a second motion for relief from the automatic stay
was filed by defendant Deutsche Bank, in which it claimed to be the holder of the mortgage
recorded at book 4001, page 98 i.e., the second mortgage. This is the same mortgage
referred to in the earlier motion, which was the subject of the Order entered by this Court
on October 9, 2007.

44. In this motion, however, rather than alleging a balance due of approximately
$359,000.00 Deutsche Bank claimed that the amount due was approximately $93,000. This
amount appears to bear some relation to the amount identified by the Plaintiff in the

Schedules filed with the petition in this case.

45. The allegation that Deutsche Bank was the holder of the mortgage appears to have
been a false allegation for two independent reasons and judicial admissions of record in this
case: 1) the second mortgage had not been allegedly assigned to any third party until
February 26, 2008, that being the date the assignment was signed and which is
approximately four months after the motion was filed; and 2) the second mortgage was
allegedly assigned to Ameriquest Funding II, LLC, not Deutsche Bank.

46. On November 8, 2007, this Court entered an order finding this motion to be mooted
by the filing of the third motion for relief from stay.

The Third Motion for Relief from Stay

47. On or about November 7, 2007, a third motion for relief from the automatic stay
(captioned Amended) was filed by defendant Deutsche Bank, in which it claimed to be the
holder of the mortgage recorded at book 4001, page 98 i.e., the second mortgage.

48. The motion alleged that relief from the stay had been granted as to the first
mortgage. However, as noted above, all of the prior motions referred to the Registry book
and page of the second mortgage.

49. The motion alleged that the amount due was estimated at $93,000, which would
appear to be the amount listed for the second mortgage in the Schedules filed with the
petition.

50. The allegation that Deutsche Bank was the holder appears to have been a false
allegation for two independent reasons and based on judicial admissions in this case: 1) the
second mortgage had not been allegedly assigned to any third party until February 26,
2008, that being the date the purported assignment was signed and which is approximately
six months after the motion was filed; and 2) the second mortgage was allegedly assigned
to Ameriquest Funding II, LLC, not Deutsche Bank.

51. On March 5, 2008, Deutsche Bank filed a motion seeking to withdraw a motion for
relief from stay, alleging that the motion was filed in error. Although it was unclear, the
motion apparently sought to withdraw the third motion for relief from stay.

52. That same day, a Supplemental Motion to Withdraw Motion for Relief From Stay
was filed, admitting that the third motion for relief from stay was factually incorrect and
stating that the debtor would not be charged any fees or costs associated with the motion.


The Fourth Motion for Relief from Stay

53. On or about March 11, 2008, a fourth motion for relief from the automatic stay was
filed by defendant Ameriquest Funding II, LLC.

54. The motion asserted that Ameriquest Funding II, LLC, was the holder (and
presumably the owner) of the first mortgage.

55. However, all of the other allegations of the motion, and the exhibits attached to it,
make it clear that it is the second mortgage that was duly recorded and identified in the
Schedules which is the subject of the motion. Unlike the prior motions for relief from the
stay, the fourth motion does not include any reference to any public Registry recording
information.

56. Brown filed an objection in which he noted, among other things, that the mortgage is
modifiable within the meaning of 11 USC 1322(b)(2), and that he intended to file an
amended plan modifying the mortgage.

57. On July 15, 2008, the motion was withdrawn based on information gathered by the
lender. The Plaintiff has no idea what this might mean other than perhaps the movant had
reviewed the prior three motions filed with this Court.

Related Motions

58. On March 3, 2008, Deutsche Bank filed a motion asking the court to amend the order
dated October 4, 2007, to correct the incorrect Registry recording information in the order,
alleging that the error on the part of its counsel was administrative. This motion was
allowed on March 5, 2008.

59. Brown filed a Second Amended Plan, and a motion for approval of the same, on or
about May 5, 2008, which set forth a proposed modification of both mortgages. Deutsche
Bank filed an objection to the plan on May 28, 2008. Ameriquest Funding II, LLC, does not
appear to have filed an objection. The objection took issue with, among other things, the
provision in the plan for a balloon payment. Brown filed a response in which the standing of
Deutsche Bank was raised. On July 17, 2008, the court sustained the objection but did not
reach the standing issue. Brown intends to seek leave for an interlocutory appeal of the
order sustaining the objection.

60. Pursuant to an order of the court, Brown filed a motion for approval of use of the
rents from the property. The court has allowed that motion on an interim basis, not
withstanding the Limited Objection of Deutsche Bank to the motion. It does not appear that
Ameriquest Funding II, LLC, has filed any objection to the cash collateral motion.

Browns Motion to Reinstate the Automatic Stay

61. Having filed an amended plan seeking to modify the mortgage, Brown filed a motion
seeking to reinstate the automatic stay to the extent that it was granted by the first motion
for relief from stay, which was effective as of December 4, 2007. The motion noted that the
second amended plan (modifying the mortgage) had been filed, as well as many of the
factual errors detailed in previous paragraphs of this motion.

62. Deutsche Bank filed an opposition to the motion on May 27, 2008. Ameriquest
Funding II, LLC, did not file an opposition. Deutsche Banks opposition claimed that there
existed significant post-petition arrears even though the plan modified the mortgage, and
under existing law in the District of Massachusetts, modified secured obligations must be
paid by the trustee, not directly. At the hearing on the motion, the court roundly rejected
Deutsche Banks contention that Brown should be required to cure the post-petition arrears
forthwith.

63. Attached to the opposition were copies of two of the assignments referred to herein,
together with a Limited Power of Attorney allegedly appointing Citi Residential as attorney in
fact for Argent Mortgage Company, and an Incumbency Certificate.

64. The motion was allowed on condition that Brown tender all net rents generated by
the subject property (emphasis added) to the Chapter 13 trustee for distribution to the
mortgagee pending further order of court.

The Pooling and Servicing Agreement

65. As noted in paragraph 15 above, Deutsche Bank claims to be the holder of the first
mortgage, as trustee of a securitized real estate trust, pursuant to a certain Pooling and
Servicing Agreement (hereinafter the Agreement).

66. Said agreement is a legal document that was filed with the Securities and Exchange
Commission on or about October 24, 2006.

67. The agreement, in essence, is a purchase and sale agreement whereby a depositor
agrees to sell certain mortgage loans to a trust, the beneficiaries of which purchase
interests in the trust.

68. A review of the agreement, obtained via the internet from the Securities and
Exchange Commissions web site, indicates that the Depositor of this trust is Ameriquest
Mortgage Securities Inc.


69. Under Section 2.01 of the agreement, the Depositor, "concurrently with the
execution and delivery [of the agreement], does [thereby] transfer, assign, set over and
otherwise convey to the Trustee all the right, title and interest of the Depositor, in and
to the Mortgage Loans identified on the Mortgage Loan Schedule " together with certain
other rights and/or property.

70. (add the conveyancing language from the PSA along with the delivery date
of the notes to the Trust and the cut-off dates for the notes.)

71. The agreement contains four references to Shelby, the location of the property, but
it is impossible to ascertain from the agreement itself whether the first mortgage is included
in the Pool.

Count I

The First Mortgage:

72. Argent Mortgage Company, the mortgagee on the first mortgage, is a stranger to the
Pooling and Servicing Agreement because the agreement is between Ameriquest Mortgage
Securities Inc. and Deutsche Bank as trustee, and there is nothing to indicate that Argent
Mortgage Company has any power to convey mortgages or negotiate mortgage notes to the
trust.

73. The Power of Attorney referred to in paragraph 63 above does not contain any
provision granting Citi Residential authority to convey mortgages or mortgage notes to the
trust.

74. Thus the alleged assignment from Argent Mortgage Company directly to Deutsche
Bank is invalid as a matter of law and pursuant to the controlling legal documents in this
case, as Argent is a stranger to the agreement and was not legally authorized to take any
acts with respect thereto. To be valid, the assignment of the mortgage and the negotiation
of the mortgage note must be from Argent Mortgage Company to Ameriquest Mortgage
Securities Inc., the depositor, and must be executed by a party with power and/or authority
to do so.

75. Furthermore, the attempt to backdate the assignment to July 23, 2007, is a nullity
because a mortgage is an interest in land, and as such must be in writing to satisfy the
Statute of Frauds. Such back-dating is also totally inconsistent with the governing Rules of
the Pooling and Servicing Agreement and therefore is not authorized by this controlling
document. Because the assignment purports to convey an interest in land, the assignment
must also be in writing and can only be effective as of the date it is signed.

76. The proof of claim in this case was filed by AMC Mortgage Services, Inc., as servicer

for Secured Creditor Argent Mortgage Company, LLC, on or about August 23, 2007.

77. The proof of claim did not contain a copy of the note, the mortgage, or any proof of
authority of AMC Mortgage Services to file the proof of claim on behalf of Argent.

78. If the assignment were found to be valid, then the proof of claim is false because on
the date the proof of claim was filed (i.e., after the effective date of the assignment), the
secured creditor was Deutsche Bank as trustee, not Argent Mortgage Company, LLC.

79. In addition, Brown is unable to ascertain from the information included on the proof
of claim whether the account claimed due is correct, and believes that it may include
amounts to which the claimant is not legally entitled.

Count II

The Second Mortgage:

80. The proof of claim relating to the second mortgage was filed by AMC Mortgage
Services Inc., claiming to be loan servicer for Secured Creditor Argent Mortgage Company,
LLC.

81. The two assignments of the second mortgage to Ameriquest Funding II, LLC, were
signed by Tamara Price, claiming to be Vice President of Citi Residential Lending Inc.

82. The Power of Attorney referred to in paragraph 63 above does not contain any
provision granting Citi Residential authority to convey mortgages to third parties.

83. Thus the assignment from Argent Mortgage Company to Ameriquest Funding II, LLC,
is invalid. To be valid, the assignment must be executed by a party with power and/or
authority to do so.

84. The proof of claim in this case was filed by AMC Mortgage Services, Inc., as servicer
for Secured Creditor Argent Mortgage Company, LLC, on or about August 23, 2007.

85. The proof of claim did not contain a copy of the note, the mortgage, or any proof of
authority of AMC Mortgage Services to file the proof of claim on behalf of Argent.

86. If the assignment were found to be valid, then the proof of claim is false because on
the date the proof of claim was filed (i.e., after the effective date of the assignment), the
secured creditor was Ameriquest Funding II, LLC, not Argent Mortgage Company, LLC.

87. In addition, Brown is unable to ascertain from the information included on the proof
of claim whether the account claimed due is correct, and believes that it may include

amounts to which the claimant is not legally entitled.

WHEREFORE, Brown requests that the court enter judgment finding and declaring that the
purported assignments of the mortgages are void and ineffective; that the claims be
disallowed; and that the security interests be deemed void pursuant to 11 USC 506(d); or
in the alternative declaring the identity of the actual holder of the mortgage and note,
compelling the holder to provide him with a complete accounting of the obligation; together
with attorneys fees, costs, and such other or different relief as may be appropriate to the
facts as determined at trial.

Dated this _____ day of __________________, 2008.

________________________________________
O. Max Gardner III
Law Offices of O. Max Gardner III, P.C.
Attorney for the Debtor
NC State Bar #6164
P.O. Box 1000, Shelby, NC 28151-1000
(704) 487-0616 / FAX (704) 487-0619
e-mail maxgardner@maxgardner.com


FOR THE WESTERN DISTRICT OF NORTH CAROLINA
SHELBY DIVISION

IN RE: JOHNSON, SAMUEL LEON CASE NO: 07-
41234
DEBTOR CHAPTER 13

SAMUEL LEON JOHNSON
and STEVEN G. TATE,
CHAPTER 13 TRUSTEE,
PLAINTIFFS

versus AP No. ____________

CITIMORTGAGE, INC.,
CITICORP MORTGAGE SECURITIES, INC.,
CITICORP MORTGAGE SECURITIES TRUST,
SERIES 2007-7 REMIC Pass-Through Certificates,
and ABN AMRO MORTGAGE GROUP, INC.,
a wholly owned subsidiary of
CITIMORTGAGE, INC., U.S. BANK NATIONAL
ASSOCIATION, TRUSTEE, CITIBANK, N.A.,

DEFENDANTS.

Complaint of the Debtor for Declaratory Judgment and for Damages
For Filing a False Proof of Claim and For Failure to Perfect Deed of Trust on
Residential Real Property


Introduction

1. This is an action brought by the Debtor/Plaintiff (hereinafter Debtor) for a
Declaratory Judgment, injunctive and equitable relief as provided for by Rules 2016(a), 3007,
7001(7) and 7001(9) of the Federal Rules of Bankruptcy Procedure (Rules of Bankruptcy
Procedure).
2. This is also an action to determine the secured status of the Defendants in this
case pursuant to Sections 105(a), 502(b)(1), 506 and 544(a) of the Bankruptcy Code and
Rule 3007 of the Bankruptcy Rules.
3. The Debtor is also seeking the recovery of actual and punitive damages from
the Defendants pursuant to Sections 362(a) and 105(a) of Title 11 of the Untied States Code
commonly referred to as the Bankruptcy Abuse Prevention and Consumer Protection Act of
2005 (hereinafter the Bankruptcy Code) for filing a false and fraudulent proof of claim in
violation of Section 501 of the Code and Rules 3001(c) and 3001(d) of the Bankruptcy Rules.

Jurisdiction
4. This is a core proceeding as that term is defined by Section 157(b)(2) of Title
28 of the United States Code in that it concerns claims and counter-claims to the Proof of
Claim and matters arising out of the administration of this bankruptcy case and rights duly
established under Title 11 of the United States Code and other applicable federal law.
5. This Court has both personal and subject matter jurisdiction to hear this case
pursuant to Section 1334 of Title 28 of the United States Code and Section 157(b)(2) of Title
28 of the United States Code.
6. Venue lies in this District pursuant to Section 1391(b) of Title 28 of the United
States Code.
The Parties
7. Samuel Leon Johnson (Johnson and/or Debtor) is a debtor under Chapter
13 of Title 11 of the United States Code.
8. Steven G. Tate (Trustee and/or Tate) is the Standing Chapter 13 Trustee
for the United States Bankruptcy Court for the Western District of North Carolina, Shelby
Division, and is the assigned Trustee in Johnsons case.
9. CitiMortgage, Inc. (CitiMortgage) is a New York corporation with its principal
place of business at 1000 Technology Drive, OFallon, Missouri 63368-2240. The published
internet address for CitiMortgage is www.citimortgageembs.com.
10. Citicorp Mortgage Securities, Inc. (Citi Securities) is a Delaware Corporation
with its principal place of business located at 1000 Technology Drive, OFallon, Missouri
63368-2240.
11. Citicorp Mortgage Securities Trust, Series 2007-7 REMIC Pass-Through

Certificates (the Trust) is a common law trust formed on or about August 28, 2007,
pursuant to New York law. The corpus of the Trust allegedly consists of a pool of
approximately $629,365,597.00 of residential mortgage notes allegedly secured by liens on
residential real estate. The Plaintiffs are informed and believe and therefore allege that the
Trust has no officers or directors and no continuing duties other than to hold assets and to
issue the series of certificates of investment as described in the Prospectus identified below.
The Plaintiffs allege that the mortgage notes were divided into three pools with each pool
based on the stated maturity dates of the notes. A detailed description of the mortgage
loans is included in Form 425B5 (the Prospectus) duly filed with the Securities and
Exchange Commission on August 29, 2007, per SEC Accession No. 0001401025-07-000063
and accepted by the SEC on that date at 15:04:18. The Trusts SEC CIK Code for all SEC
filings is 0001408211.
12. ABN AMRO Mortgage Group, Inc (AAMG) is a Delaware corporation, which
became a wholly owned subsidiary of CitiMortgage on or about March 1, 2007. The Plaintiffs
are informed and believe and therefore allege that AAMG may now have been legally merged
into CitiMortgage.
13. U.S. Bank National Association is a national banking association organized
under the laws of the United States and is a wholly-owned subsidiary of U.S. Bancorp. The
Plaintiffs allege that U.S. Bank National Association (the Trustee) is the named Trustee for
the Trust. The Plaintiffs believe and therefore allege that the Trustee has acted as a trustee
for mortgage-backed securitized trusts since 1987. The principal location for the Trustee is
US Bank National Association, Corporate Trust Services, One Federal Street, 3
rd
Floor,
Boston, Massachusetts 02110. The website for the Trustee is http://www.usbank.com/abs.
14. Citibank, N.A. (Citibank) is a national banking association organized under
the laws of the United States and serves as the paying agent, transfer agent and certificate
registrar for the Trust. The notice address for Citibank is Citibank, N.A., Agency and Trust,
388 Greenwich Street, New York, New York 10013. The website for Citibank is
http://www.sf.citidirect.com.
15. The Plaintiffs are informed and believe and therefore allege that CitiMortgage
was the originator of the mortgage loan in this case and also served as the sponsor for the
mortgage-backed Trust identified herein.
16. The Plaintiffs are informed and believe and therefore allege that CitiMortgage
and AAMG are the Primary Mortgage Servicers for the Trust and that CitiMortgage is also
the Master Servicer. The Pooling and Servicing Agreement is a public document on file with
the SEC. The website for this document:
http://www.sec.gov/Archives/edgar/data/811785/000140102507000073/poolingandservicing
agreement.htm.
17. The Plaintiffs are informed and believe and allege that Citi Securities issued the

investment bonds in the mortgage-backed Trust identified herein. The said securities were
underwritten by Morgan Stanley & Co. Incorporated. The Plaintiffs allege that these
securities were duly registered with the Securities and Exchange Commission (SEC) on a
registration statement bearing file number 333-130333. The registration statement and
other reports and information regarding the Trustee are available at the SECs Internet site at
http://www.sec.gov. The materials are also available to read and copy at the SECs Public
Reference Room at 100 F. Street, N.E., Washington, D.C. 20549.

The Base Case
18. This case was commenced by the filing of a Chapter 13 petition with the Clerk
of this court on December 19, 2007. On or about December 19, 2007, the Bankruptcy
Noticing Center notified Defendants of Debtors bankruptcy case. The attorney for the Debtor
also provided the Defendants with written notice of the filing and with a copy of the Chapter
13 plan at or about the same time.
19. An Order for Relief under the provisions of Chapter 13 of the Bankruptcy Code
was duly entered by this Court upon the filing of the petition. This order served to invoke the
provisions of Section 362(a) of the Bankruptcy Code.
20. The 341(a) meeting of creditors has been scheduled for Friday, February 16,
2008 in Shelby, North Carolina.
21. The debtor listed on Schedule D a disputed debt to CitiMortgage in the current
outstanding amount of $177,757.57. The debt was disputed to the extent that the debtor
denied that CitiMortgage or the Trust held a valid, and enforceable secured claim against
property of the bankruptcy estate, specifically: the debtors single-family home located at
821 Hawthorne Rd, Shelby, Cleveland County, North Carolina, as more particularly described
in that Deed recorded in Book 707 at Page 421 of the Cleveland County Public Registry.
22. The debtor also noted on Schedule D that the debt was evidenced by a
scheduled payment residential mortgage instrument (the mortgage or note) issued on a
standard Fannie/Freddie Uniform instrument for the State of North Carolina with a publication
date of January 1, 2001. The note was actually signed on March 15, 2005, and provides for
a fixed rate of interest of 7.50%, with monthly payments of $1,437.50 due on the 1
st
day of
each month for a term of 30 years, beginning on April 1, 2005. The mortgagee of record
on the note is CitiMortgage.
23. The debtor also indicated on Schedule D that the note was allegedly secured by
a Deed of Trust recorded in Deed of Trust Book 343 at Page 471 of the Cleveland County
Public Registry. CitiMortgage is named as the beneficiary of the said Deed of Trust and
Grady S. Ingle of Shapiro & Ingle of 137 E. Trade Street, Charlotte, North Carolina 28150 is
listed as the Trustee under the Deed of Trust. The Plaintiffs allege that as of the date of the
filing of the petition the Deed of Trust had not bee assigned of record to any other party.

24. The debtor alleges that as of the date of the filing of this Chapter 13 case the
instrument identified in paragraph 22 was the only Deed of Trust of record recorded against
the property at 821 Hawthorne Rd., Shelby, Cleveland County, North Carolina.
25. The Plaintiffs allege that on or about January 8, 2008, CitiMortgage filed a
sworn proof of claim with this Court. The Claim was duly docketed by the Clerk of this Court
and was assigned Docket Number 11. The Proof of Claim was filed by the Law Firm of
McCalla Raymer on behalf of and as attorneys of record for CitiMortgage and the Trust. The
Claim form was signed by Michael McCormick, who identified himself as an attorney with
McCalla Raymer and also as an agent for MR Default Services LLC.
26. The Proof of Claim filed by CitiMortgage included as attachments the Note and
the Deed of Trust and a report prepared by Debra Jenkins, who identified herself as an
agent of CitiMortgage employed by MR Default Services LLC. The Proof of Claim did not
include any endorsement or endorsements evidencing the transfer and delivery of the Note to
the Trust, the identified claimant therein. Accordingly, the Proof of Claim included no
documents supporting the position that the Trust, for whom Debra Jenkins or Michael
McCormick are alleged agents, is the present transferee, holder and owner of the note. In
addition, the Proof of Claim failed to attach a copy of the Pooling and Servicing Agreement
referred to therein which allegedly granted CitiMortgage legal authority to act for the Trust.
27. Exhibit C attached to the Proof of Claim states that there are prepetition
attorney fees and costs of $1,821.08 included in the aggregate amount allegedly owed of
$180,432.37. However, there are no documents attached to the Proof of Claim supporting
such fees and charges or expenses and the Schedules and Statement of Financial Affairs filed
by the debtor does not indicate that a foreclosure case was pending as of the petition date.
In addition, the attachments to the Proof of Claim fail to include all agreements between the
claimants and their lawyers, any time and expense records of the attorneys for the claimants,
the source of compensation already paid or promised, the amount of compensation already
paid and by whom it was paid, and further fails to identify if any compensation received ahs
been shared and whether an agreement or understanding exists between the claimants and
their attorneys and another other entity for the sharing of compensations received or to be
received. The Plaintiffs also allege that the mathematical computations on the Proof of Claim
are not consistent with the amount of the debt plus the fees as stated on Schedule D.
28. The Plaintiffs allege that Rule 3001(c) of the Bankruptcy Rules and Paragraph 9
of the Official Proof of Claim form expressly require a party filing a Proof of Claim to attach
all supporting documents. To the extent that no documents are filed in support of these
fees, the Plaintiffs allege that the Proof of Claim is fatally defective and that all such fees and
charges are unreasonable per se.
Property Preservation/Inspection Fees of $290.00 included in the aggregate amount

allegedly owed of $180,432.37. However, there are no documents attached to the Proof of
Claim supporting such fees and charges.
fees, the Plaintiffs allege that the Proof of Claim is fatally defective and such proper
inspection and preservation fees are unreasonable per se.
Appraisal/BPO fees of $790.00 included in the aggregate amount allegedly owed of
$180,432.37. However, there are no supporting documents supporting any of these fees
including but not limited to the alleged appraisals. As a result, the Plaintiffs allege that all
such fees and charges are unreasonable per se.
fees, the Plaintiffs allege that the Proof of Claim is fatally defective and the fees and charges
are unreasonable per se.
33. Exhibit C attached to the Proof of Claim states that there are postpetition
Property Preservation/Inspection fees of $22.00 included in the aggregate amount allegedly
owed of $180,432.37. However, there are no supporting documents supporting any of these
fees including but not limited to the alleged property inspection reports.
fees, the Plaintiffs allege that the Proof of Claim is fatally defective and are unreasonable per
se. The Plaintiffs also allege that such property inspection fees as well as the broker price
opinions fees are illegal in the Western District of North Carolina pursuant to well-settled
case law and Administrative Orders.
Appraisal/BPO fees of $390.00 included in the aggregate amount allegedly owed of
$180,432.37. However, there are no supporting documents supporting any of these fees
including but not limited to the alleged appraisals.
fees, the Plaintiffs allege that the Proof of Claim is fatally defective and such fees are
unreasonable per se.

attorney fees of $750.00 included in the aggregate amount allegedly owed of $180,432.37.
However, there are no supporting documents supporting any of these fees including but not
limited to the alleged time and expense records.
fees, the Plaintiffs allege that the Proof of Claim is fatally defective.
39. The Plaintiffs allege that the sworn Proof of Claim filed in this case indicates
that the Trust is the holder and owner of the mortgage note and the real party in interest in
connection with the legal and financial obligations of the debtor. However, the Trust has
attached no documents to the Proof of Claim in support of these claims.
40. The Plaintiffs allege that a party seeking to file a claim in any Federal Court
bears the burden of demonstrating standing and must plead its components with
specificity. Coyne v American Tobacco Company, 183 F.3d 488, 494 (6
th
Cir. 1999). The
minimum constitutional requirements for standing are: proof of injury in fact, causation, and
redressability. Valley Forge Christian College v Americans United for Separation of Church &
State, Inc., 454 U.S. 464, 473 (1982). Furthermore, the Plaintiffs allege that in order to
satisfy the requirements of Article III of the United States Constitution, any claimant
asserting rights in a Federal Court must show he has personally suffered some actual injury
as a result of the conduct of the adverse party. Coyne, 183 F.3d at 494; Valley Forge, 454
U.S. at 472.
41. In the Proof of Claim filed in this case, the Trust alleges that it is the holder
and owner of the Note and the beneficiary of the Deed of Trust. However, the Note and
Deed of Trust attached to the Proof of Claim as Exhibits identify the mortgagee and note
holder as the original lending institutionCitiMortgage. However, in documents filed under
penalty of perjury with the Securities and Exchange Commission, CitiMortgage states that it
sold the mortgage loan to Citi Securities who in turn sold the mortgage loan to the Trust. As
a result, CitiMortgage is estopped and precluded from asserting any claim in this case, either
secured or unsecured.
42. The Plaintiffs further allege that no documents or records have been filed with
the Proof of Claim that demonstrate that prior to the petition date the note was duly
endorsed, transferred and delivered to the Trust. The Plaintiffs further allege that in order
for the Trust to have a valid and enforceable secured claim against the real property of this
estate in bankruptcy the Trust must prove that it received an endorsement of the Note that
was duly executed prior to the petition date and that it had physical possession of the note at
that point in time. Absent such proof, the Plaintiffs allege that the Trust has failed to
demonstrate that it had standing as a secured creditor in this case prior to the creation of the
Bankruptcy Estate. Furthermore, since the Trust does not hold and possess the Note it is

estopped and precluded from asserting any secured or unsecured claim in this case.
43. The Plaintiffs further aver that any documents that purport to transfer any
interest in the Note to the Trust postpetition are void as a matter of law pursuant to Sections
362(a)(4) and 549 of Title 11 of the United States Code.
44. The Plaintiffs allege that on or about August 1, 2007, the Defendants caused to
be filed in Form 8-K with the SEC a Pooling and Servicing Agreement (the PSA) for Citicorp
Mortgage Securities Trust, Series 2007-7, REMIC Pass-Through Certificates, identified herein
as the Trust. The document is filed at the following SEC Internet address:
http://www.sec.gov/Archives/edgar/data/811785/000140102507000073/poolingandservicing
agreement.htm.
45. The Plaintiffs allege that one purpose of the PSA is to document that in the
regular course of business the Defendants originate and acquire mortgage loans and desire
by the PSA to confirm the terms and conditions under which the Trust will acquire the
mortgage loans so originated.
46. The Plaintiffs allege that the mortgage loans allegedly transferred to the Trust
pursuant to the PSA where identified on an Exhibit B, attached to the PSA.
47. The Plaintiffs allege that the Note in this case was one of the mortgage loans
identified in the said Exhibit B.
48. The Plaintiffs allege that the Note in this case was never lawfully negotiated
and physically delivered to the Trust. Rather, the Plaintiffs allege that the Note was
executed in blank by Citi Securities and delivered to a third-party custodian to hold in the
capacity of a depository. The Plaintiffs allege that this arrangement is evidenced by a
Mortgage Note Custodial Agreement executed between the Trustee and CitiMortgage and on
file with the Securities and Exchange Commission.
49. The Plaintiffs allege that pursuant to Section 2.1 of the PSA Citi Securities
agreed to transfer and endorse to the Trustee for the Trust, without recourse, all of Citi
Securities right, title and interest in and to the mortgage loan of the debtor herein and all
other mortgage loans identified on Exhibit B to the PSA. The Plaintiffs further allege that the
PSA provides that such transfer and assignment is absolute, is made in exchange for the
certificates described in this section 12, and is intended by the parties to be a sale. As a
result thereof, the Plaintiffs allege that Citi Securities is estopped and precluded from
asserting any secured or unsecured claim in this case.
50. The Plaintiffs allege on information and belief that CitiMortgage had previously
agreed to transfer and deliver to Citi Securities, without recourse, all of CitiMortgages right,
title and interest in and to the mortgage loan of the Plaintiff herein and all other mortgage
loans identified on Exhibit B to the PSA. The Plaintiffs further allege that such transfer and
delivery was stated to be absolute, was made for valuable consideration, and was intended
by the parties to be a bona fide sale. As a result thereof, the Plaintiffs allege that

CitiMortgage is estopped and precluded from asserting any secured or unsecured claim in this
case.
51. The Plaintiffs allege that as a result of the PSA and other documents signed in
relation thereto both CitiMortgage and Citi Securities are collaterally and judicially estopped
from claiming any interest in the Note that is alleged secured by the Deed of Trust on the
debtors residential real estate. The Plaintiffs also allege that the said parties are estopped
and precluded from asserting any secured or unsecured claim in this case.
52. The Plaintiffs are informed and believe and therefore allege that the Note in
this case and the other mortgage loans identified in Exhibit B to the PSA were never actually
transferred and delivered by CitiMortgage to Citi Securities and by Citi Securities to the
Trustee for the Trust but rather were endorsed in blank and then delivered to the possession
of the Mortgage Note Custodian. Specifically, the Plaintiffs allege that Section 2.1 of the PSA
provides as follows: For each mortgage loan . . . CMSI [Citi Securities] will on or before the
closing date deliver to the Mortgage Note Custodian the mortgage note, endorsed by manual
or facsimile signature without recourse by the Originator or an affiliate of the Originator in
blank . . .
53. The Plaintiffs further allege that the PSA provides additionally as follows: The
Depositor will deliver to the Custodian, on behalf of the Trustee, with respect to each
Mortgage Loan (i) the mortgage note endorsed without recourse in blank to reflect the
transfer of the Mortgage Loan, (ii) the original mortgage with evidence of recording
indicated thereon and (iii) an assignment of the mortgage in recordable form endorsed
in blank without recourse, reflecting the transfer of the Mortgage Loan. The Depositor will
not cause to be recorded any assignment of mortgage which relates to a Mortgage Loan in
any jurisdiction (except with respect to any Mortgage Loan located in the State of
Maryland) unless such failure to record would result in a withdrawal or a downgrading by
any Rating Agency of the rating on any class of Certificates; provided, however, upon the
occurrence of certain events set forth in the Pooling and Servicing Agreement, each such
assignment of mortgage will be recorded, or submitted for recording by the Seller, at the
Seller's expense (or, if the Seller is unable to pay the cost of recording the assignments
of mortgage, such expense will be paid by the Trustee, which expense will be reimbursed
by the Trust) as set forth in the Pooling and Servicing Agreement.
54. The Prospectus and Prospectus Supplement filed with the SEC in this case on
From 424B5 includes the Risk of Investment in the Trust. The form is filed at the following
website:
http://www.sec.gov/Archives/edgar/data/811785/000140102507000063/cmsi2007-
7424b5.htm.
55. The Prospectus and Prospectus Supplement provide on pages 52 and 53 of the
Core Supplement that if a homeowner files for protection under the federal bankruptcy laws,

the bankruptcy court may reduce the outstanding principal balance of the mortgage loan, or
some monthly scheduled principal payments by reducing the loans interest rate and/or
extending its maturity date, or both. Either of such reductions by a bankruptcy court will be
a bankruptcy loss. If a bankruptcy court reduces the original scheduled monthly payment on
a mortgage loan, the reduction, after taking into account any reduction in the outstanding
principal balance ordered by the bankruptcy court, will be a debt service reduction. This
Section then provides that since a debt service reduction is a form of bankruptcy loss, debt
service reductions will be counted toward any bankruptcy loss limit stated in the prospectus
supplement, bull will not be considered realized losses for purposes of adjusting principal
balances of classes under Adjustments to calls balances below. The Plaintiffs allege that
these statements to the potential investors in the Prospectus and the Prospectus Supplement
constitute admissions and admissions against interest by the Defendants that they Note may
not be a perfected claim in the event in loan in the pool becomes involved in a bankruptcy
proceeding.
56. The Plaintiffs therefore allege upon information and belief that none of the
Defendants in this case holds a perfected and secured claim in the residential real estate of
the Debtor and property of this estate in bankruptcy and that all of the said Defendants are
estopped and precluded from asserting an unsecured claim against this estate.
57. As a result of the allegations herein, the Plaintiffs respectfully pray of the Court
that:
a. The Trust has no enforceable secured or unsecured claim against
property of the estate in bankruptcy;
b. The Trustee for the Trust has no enforceable secured or unsecured
claim against property of the estate in bankruptcy;
c. Citi Securities has no enforceable secured or unsecured claim against
d. CitiMortgage has no enforceable secured or unsecured claim against
e. AAMG has no enforceable secured or unsecured claim against property
of the estate in bankruptcy;
f. Citibank has no enforceable secured or unsecured claim against
g. The sworn Proof of Claim filed by McCalla Raymer on behalf of the Trust
is false, fraudulent, and otherwise unlawful;
h. The sworn Poof of Claim filed by McCalla Raymer on behalf of the Trust
includes unlawful and illegal proof of claim preparation and filing fees that have been
declared improper by Administrative Orders and Decisions of this Court;
i. The sworn Proof of Claim filed by McCalla Raymer on behalf of the Trust

violates the Local Rules of this Court, Rule 3001 of the Bankruptcy Rules, and the Official
forms and instructions thereto for lack of any supporting documentation;
j. The sworn Proof of Claim filed by McCalla Raymer on behalf of the Trust
includes illegal and unlawful postpetition fees and charges that have never been approved by
this Court pursuant to Section 506(b) of the Bankruptcy Code and Rule 2016(a) of the
Bankruptcy Rules;
k. The sworn Poof of Claim attempts to unlawfully secure property of the
estate and property from the estate in violation of Section 362(a)(3) of the Bankruptcy Code;
l. In the alternative, any efforts of the Defendants to assign and deliver
the Note to the Trustee or the Trust postpetition be declared an unlawful act in willful
violation of Section 362(a)(4) of the Bankruptcy Court;
m. The Deed of Trust on the real property be assigned to the Chapter 13
Trustee along with the note;
n. The Chapter 13 Trustee be granted a first Deed of Trust or First Lien on
the real property in order to preserve the rights of the estate in the said collateral subject to
the exemption claim of the Plaintiffs in the said residential real estate;
o. The Plaintiffs have and recover actual and punitive damages in an
amount to be determined by this Court;
p. The Plaintiffs have and recover their reasonable legal fees in an amount
to be determined by this Court;
q. The Plaintiffs recover all reasonable costs and expenses in this case in
an amount to be determined by this Court;
r. The Plaintiffs have such other and further relief as to the Court may
seem just and proper.

Dated this the ___________ day of _______________, 2009.

__________________________________
O. Max Gardner III
Gardner Law Offices
403 South Washington Street
PO Box 1000
Shelby NC 28151-1000
704.487.0616
J . 7 Act i on Chal l engi ng MERS as Pl ai nt i f f

I N THE CI RCUI T COURT, FOURTH
J UDI CI AL CI RCUI T, I N AND FOR
DUVAL COUNTY, FLORI DA.

[ pl ai nt i f f ] MORTGAGE ELECTRONI C REGI STRATI ON
SYSTEMS, I NC. as Nomi nee f or Tayl or , Bean
& Whi t aker Mor t gage Cor por at i on,
Pl ai nt i f f ,
[ vs]

[ def endant ] WI LLI E CONSUMER, et al.
Def endant s.

DEFENDANT, WILLIE CONSUMERS AMENDED MOTION
TO DISMISS PLAINTIFFS COMPLAINT, OR IN THE
ALTERNATIVE, MOTION FOR MORE DEFINITE STATEMENT

The Def endant , WI LLI E CONSUMER, ( her ei naf t er Mr .
Consumer ) by and t hough hi s under si gned at t or ney, f i l es
t hi s amended mot i on t o di smi ss, or i n t he al t er nat i ve,
mot i on f or mor e def i ni t e st at ement , pur suant t o Rul es
1. 210( a) , 1. 130( a) and 1. 140( b) ( 7) of t he Fl or i da Rul es of
Ci vi l Pr ocedur e, f or Pl ai nt i f f s f ai l ur e t o j oi n an
i ndi spensabl e par t y. I n t he al t er nat i ve, Mr . Consumer
r equest s t hi s Cour t t o ent er an Or der r equi r i ng Pl ai nt i f f
t o pr ovi de a mor e def i ni t e st at ement . I n suppor t of t hese
al t er nat i ve mot i ons, Mr . Consumer says:

1. Mr . Consumer i s t he owner of t he pr oper t y whi ch i s
t he subj ect of t hi s mor t gage f or ecl osur e Compl ai nt . He
r equest s t he Cour t di smi ss t hi s act i on pur suant t o Rul e
1. 210( a) and 1. 140( 7) , because i t appear s on t he f ace of
t he Compl ai nt t hat a per son ot her t han t he Pl ai nt i f f i s t he
t r ue owner of t he cl ai msued upon and t hat t he Pl ai nt i f f i s
not t he r eal par t y i n i nt er est and i s not shown t o be
aut hor i zed t o br i ng t hi s act i on. In re: Shelter
Development Group, Inc. , 50 B. R. 588 ( Bankr . S. D. Fl a.
1985) [ I t i s axi omat i c t hat a sui t cannot be pr osecut ed t o
f or ecl ose a mor t gage whi ch secur es t he payment of a
pr omi ssor y not e, unl ess t he Pl ai nt i f f act ual l y hol ds t he
or i gi nal not e, ci t i ng Downing v. First National Bank of
Lake City, 81 So. 2d 486 ( Fl a. 1955) ] , See also 37 Fl a.
J ur . Mor t gages and Deeds of Tr ust 240 ( One who does not
have t he owner shi p, possessi on, or t he r i ght t o possessi on
of t he mor t gage and t he obl i gat i on secur ed by i t , may not
f or ecl ose t he mor t gage) .

2. Fl a. R. Ci v. P. Rul e 1. 130( a) r equi r es a Pl ai nt i f f
t o at t ach copi es of al l bonds, not es, bi l l s of exchange,
cont r act s, account s, or document s upon whi ch act i on may be
br ought t o i t s compl ai nt . At t ached t o Pl ai nt i f f s
Compl ai nt , ar e a pr omi ssor y not e and mor t gage. The
Pr omi ssor y Not e i s payabl e t o Tayl or , Bean & Whi t aker
Mor t gage Cor por at i on as Lender . The Pl ai nt i f f i n t he
above- st yl ed case i s Mor t gage El ect r oni c Regi st r at i on
Syst ems, I nc. as nomi nee f or Tayl or , Bean & Whi t aker
Mor t gage Cor por at i on. ( MERS)

3. Fl a. R. Ci v. P. Rul e 1. 310( b) pr ovi des t hat al l
exhi bi t s at t ached t o a pl eadi ng shal l be consi der ed a par t
of t he pl eadi ng f or al l pur poses. Ther ef or e, t he
pr omi ssor y not e at t ached t o MERS Compl ai nt must be
consi der ed i n det er mi ni ng i f i t i s t he pr oper par t y t o
br i ng t hi s act i on and f or pur poses of det er mi ni ng i f an
i ndi spensabl e par t y has been over l ooked. I t appear s on t he
f ace of MERS Compl ai nt t hat i t i s not t he pr oper par t y t o
br i ng t hi s act i on based upon t he not e at t ached t o t he
Compl ai nt payabl e t o Tayl or , Bean & Whi t aker .

4. The Mor t gage at t ached t o Pl ai nt i f f s Compl ai nt
r eads:

Thi s Secur i t y I nst r ument i s gi ven t o Mor t gage El ect r oni c
Regi st r at i on Syst ems, I nc. ( MERS) ( sol el y as nomi nee f or
Lender , as her ei naf t er def i ned, and Lender s successor s and
assi gns) .

The Mor t gage f ur t her pr ovi des t hat t he Lender i s
Tayl or , Bean & Whi t aker Mor t gage Cor por at i on.
5. A nomi nee i s def i ned i n Bl ack s Law Di ct i onar y
( 7t h Edi t i on, 1999) as:

. . . A per son desi gnat ed t o act i n pl ace of anot her ,
usual l y i n a ver y l i mi t ed way. . . A par t y who hol ds bar e
l egal t i t l e f or t he benef i t of ot her s or who r ecei ves and
di st r i but es f unds f or t he benef i t of ot her s.

6. A nomi nee i s one desi gnat ed t o act f or anot her as
hi s/ her r epr esent at i ve i n a r at her l i mi t ed sense. . . I n i t s
commonl y accept ed meani ng, t he wor d nomi nee connot es t he
del egat i on of aut hor i t y t o t he nomi nee i n a r epr esent at i ve
capaci t y onl y, and does not connot e t he t r ansf er or
assi gnment t o t he nomi nee of any pr oper t y i n or owner shi p
of t he r i ght s of t he per son nomi nat i ng hi m/ her . Mortgage
Electronic Registration Systems, Inc., v. Rees, 2003 WL
22133834 ( Conn. Super . Ct . 2003) .

7. I n t he absence of cont r ar y evi dence, nomi nee
shoul d be gi ven i t s commonl y accept ed meani ng. I t connot es
t he del egat i on of aut hor i t y i n a r epr esent at i ve or nomi nal
capaci t y onl y, and does not connot e t he t r ansf er or
assi gnment t o t he nomi nee of any pr oper t y i n or owner shi p
of t he r i ght s of t he per son nomi nat i ng hi m. Winters
National Bank and Trust Company v. Saker, 419 N. E. 2d 890
( Ohi o App. 1979) .

8. MERS i s a f or - pr of i t el ect r oni c r egi st r at i on and
t r acki ng syst emut i l i zed by some owner s and hol der of not es
t hat al l ows t hese par t i es t o avoi d paper t r ansf er s of t he
owner shi p of not es and mor t gages. A l oan r egi st er ed wi t h
MERS i s pr ovi ded an 18 di gi t number whi ch f ol l ows i t as i t
i s t r ansf er r ed f r omowner / hol der t o owner / hol der . MERS i s
not t he t r ue owner or hol der of t he not e and mor t gage and,
i nst ead, MERS act s as a l i br ar y or hol der of i nf or mat i on
r egar di ng t he t r ue owner s and hol der s of not es and
mor t gages. Thr ough i t s dat abase a per son who i s pr oper l y
qual i f i ed and r egi st er ed t o do so can det er mi ne t he t r ue
owner or hol der .

9. Mr . Consumer s mor t gage i s i nsur ed by t he FHA.
The FHA wi l l al l ow HUD- appr oved mor t gagees t o r egi st er
t hei r FHA- i nsur ed l oans wi t h MERS, however , t he mor t gagees
must al so cont i nue t o compl y wi t h al l Depar t ment al
r egul at i ons, r epor t i ng r equi r ement s and ot her est abl i shed
pol i ci es. Mor t gagees wi l l cont i nue t o be r esponsi bl e f or
i nf or mi ng FHA of any changes r el at ed t o t he mor t gage such
as change of hol der / ser vi cer , f or ecl osur e i ni t i at i on and
t er mi nat i ons. See MORTGAGEE LETTER 97- 30, To: Al l Appr oved
Mor t gagees, SUBJ ECT: Regi st er i ng FHA- i nsur ed Loans wi t h
Mor t gage El ect r oni c Regi st r at i on Syst em, I nc. ( MERS) dat ed
J ul y 16, 1997. MERS cannot be t he t r ue hol der or owner of
Mr . Consumer s mor t gage as i t woul d be a vi ol at i on of FHA
pol i ci es and t he t er ms and condi t i ons of t he subj ect
mor t gage and not e.

10. I n t hi s case, MERS al l egat i ons of mat er i al f act s
cl ai mi ng i t i s t he owner of t he subj ect not e ar e
i nconsi st ent wi t h t he document s at t ached t o t he Compl ai nt .
MERS has not pl ed or at t ached an assi gnment t o t he
Compl ai nt . MERS al so has not and cannot pl ead or at t ach
any document at i on memor i al i zi ng t he t r ansf er of t he subj ect
not e or mor t gage t o i t sel f . Fur t her , MERS has al l eged i t
does not have t he or i gi nal pr omi ssor y not e. When exhi bi t s
ar e i nconsi st ent wi t h t he pl ai nt i f f s al l egat i ons of
mat er i al f act as t o who t he r eal par t y i n i nt er est i s, such
al l egat i ons cancel each ot her out . Fladell v. Palm Beach
County Canvassing Board, 772 So. 2d 1240 ( Fl a. 2000) ;
Greenwald v. Triple D Properties, Inc., 424 So. 2d 185, 187
( Fl a. 4t h DCA 1983) ; Costa Bella Development Corp. v. Costa
Development Corp., 441 So. 2d 1114 ( Fl a. 3d DCA 1983) .

WHEREFORE, Mr . Consumer r equest s t he Cour t t o di smi ss
t he Pl ai nt i f f s compl ai nt wi t h pr ej udi ce; al t er nat i vel y
or der t he Pl ai nt i f f t o add t he owner and hol der of t he
subj ect mor t gage as an i ndi spensabl e par t y t o t hi s
f or ecl osur e act i on, and awar d t hi s def endant at t or ney s
f ees and al l ot her r el i ef t o whi ch he pr oves hi msel f
ent i t l ed.

[ At t or ney f or Consumer ]

In THE UNITED STATES BANKRUPTCY COURT
SHELBY DIVISION

_________________________________________________________________

IN THE MATTER OF:

John Q. Public
Mary E. Public
100 Main Street
Anywhere, NC 28999
Chapter 13 Case
Court No:
SSN:
File Date:
Our File No:
Contested Case: Chase Home Finance, LLC v Public
Court Date: Friday, ____________ at 9:30 a.m.
Location: Courtroom #5, Cleveland County Courthouse, Shelby
_________________________________________________________________

MOTION TO DISMISS THE MOTION FOR RELIEF
FROM AUTOMATIC STAY

(Not the Real Party in Interest & Absence of Cause Pursuant to 362(d)(1))

COME NOW the above-named debtors, by and through their attorney of record, and move
to dismiss the motion for relief from stay filed by Chase Home Finance, LLC (Chase) on
the following grounds:

FAILURE TO PROSECUTE IN THE NAME OF THE REAL PARTY IN INTEREST

1. Chase filed a motion with this court for Relief from the Automatic Stay. The motion
was based on an alleged default in mortgage payments on a note secured by a first Deed of
Trust on the residential real estate of the debtor(s). Chase alleged in its motion that it was
the owner and holder of the Deed of Trust Note.

2. The debtor(s) allege that Chase is not the actual holder or current assignee of the
Deed of Trust Note, is not the real party in interest in this matter, and has no legal standing
under applicable Federal Law to bring this motion and invoke the jurisdiction of this Court.
The debtor(s) believe and therefore allege that the actual holder of the Deed of Trust Note
is the originator of the debt obligation, a document repository company, a special purposes
vehicle, a mortgage sponsoring entity, or the trustee under a mortgage-backed securitized
trust that includes thousands of notes and similar evidence of indebtedness.

3. The debtor(s) allege that as opposed to being the current owner and holder of the
Deed of Trust Note, Chase is only a servicer, a sub-servicer or a default-servicer of the debt
pursuant to a pooling and servicing agreement with the actual holder, who the debtor(s)
allege may or may not be a mortgage-backed securitized trust.

4. Rule 17(a) of the Federal Rules of Civil Procedure provides that every action shall be
prosecuted in the name of the real party in interest. Rule 17(b) of the Federal Rules of

Civil Procedure provides that the party filing the action must have the capacity to sue or be
sued (Miguel v Country Funding Corp. HI D.C. No. CV-97-01593 DAE). In this case, the
movant is not the real party in interest and therefore has no standing to bring the Motion
for Relief against the debtor(s).

ABSENCE OF CAUSE OF ACTION PURSUANT TO SECTION 362(d)(1)

5. The debtors mortgage loan with Chase was deemed current upon confirmation of
their Chapter 13 plan.

6. The Plan specifically provided that the debtors intended to retain their residential real
estate, cure the arrears through the plan and make all future payments directly to Chase.

7. The debtors claimed all equity in the property, if any, was exempt.

8. Since the debtors payments are not considered late until after the 15
th
day of the
month in which the payment is due, the debtors were literally only one (1) payment in
arrears under the loan instruments when the motion for relief from stay was filed.

9. The debtors allege that the movant made no effort to resolve this matter informally
prior to the filing of a motion for relief from stay.

10. The underlying loan instruments provide that the debtors must be provided with
prior notice of any default and the right to cure the same before the movant is entitled to
any legal fees or expenses.

11. The movant failed to provide the debtors with any prior notice of default or right to
cure.

12. The movant has also failed to comply with the mandatory notice provisions of
N.C.G.S. 6.21.2(5). This statute provides that a creditor has to give a debtor five days
notice after default of the intent to assert attorneys fees. If the debtor then pays the
defaulted amount within the five day period, attorneys fees cannot be collected against the
debtor even if the agreement between the creditor and the debtor provides for the payment
of such fees. The secured creditor in this case did not give any such notice but filed an
application for legal fees before the bankruptcy court.

13. The debtor(s) are therefore moving this Court to dismiss the motion for relief from
stay with prejudice.

14. The debtor(s) are further moving this Court for the award of reasonable legal fees
and expenses of no less than $450.00 for filing an improper motion in this case and for
damages payable to the debtor(s) in the sum of at least $250.00.

WHEREFORE the debtor(s) respectfully pray of the Court as follows:

A. That the motion for relief from the automatic stay of Chase be dismissed with
prejudice;

B. That Chase be precluded from filing any future motions for a period of 12 months;


C. That the attorney for the debtor(s) be awarded the sum of $450.00 as reasonable
legal fees and expenses and the debtors be awarded damages of $250.00 for the filing of an
improper motion in this case by Chase;

D. That this matter be set for hearing;

E. That the debtor(s) have such other and further relief as to the Court may seem just
and proper.

Dated this the __________ day of __________ 2009.

_________________________
O. Max Gardner, III
Law Offices of O. Max Gardner, III, PC
Attorney for the Debtor(s)
North Carolina State Bar No. 6164
P O Box 1000
Shelby, NC 28151-1000
704.487.0616 (Voice)
704.487.0619 (Fax)
email: maxgardner@maxgardner.com


In THE UNITED STATES BANKRUPTCY COURT
SHELBY DIVISION

_________________________________________________________________

IN THE MATTER OF:

John Q. Public
Mary E. Public
100 Main Street
Anywhere, NC 28999
Chapter 13 Case
Court No:
SSN:
File Date:
Our File No:
Contested Case: Chase Home Finance, LLC v Public
Court Date: Friday, ____________ at 9:30 a.m.
Location: Courtroom #5, Cleveland County Courthouse, Shelby
_________________________________________________________________

NOTICE OF HEARING ON MOTON TO DISMISS
MOTION FOR RELIEF FROM STAY

PLEASE BE ADVISED that the above-named debtor(s) have filed papers with the United
States Bankruptcy Court for the Western District of North Carolina for approval of a Motion
to Dismiss the Motion for Relief from Stay.

YOUR RIGHTS MAY BE AFFECTED. YOU SHOULD READ THESE PAPERS CAREFULLY
AND DISCUSS THEM WITH YOUR ATTORNEY IF YOU HAVE ONE IN THIS
BANKRUPTCY CASE. IF YOU DO NOT HAVE AN ATTORNEY, YOU MAY WISH TO
CONSULT ONE.

If you do not want the Court to grant the relief requested by the debtor(s) in this motion, or
if you want the Court to consider your views on the motion, then on or before
___________, 2007 you or your attorney must file with the Court a written request for a
hearing and a written response if you desire to file one. If you mail your response to the
Court for filing, you must mail it early enough so the Court will receive it on or before the
date stated above. The Courts mailing address for service is:

United States Bankruptcy Court
Western District of North Carolina
P O Box 34189
Charlotte, NC 28234-4189

You must also mail a copy to:

O. Max Gardner, III, Attorney for the Debtor(s) Steven G. Tate, Chapter 13 Trustee
P O Box 1000 P O Box 1778
Shelby, NC 28151-1000 Statesville, NC 28687-1778

You must also attend the hearing scheduled to be held on Friday, July 27, 2007 at 9:30
am in Courtroom Number 5, Cleveland County Courthouse, 100 Justice Place, Shelby, NC.

If you or your attorney do not take these steps, the court may decide that you do not
oppose the relief sought in the motion or objection and may enter an order granting that
relief.

This document may contain nonpublic personal information about the consumer-
debtor(s) subject to the restrictions of the Federal Gramm-Leach-Bliley Act. Such
information, if any, is only included in this document for matters and things
related to the bankruptcy case of these consumer-debtor(s). You may therefore
only use this information in connection with proceedings in this bankruptcy case
and for no other purpose. You may not directly or indirectly redisclose or reuse
any of the consumer-debtor(s) nonpublic personal information contained in this
document for any other purpose.

Dated this the __________ day of ______________ 2007.

_________________________
O. Max Gardner, III
Law Offices of O. Max Gardner, III, PC
North Carolina State Bar No. 6164
P O Box 1000
Shelby, NC 28151-1000
704.487.0616 (Voice)
704.487.0619 (Fax)
email: maxgardner@maxgardner.com


CERTIFICATE OF SERVICE

O. MAX GARDNER III, attorney of record in this case for the debtor(s), hereby
certifies to the court as follows:
1. I am not a party to this case;
2. I am not less than 18 years of age;
3. I have this day served a copy of the foregoing MOTION TO DISMISS MOTION
FOR RELIEF FROM STAY, on the parties listed below by placing the same in an envelope,
first-class mail, postage prepaid, addressed to each person or entity as indicated below:

John Q. Public
Mary E. Public
100 Main Street
Anywhere, NC 28999

And by Electronic Notification to:

Creditor atty

John Bramlett
Bankruptcy Administrator
402 W. Trade Street, Suite 200
Charlotte NC 28202-1669

Steven G. Tate
CHAPTER 13 TRUSTEE
PO Box 1778
Statesville NC 28687-1778

4. To the best of my knowledge, information and belief, the parties in interest in this
case are not infants or incompetent persons; and
5. Service as outlined herein was made within the United States of America.

Dated this the ______ day of ____________ 2007.

________________________
O. Max Gardner III
NC State Bar NO: 6164
PO Box 1000
704 487-0616
1
SHELBY DIVISION

IN THE MATTER OF:

NAME: CHAPTER 13 CASE NO.
OUR FILE NO.

ADDRESS:

SSN:

DEBTORS.
____________________________________

Adversary Proc. No.______

Plaintiffs,

versus

Defendant.

FIRST INTERROGATORIES AND REQUEST FOR PRODUCTION
OF DOCUMENTS FROM THE PLAINTIFFS TO THE DEFENDANTS

COME NOW the above-named debtors and Plaintiffs herein, by and through their
attorney of record, and herewith serve upon the DEFENDANT(S) in this case the following
written interrogatories pursuant to the provisions of Rule 7033 of the Rules of Bankruptcy
Procedure and Rule 33 of the Federal Rules of Civil Procedure and the following request for
the production and inspection of documents pursuant to Rule 7034 of the Rules of
Bankruptcy Procedure and Rule 34 of the Federal Rules of Civil Procedure as provided for
and set forth in the foregoing rules. Answers to these Interrogatories and Request for
Production of Documents must be furnished within forty-five (45) days of the service of the
Summons and Complaint or within thirty (30) days of the service of these Interrogatories,
whichever is later.

2

DEFINITIONS AND INSTRUCTIONS

A. If there is insufficient space after each interrogatory for you to provide a full and
complete answer, then you should state your full and complete answer on a separate page,
identify the page, and attach the page to your response as a properly identified and marked
exhibit thereto.

B. The term Document means all writings of any kind, including the originals and all
other non-identical copies, whether different from the originals by reason of any notation
made on such copies or otherwise, including but not limited to correspondence,
memoranda, notes, diaries, desk or other calendars, statistics, letters, telegrams, minutes,
business records, personal records, accountants' statements, account statements, contracts,
reports, credit reports, studies, checks, statements, receipts, invoices, bills, return checks,
summaries, pamphlets, books, inter-office and intra-office communications, notations of any
sort of conversations or meetings, telephone call meetings or other communications, written
agreements, bulletins, printed matter, computer printouts, teletypes, telefaxes, invoices,
worksheets, all drafts, alterations, modifications, changes and amendments of any kind with
respect to any of the foregoing, graphic or oral records or representations of any kind
(including, without limitation, tapes, cassettes, discs, recordings, electronic mail records,
computer memory records such as hard disk drives and master back-up tapes, diskettes, or
other devices such as zip drive records).

C. The term "act" as used herein includes acts of every kind and description.

D. The term "identify" or "describe" when used in reference to a "document" means to
state:
a. The type of document (e.g., letter, memorandum, report, electronic mail
records, notes, etc.);
b. The date of the document;
c. The name of the parties or parties who originated the document, their past or
present position with the defendants, their general duties and responsibilities,
their current physical location with the company, and their e-mail, telephone
number and telephone extension;
d. The name and address of the current custodian of the document;
e. The name and current address of each signatory thereon;
f. The reason, in detail, for the preparation of the document;
g. The subject or subjects covered by the document;
h. The names, business addresses and titles of the persons to whom the
document writing was directed; and
i. The name and address and title of each person who originated, read or
received the document.

E. The term "identify" as used herein in connection with a "person" or "persons" means
to state the names, titles, the present employer of such "person" or "persons," the
relationship of such person or persons to any of the defendants, and such person's current
business address and business telephone number.

F. The term "identify" as used herein with respect to or in connection with an "act"
means to:
3

a. Furnish the date and place of the act;
b. Identify the person acting, the person for whom the act was performed, and
the person against whom the act was directed; and
c. Describe in detail the act.

G. The terms "describe" or "state" as used herein mean:

a. Describe or state fully by reference to underlying facts rather than by ultimate
facts or conclusions of law;
b. Particularize as to the:
i. Time;
ii. Date;
iii. Manner; and
iv. Place.

H. The term "oral communication" as used herein means and includes any face-to-face
conversation, meeting, conference, telephone conversation, cell-phone conversation,
computer conversation with voice mail, or any one for more of these or related devices.

I. The term "person" or "persons" as used herein means and includes all natural
persons, public and private corporations, associates, wholly owned affiliates or subsidiary
corporations or any other form of a business association, and any other type of entity and
the agents, employees, officers, deputies and representatives thereof.

J. The terms "you" or "your" as used herein shall refer to any one or all of the named
defendants and any related or affiliated companies associated in any way therewith.

K. All requests shall be deemed to include any documents made by, held by, or
maintained in the files of any predecessor, successor, employee, agent or assignee of either
one or all of the defendants.

L. The term "the transaction" or "the transactions" or "account" or "accounts" when
used herein without qualification means the transactions and accounts between or among
the debtors and the named defendants and all related activities and agents or assigns of
either party.

M. The term accepted servicing practices with respect to any Mortgage Loan, when
used herein means those mortgage servicing practices (including collection procedures) of
prudent mortgage banking institutions which service mortgage loans of the same type as
such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located, and
which are in accordance with FNMA servicing practices and procedures, for MBS pool
mortgages, as defined in the FNMA Guidelines including future updates.

N. The term adjustable rate mortgage loan when used herein means any Mortgage
Loan purchased pursuant to this Agreement as to which the related Mortgage Note contains
a provision whereby the Mortgage Interest Rate is adjusted from time to time in accordance
with the terms of such Mortgage Note.

O. The term agreement when used herein means This Mortgage Loan Purchase and
Servicing Agreement and all amendments hereof and supplements hereto.

4
P. The term ALTA when used herein means The American Land Title Association, its
successors and assigns.

Q. The term appraised value when used herein with respect to any mortgage loan,
means the value of the related Mortgaged Property based upon the lesser of (i) the
appraisal made for the originator at the time of origination of the Mortgage Loan and (ii) the
purchase price of the Mortgaged Property at the time of origination of the Mortgage Loan,
provided, however, that in the case of a Refinanced Mortgage Loan, such value is based
solely upon the appraisal made at the time of origination of such Refinanced Mortgage Loan
and further provided, however, in the case of a Mortgage Loan originated under the Sellers
streamlined documentation program, such value may be based upon a prior appraisal that
satisfies the requirements of the Sellers streamlined documentation program.

R. The term assignment of mortgage when used herein means an assignment of the
Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under
the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the
sale of the Mortgage to the Purchaser.

S. The term balloon mortgage loan when used herein means any individual Mortgage
Loan purchased pursuant to this Agreement wherein the Mortgage Note matures after seven
years requiring a final and accelerated payment of the outstanding principal prior to full
amortization.

T. The term balloon payment when used herein means a payment of the unamortized
principal balance of a Balloon Mortgage Loan in a single payment at the maturity of such
Mortgage Loan that is substantially greater than the preceding Monthly Payment.

U. The term BIF when used herein means The Bank Insurance Fund, or any
successor thereto.

V. The term business day when used herein means any day other than (i) a Saturday
or Sunday, or (ii) a day on which banking and savings and loan institutions, in the States of
California, Texas or New York or the state in which the Servicers servicing operations are
located, are authorized or obligated by law or executive order to be closed.

W. The term cash liquidation when used herein means recovery of all
cash proceeds by the Servicer with respect to the termination of any defaulted Mortgage
Loan other than a Mortgage Loan which became an REO Property, including all Primary
Mortgage Insurance Proceeds, Other Insurance Proceeds, Liquidation Proceeds,
Condemnation Proceeds and other payments or recoveries whether made at one
time or over a period of time which the Servicer deems to be finally recoverable, in
connection with the sale or assignment of such Mortgage Loan, trustees sale, foreclosure
sale or otherwise.

X. The term CD mortgage loan when used herein means Any individual Mortgage Loan
purchased pursuant to this Agreement which contains a provision whereby the interest rate
on such Mortgage Loan is adjusted semi-annually based upon the weekly average yield on
certificates of deposit.

Y. The term closing date when used herein means the date this Agreement is
executed and delivered and the date or dates on which the Purchaser from time to time
shall purchase, and the Seller from time to time shall sell, the Mortgage Loans listed on the
related Mortgage Loan Schedule with respect to the related Mortgage Loan Package.
5

Z. The term condemnation proceeds when used herein means all awards or
settlements in respect of a taking of an entire Mortgaged Property by exercise of the power
of eminent domain or condemnation.

AA. The term consumer personal information when used herein means any information,
including, but not limited to, all personal information about a Mortgagor that is disclosed to
any of the Seller, the Servicer or the Purchaser by or on behalf of a Mortgagor.

BB. The term convertible mortgage loan when used herein means any individual
Adjustable Rate Mortgage Loan purchased pursuant to this Agreement which contains a
provision whereby the Mortgagor is permitted to convert the Mortgage Loan to a Fixed Rate
Mortgage Loan in accordance with the terms of the related Mortgage Note.

CC. The term custodial account when used herein means the separate account or
accounts created and maintained pursuant to this Agreement, which shall be entitled
Countrywide Home Loans Servicing LP, in trust for the Purchaser and various Mortgagors,
Conventional Mortgage Loans.

DD. The term custodial agreement when used herein means the agreement between
the Purchaser and the Custodian governing the retention of the Mortgage Files.

EE. The term custodian when used herein means the custodian under the Custodial
Agreement, or its successor in interest or assigns, or any successor to the Custodian under
the Custodial Agreement, as therein provided.

FF. The term cut-off date when used herein means the first day of the month in which
the related Closing Date occurs.

GG. The term deleted mortgage loan when used herein means a Mortgage Loan
repurchased or replaced or to be replaced with a Qualified Substitute Mortgage Loan.

HH. The term determination date when used herein means the 15th day of the month
of the related Remittance Date or if such 15th day is not a Business Day, the Business Day
immediately following such 15th day.

II. The term due date when used herein means the day of the month on which the
Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace.

JJ. The term due period when used herein means With respect to each Remittance
Date, the period commencing on the second day of the month preceding the month of the
Remittance Date and ending on the first day of the month of the Remittance Date.

KK. The term eligible account when used herein means An account or accounts (i)
maintained with a depository institution the short term debt obligations of which are rated
by Standard & Poors at least A-1+, by Fitch at least F-1, and by Moodys at least P-1 at the
time of any deposit therein, (ii) the deposits of which are fully insured by the FDIC, (iii)
maintained in a parent, affiliate or subsidiary of the Seller provided that such account
satisfies the requirements of (i) or (ii) above or (iv) maintained with a trust account or
accounts maintained with a federal or state chartered depository institution or trust
company acting in its fiduciary capacity.

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LL. The term equity take-out refinanced mortgage loan when used herein means A
Mortgage Loan used to refinance an existing mortgage loan, the proceeds of which were in
excess of the sum of (i) the unpaid principal balance of the existing mortgage loan; and (ii)
the lesser of (A) two percent (2%) of the unpaid principal balance of the existing mortgage
loan or (B) $2000.

MM. The term escrow account when used herein means the separate trust account or
accounts created and maintained pursuant to this Agreement which shall be entitled
Countrywide Home Loans Servicing LP, in trust for the Purchaser and various Mortgagors,
Conventional Mortgage Loans.

NN. The term event of default when used herein means the amounts constituting
ground rents, taxes, assessments, water rates, mortgage insurance premiums, fire and
hazard insurance premiums and other payments required to be escrowed by the Mortgagor
with the mortgagee pursuant to any Mortgage Loan.

OO. The term fair market value when used herein means with respect to any Mortgage
Loan, the market value of the related Mortgaged Property as mutually agreed upon by the
Servicer and the Purchaser. In the event the Servicer and the Purchaser disagree as to such
Fair Market Value, the Servicer shall have the option to select an appraiser from a list of
three independent appraisers selected by the Purchaser, each of whom meets the minimum
FNMA or FHLMC requisite qualifications for appraisers. Such appraiser shall determine the
Fair Market Value of the Mortgaged Property in accordance with the then current guidelines
for the Sellers full documentation program. Such appraisal shall be in a form acceptable
to FNMA or FHLMC and shall be conclusive for the purposes of determining the Fair Market
Value of the Mortgaged Property. The fee for such appraisal shall be paid by the Servicer,
except in the event such fee is incurred in connection with calculating the Termination Fee
in which case the Purchaser shall pay the fee for such appraisal.

PP. The term FDIC when used herein means the Federal Deposit Insurance
Corporation, or any successor thereto.

QQ. The term FHLMC when used herein means Freddie Mac, formerly known as The
Federal Home Loan Mortgage Corporation, or any successor organization.

RR. The term fidelity bond when used herein means a fidelity bond to be maintained by
the Servicer pursuant to Subsection 11.12.

SS. The term FIRREA when used herein means the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989.

TT. The term Fitch when used herein means Fitch Investors Services, Inc.

UU. The term fixed rate mortgage loan when used herein means any individual
Mortgage Loan purchased pursuant to this Agreement wherein the Mortgage Interest Rate
set forth in the Mortgage Note is fixed for the term of such Mortgage Loan, including any
Balloon Mortgage Loan.

VV. The term FNMA when used herein means Fannie Mae, formerly known as The
Federal National Mortgage Association, or any successor organization.

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WW. The term FNMA Guidelines when used herein means the Fannie Mae Sellers Guide
and the Fannie Mae Servicers Guide and all amendments or additions thereto, including,
but not limited to, future updates thereof.

XX. The term funding deadline when used herein means with respect to each Closing
Date, one oclock p.m. (1:00 p.m.) New York time, or such other time mutually agreed to by
the Purchaser and the Seller.

YY. The term gross margin when used herein means with respect to each Adjustable
Rate Mortgage Loan, the fixed percentage amount set forth in the related Mortgage Note
which amount is added to the Index in accordance with the terms of the related Mortgage
Note to determine on each Interest Adjustment Date, the Mortgage Interest Rate for such
Adjustable Rate Mortgage Loan.

ZZ. The term HUD when used herein means The Department of Housing and Urban
Development or any federal agency or office thereof which may from time to time succeed
to the functions thereof.

AAA. The term index when used herein means with respect to any Adjustable Rate
Mortgage Loan, the index identified on the Mortgage Loan Schedule and set forth in the
related Mortgage Note for the purpose of calculating the Mortgage Interest Rate thereon.

BBB. The term information diskette when used herein means a diskette or electronic file
delivered by the Seller to the Purchaser, or an electronic data transfer from the Seller to the
Purchaser, in respect of each Mortgage Loan Package which shall contain: (i) the
information necessary for the Mortgage Loan Schedule and (ii) the date the last Monthly
Payment was actually applied to the unpaid principal balance.

CCC. The term insurance proceeds when used herein means with respect to each
Mortgage Loan, proceeds of insurance policies insuring the Mortgage Loan or the related
Mortgaged Property.

DDD. The term interest adjustment date when used herein means with respect to an
Adjustable Rate Mortgage Loan, the date on which an adjustment to the Mortgage Interest
Rate on a Mortgage Note becomes effective.

EEE. The term interest only mortgage loan when used herein means a Mortgage Loan
which requires only payments of interest (and not principal) for a period of time specified in
the related Mortgage Note.

FFF. The term late collections when used herein means with respect to any Mortgage
Loan, all amounts received during any Due Period, whether as late payments of Monthly
Payments or as Liquidation Proceeds, Condemnation Proceeds, Primary Mortgage Insurance
Proceeds, Other Insurance Proceeds, proceeds of any REO Disposition or otherwise, which
represent late payments or collections of Monthly Payments due but delinquent for a
previous Due Period and not previously recovered.

GGG. The term lender PMI mortgage loan when used herein means any individual
Mortgage Loan subject to an LPMI Policy.

HHH. The term LIBOR mortgage loan when used herein means any individual Mortgage
Loan purchased pursuant to this Agreement which contains a provision whereby the interest
rate on such Mortgage Loan is adjusted semi-annually or annually based upon the rate per
8
annum equal to the average of interbank offered rates for six-month or one year, as
applicable, U.S. Dollar denominated deposits in the London Market as published in The Wall
Street Journal.

III. The term lifetime mortgage interest rate cap when used herein means with respect
to each Adjustable Rate Mortgage Loan, the absolute maximum Mortgage Interest Rate
payable, above which the Mortgage Interest Rate cannot be adjusted.

JJJ. The term liquidation proceeds when used herein means amounts, other than
Primary Mortgage Insurance Proceeds, Condemnation Proceeds and Other Insurance
Proceeds, received by the Servicer in connection with the liquidation of a defaulted
Mortgage Loan through trustees sale, foreclosure sale or otherwise, other than amounts
received following the acquisition of an REO Property pursuant to Subsection 11.13.

KKK. The term Loan-to-Value Ratio or LTV when used herein means with respect to any
Mortgage Loan, the ratio of the outstanding principal amount of the Mortgage Loan as of the
date of determination to the Appraised Value of the related Mortgaged Property.

LLL. The term LPMI Fee when used herein means with respect to each Lender PMI
Mortgage Loan, the portion of the Mortgage Interest Rate as set forth on the related
Mortgage Loan Schedule (which shall be payable solely from the interest portion of Monthly
Payments, Insurance Proceeds, Condemnation Proceeds or Liquidation Proceeds), which,
during such period prior to the required cancellation of the LPMI Policy, shall be used to pay
the premium due on the related LPMI Policy.

MMM. The term LPMI Policy when used herein means with respect to a Lender PMI
Mortgage Loan, a policy of primary mortgage guaranty insurance issued by a Qualified
Insurer pursuant to which the related premium is to be paid by the Servicer from payments
of interest made by the Mortgagor in an amount as is set forth in the related Mortgage Loan
Schedule.

NNN. The term MERS when used herein means Mortgage Electronic Registration
Systems, Inc., a corporation organized and existing under the laws of the State of
Delaware, or any successor thereto.

OOO. The term MERS Mortgage Loan when used herein means any Mortgage Loan
registered with MERS on the MERS System.

PPP. The term MERS System when used herein means the system of recording transfers
of mortgages electronically maintained by MERS.

QQQ. The term MIN when used herein means the Mortgage Identification Number for any
MERS Mortgage Loan.

RRR: The term MOM Loan when used herein means any Mortgage Loan as to which
MERS is acting as mortgagee, solely as nominee for the originator of such Mortgage Loan
and its successors and assigns.

SSS: The term monthly advance when used herein means the aggregate of the advances
made by the Servicer on any Remittance Date pursuant to Subsection 11.19.

TTT. The term monthly payment when used herein means the scheduled monthly
payment of principal and interest on a Mortgage Loan.
9

UUU. The term Moodys when used herein means Moodys Investors Service, Inc.

VVV. The term mortgage when used herein means the mortgage, deed of trust or other
instrument securing a Mortgage Note, which creates a first lien on an unsubordinated estate
in fee simple in real property securing the Mortgage Note; except that with respect to real
property located in the state of Hawaii, the mortgage, deed of trust or other instrument
securing the Mortgage Note may secure and create a first lien upon a leasehold estate of
the Mortgagor.

WWW. The term mortgage file when used herein means with respect to each Mortgage
Loan, the documents pertaining thereto specified in Exhibit 5 and any additional documents
required to be added to the Mortgage File pursuant to this Agreement.

XXX. The term mortgage impairment insurance policy when used herein means a
mortgage impairment or blanket hazard insurance policy as required by Subsection 11.11.

YYY. The term mortgage interest rate when used herein means the annual rate at which
interest accrues on any Mortgage Loan, exclusive of any primary mortgage insurance
premium and, with respect to an Adjustable Rate Mortgage Loan, as adjusted from time to
time in accordance with the provisions of the related Mortgage Note and in compliance with
the related Lifetime Mortgage Interest Rate Cap, Periodic Rate Cap and negative
amortization features, if any, of the related Mortgage Note.

ZZZ. The term mortgage loan when used herein means an individual Mortgage Loan
which is the subject of this Agreement, each Mortgage Loan originally sold and subject to
this Agreement being identified on the related Mortgage Loan Schedule, which Mortgage
Loan includes without limitation the Mortgage File, the Monthly Payments, Principal
Prepayments, Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds, REO
Disposition proceeds, and all other rights, benefits, proceeds and obligations arising from or
in connection with such Mortgage Loan.

A1. The term mortgage loan documents when used herein means the documents
contained in the Mortgage File.

B1. The term mortgage loan package when used herein means the pool of Mortgage
Loans sold to the Purchaser on the related Closing Date.

C1. The term mortgage loan remittance rate when used herein means with respect to
each Mortgage Loan, the interest rate payable to the Purchaser on each Remittance Date
which shall equal the Mortgage Interest Rate less the Servicing Fee and any pool insurance
policy premiums (including, without limitation, LPMI Fees), if applicable.

D1. The term mortgage loan schedule when used herein means the schedule of
Mortgage Loans to be prepared by the Seller or Purchaser (at Sellers option) from
information contained on an Information Diskette and other information delivered by the
Seller to the Purchaser in respect of each Mortgage Loan Package, setting forth the following
information with respect to each Mortgage Loan: (1) the Sellers Mortgage Loan identifying
number; (2) the Mortgagors name; (3) the street address of the Mortgaged Property
including the city, state and zip code; (4) a code indicating whether the Mortgaged Property
is the Mortgagors primary residence, secondary residence or an investor property; (5) the
type of residential units constituting the Mortgaged Property (i.e., detached single family,
two-to-four-family, condominium units, etc.); (6) the original months to maturity or the
10
remaining months to maturity from the Cut-off Date, in any case based on the original
amortization schedule and, if different, the maturity expressed in the same manner but
based on the actual amortization schedule; (7) the Appraised Value (including the purchase
price of the Mortgaged Property, if applicable) of the Mortgaged Property and the Loan- to-
Value Ratio at origination; (8) the Mortgage Interest Rate at origination; (9) the date on
which the initial Monthly Payment was due on the Mortgage Loan; (10) the stated maturity
date; (11) the amount of the Monthly Payment as of the Cut-off Date; (12) the original
principal amount of the Mortgage Loan; (13) the principal balance of the Mortgage Loan as
of the close of business on the Cut-off Date, after deduction of payments of principal due on
or before the Cut-off Date whether or not collected; (14) with respect to an Adjustable Rate
Mortgage Loan, the first Interest Adjustment Date after each of the related origination date
and related Cut-Off Date; (15) with respect to an Adjustable Rate Mortgage Loan, the Gross
Margin; (16) a code indicating the purpose of the loan (i.e., purchase, rate and term
refinance, equity take-out refinance); (17) with respect to an Adjustable Rate Mortgage
Loan, the Lifetime Mortgage Interest Rate Cap under the terms of the Mortgage Note; (18)
with respect to an Adjustable Rate Mortgage Loan other than a NegAm Mortgage Loan, the
Periodic Rate Cap; (19) the Servicing Fee Rate; (20) a code indicating the documentation
style (i.e., full, alternative, reduced or streamlined); (21) a code indicating whether the
Mortgage Loan is Convertible or Non-Convertible, (22) a code indicating whether the
Mortgage Loan is a Balloon, Interest Only, LIBOR, NegAm, CD, Fixed, 3/1 ARM, 5/1 ARM,
7/1 ARM, 10/1 ARM or Treasury Mortgage Loan; (23) with respect to a Fixed Rate Mortgage
Loan, a code indicating whether the Mortgage Loan contains a temporary buydown
provision and, if so, the term and type of buydown; (24) the Primary Mortgage Insurance
Policy number, if any, which number (or an additional code) shall identify the applicable
Primary Mortgage Insurance Policy provider and the coverage amount; (25) with respect to
a NegAm Mortgage Loan, the first Payment Adjustment Date; (26) a code indicating
whether the Mortgage Loan is a MERS Mortgage Loan and, if so, the corresponding MIN;
(27) a code indicating whether the Mortgage Loan is a Lender PMI Mortgage Loan and, in
the case of any Lender PMI Mortgage Loan, the LPMI Fee; (28) the Mortgage Interest Rate
as of the Cut-off Date; (29) with respect to an Adjustable Rate Mortgage Loan, the related
initial Periodic Rate Cap; (30) the date on which the Mortgage Loan was originated; (31) a
code indicating whether the Mortgage Loan is subject to a prepayment penalty and if so, the
terms of such prepayment penalty; (32) the Mortgagors credit score at the time of
origination of the Mortgage Loan; (33) the paid through date; (34) with respect to each
Mortgage Loan originated more than six months prior to the related Closing Date, the
number of times in the previous twelve month period preceding the related Closing Date
that any Monthly Payment has been received thirty or more days after its Due Date; and
(35) any other information to be listed as agreed to between the Seller and the Purchaser.
With respect to the Mortgage Loans in the aggregate, the Mortgage Loan Schedule shall set
forth the following information, as of the related Cut-off Date: (1) the number of Mortgage
Loans; (2) the current principal balance of the Mortgage Loans; and (3) the weighted
average Mortgage Interest Rate of the Mortgage Loans. Such schedule may be delivered in
magnetic tape or hard copy form.

E1. The term mortgage note when used herein means the note or other evidence of
the indebtedness of a Mortgagor secured by a Mortgage.

F1. The term mortgaged property when used herein means the real property (or
leasehold estate, if applicable, in the case of a Mortgage Loan in the state of Hawaii)
securing repayment of the debt evidenced by a Mortgage Note.

G1. The term mortgagor when used herein means the obligor on a Mortgage Note.

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H1. The term NegAm mortgage loan when used herein means any individual Mortgage
Loan purchased pursuant to this Agreement which permits negative amortization and which
contains a provision whereby the interest rate on such Mortgage Loan is adjusted monthly.

I1. The term negative amortization cap when used herein means with respect to each
NegAm Mortgage Loan, the provision of each Mortgage Note which provides for an absolute
maximum percentage of the original principal amount of such Mortgage Loan that the
outstanding principal amount of the Mortgage Loan may reach as a result of negative
amortization which shall percentage shall not be greater than permitted under applicable
state law.

J1. The term non-convertible mortgage loan when used herein means any individual
Adjustable Rate Mortgage Loan purchased pursuant to this Agreement which does not
contain a provision whereby the Mortgagor may convert the Mortgage Loan to a fixed-rate
mortgage loan.

K1. The term nonrecoverable advance when used herein means any Monthly Advance
or Servicing Advance previously made or proposed to be made in respect of a Mortgage
Loan which, in the good faith judgment of the Servicer using Accepted Servicing Practices,
will not or, in the case of a proposed advance, would not, be ultimately recoverable from
related Late Collections, Insurance Proceeds, Other Insurance Proceeds, Liquidation
Proceeds or otherwise from such Mortgage Loan.

LI. The term officers certificate when used herein means a certificate signed by the
Chairman of the Board or the Vice Chairman of the Board or a President or a Vice President
and by the Treasurer or the Secretary or one of the Assistant Treasurers or Assistant
Secretaries of the Seller or the Servicer, as applicable, and delivered to the Purchaser.

M1. The term opinion of counsel when used herein means a written opinion of counsel,
who may be an employee of the party on behalf of whom the opinion is being given,
reasonably acceptable to the Purchaser.

N1. The term other insurance proceeds when used herein means proceeds of any title
policy, hazard policy, pool policy or other insurance policy covering a Mortgage Loan, other
than the Primary Mortgage Insurance Policy, if any, to the extent such proceeds are not to
be applied to the restoration of the related Mortgaged Property or released to the Mortgagor
in accordance with the procedures that the Servicer would follow in servicing mortgage
loans held for its own account.

O1. The term OTS when used herein means the Office of Thrift Supervision, its
successors and assigns.

P1. The term pass-through transfer when used herein means the sale or transfer of
some or all of the Mortgage Loans to a trust to be formed as part of a publicly or privately
traded pass-through transaction retaining the Seller as servicer thereunder.

Q1. The term payment adjustment date when used herein means with respect to each
Adjustable Rate Mortgage Loan, the date on which an adjustment to the Monthly Payment
pursuant to the related Mortgage Note becomes effective.

R1. The term periodic payment cap when used herein means with respect to each
NegAm Mortgage Loan, the provision of each Mortgage Note which permits limiting any
change in the amount of the adjusted Monthly Payment due on any Payment Adjustment
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Date to an amount not greater than a certain percentage (set forth in the Mortgage Note) of
the amount of the Monthly Payment due on the preceding Due Date. The Periodic Payment
Cap for a NegAm Mortgage Loan shall not exceed the limits imposed by applicable state law.

S1. The term periodic rate cap when used herein means with respect to each
Adjustable Rate Mortgage Loan other than a NegAm Mortgage Loan, the provision of each
Mortgage Note which provides for an absolute maximum amount by which the Mortgage
Interest Rate therein may increase or decrease on an Interest Adjustment Date above the
Mortgage Interest Rate previously in effect, equal to the rate set forth on the Mortgage Loan
Schedule per adjustment.

T1. The term person when used herein means any individual, corporation, partnership,
joint venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision thereof.

U1. The term prepayment interest shortfall amount when used herein means with
respect to any Mortgage Loan that was subject to a Principal Prepayment in full or in part
during any Due Period, which Principal Prepayment was applied to such Mortgage Loan prior
to such Mortgage Loans Due Date in such Due Period, the amount of interest (net of the
related Servicing Fee) that would have accrued on the amount of such Principal Prepayment
during the period commencing on the date as of which such Principal Prepayment was
applied to such Mortgage Loan and ending on the day immediately preceding such Due
Date, inclusive.

V1. The term primary mortgage insurance policy when used herein means a policy of
primary mortgage guaranty insurance issued by a Qualified Insurer which conforms in all
respects to the description set forth in Subsection 7.02(xxxi) herein.

W1. The term primary mortgage insurance proceeds when used herein means proceeds
of any Primary Mortgage Insurance Policy.

X1. The term principal payment when used herein means any payment or other
recovery of principal on a Mortgage Loan which is received in advance of its scheduled Due
Date which is not accompanied by an amount of interest representing scheduled interest
due on any date or dates in any month or months subsequent to the month of prepayment.

Y1. The term principal prepayment period when used herein means as to any
Remittance Date, period commencing on the 2nd day of the calendar month preceding the
month in which such Remittance Date occurs and ending on the 1st day of the month in
which such Remittance Date occurs, both inclusive.

Z1. The term purchase price when used herein means the price paid on the related
Closing Date by the Purchaser to the Seller in exchange for the Mortgage Loans purchased
on such Closing Date as calculated in Section 4 of this Agreement.

A2. The term purchase price and term letters when used herein means those certain
letter agreements executed on or after the date hereof setting forth the general terms and
conditions of each transaction contemplated herein and identifying the loan characteristics
of the Mortgage Loans to be purchased from time to time hereunder, by and between the
Seller and the Purchaser. All of the individual Purchase Price and Terms Letters shall
collectively be referred to as the Purchase Price and Terms Letter.

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B2. The term purchaser when used herein means DLJ Mortgage Capital, Inc. or its
successor in interest or any successor to or assignee of the Purchaser under this Agreement
as herein provided.

C2. The term qualified insurer when used herein means an insurance company duly
qualified as such under the laws of the states in which the Mortgaged Properties are located,
duly authorized and licensed in such states to transact the applicable insurance business
and to write the insurance provided, approved as an insurer by FNMA and FHLMC and whose
claims paying ability is rated in one of the two highest rating categories by the Standard &
Poors or Moodys with respect to primary mortgage insurance and in one of the two highest
rating categories by A.M. Best Company, Inc. with respect to hazard and flood insurance.

D2. The term qualified substitute mortgage loan when used herein means a mortgage
loan eligible to be substituted by the Seller for a Deleted Mortgage Loan which must, on the
date of such substitution, (i) have an unpaid principal balance, after deduction of all
scheduled payments due in the month of substitution (or in the case of a substitution of
more than one (1) mortgage loan for a Deleted Mortgage Loan, an aggregate principal
balance), not in excess of the unpaid principal balance of the Deleted Mortgage Loan (the
amount of any shortfall will be deposited in the Custodial Account by the Seller in the month
of substitution); (ii) have a Mortgage Interest Rate not less than, and not more than 1%
greater than, the Mortgage Interest Rate of the Deleted Mortgage Loan; (iii) have a
remaining term to maturity not later than, and not more than one year earlier than, the
maturity date of the Deleted Mortgage Loan; (iv) comply with each representation and
warranty (respecting individual Mortgage Loans) set forth in Subsection 7.02 hereof; and
(v) be the same type of Mortgage Loan as the Deleted Mortgage Loan.

E2. The term reconstitution agreements when used herein means the agreement or
agreements entered into by the Servicer and the Purchaser and/or certain third parties on
the Reconstitution Date or Dates with respect to any or all of the Mortgage Loans serviced
hereunder, in connection with a Whole Loan Transfer or a Pass-Through Transfer as set
forth in Section 12. Such agreement or agreements shall prescribe the rights and
obligations of the Seller in servicing the related Mortgage Loans.

F2. The term reconstitution date when used herein means the date or dates on which
any or all of the Mortgage Loans serviced under this Agreement shall be removed from this
Agreement and reconstituted as part of a Whole Loan Transfer or Pass-Through Transfer
pursuant to Section 12 hereof.

G2. The term record date when used herein means the close of business of the last
Business Day of the month preceding the month of the related Remittance Date.

H2. The term refinanced mortgage loan when used herein means a Mortgage Loan
which was made to a Mortgagor who owned the Mortgaged Property prior to the origination
of such Mortgage Loan and the proceeds of which were used in whole or part to satisfy an
existing mortgage.

I2. The term relief act when used herein means the Service members Civil Relief Act,
or any similar state or local law.

J2. The term relief act interest shortfall when used herein means with respect to any
Remittance Date, for any Mortgage Loan with respect to which there has been a reduction in
the amount of interest collectable thereon for the most recently ended Due Period as a
result of the application of the Relief Act, the amount by which (i) interest collectable on
14
such Mortgage Loan during such Due Period is less than (ii) one months interest on the
Stated Principal Balance of such Mortgage Loan at the related Mortgage Interest Rate before
giving effect to the application of the Relief Act.

K2. The term REMIC when used herein means a real estate mortgage investment
conduit within the meaning of Section 860D of the Internal Revenue Code.

L2. The term remittance date when used herein means the eighteenth (18th) day of
any month, beginning with the First Remittance Date, or if such eighteenth (18th) day is not
a Business Day, the first Business Day immediately following.

M2. The term REO account when used herein means the account created and
maintained pursuant to Subsection 11.13, which account shall be an Eligible Account.

N2. The term REO disposition when used herein means the final sale by the Seller of
any REO Property.

O2. The term REO property when used herein means a Mortgaged Property acquired by
the Servicer on behalf of the Purchaser as described in Subsection 11.13.

P2. The term Repurchase Price when used herein means with respect to any Mortgage
Loan, a price equal to (i) the Stated Principal Balance of the Mortgage Loan plus (ii) interest
on such Stated Principal Balance at the Mortgage Loan Remittance Rate from the last date
through which interest has been paid and distributed to the Purchaser to the date of
repurchase, less amounts received or advanced in respect of such repurchased Mortgage
Loan which are being held in the Custodial Account for distribution in the month of
repurchase plus (iii) with respect to any Mortgage Loan included in a Pass-Through Transfer,
any costs incurred by the related trust in connection with the breach of any predatory and
abusive lending law by such Mortgage Loan.

Q2. The term SAIF when used herein means the Savings Association Insurance Fund,
or any successor thereto.
R2. The term seller when used herein means the loan originator or any successor to
the Seller under this Agreement as provided herein.

S2. The term servicer when used herein means master servicer or primary servicer
under the Pooling and Servicing Agreement or any successor to or assignee of the Servicer
under this Agreement as provided herein.

T2. The term servicing advances when used herein means all customary, reasonable
and necessary out of pocket costs and expenses incurred in the performance by the
Servicer of its servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of the Mortgaged Property, (ii) any enforcement or
judicial proceedings, including foreclosures, (iii) the management and liquidation of the REO
Property and (iv) compliance with the obligations under Subsection 11.08.

U2. The term servicing fee when used herein means with respect to each Mortgage
Loan, the amount of the annual fee the Purchaser shall pay to the Servicer, which shall, for
a period of one full month, be equal to one-twelfth of the product of (a) the Servicing Fee
Rate and (b) the Stated Principal Balance of such Mortgage Loan. Such fee shall be payable
monthly, computed on the basis of the same principal amount and period respecting which
any related interest payment on a Mortgage Loan is computed. The obligation of the
Purchaser to pay the Servicing Fee is limited to, and the Servicing Fee is payable solely
15
from, the interest portion of such Monthly Payment collected by the Servicer, or as
otherwise provided under Subsection 11.24 hereof. With respect to REO Property, the
Servicing Fee shall be payable to the Servicer through REO Disposition in accordance with
Subsection 11.13, which Servicing Fee payable in respect of any REO Property shall be
based upon the Stated Principal Balance of the related Mortgage Loan at the time of
foreclosure, as reduced by any income or proceeds received by Purchaser in respect of such
REO Property and applied to reduce the outstanding principal balance of the foreclosed
Mortgage Loan.

V2. The term servicing fee rate when used herein means with respect to each
transaction contemplated herein, the per annum rate set forth as such in the related
Purchase Price and Terms Letter.

W2. The term servicing file when used herein means with respect to each Mortgage
Loan, the documents pertaining to such Mortgage Loan retained by the Servicer, consisting
of copies or microfilmed copies, as the case may be, of each of the documents in the
Mortgage File and originals of each of the other documents set forth in Exhibit 6 hereto.
Such documents may be maintained on microfilm (provided that the Servicer shall deliver to
the Purchaser an electronic copy of the Servicing File upon the Purchasers request).

X2. The term servicing officer when used herein means any officer of the Servicer
involved in, or responsible for, the administration and servicing of the Mortgage Loans
whose name appears on a list of servicing officers furnished by the Servicer to the
Purchaser upon request, as such list may from time to time be amended.

Y2. The term Standard & Poors when used herein means Standard & Poors Ratings
Services, a division of the McGraw-Hill Companies, Inc.

Z2. The term stated principal balance when used herein means with respect to each
Mortgage Loan as of the date of such determination: (i) the unpaid principal balance of the
Mortgage Loan as of the Cut-off Date after giving effect to payments of principal due on or
before such date, whether or not received, and without giving effect to payments received
on or before such date in respect of payments due after such date for application on the
scheduled Due Date, minus (ii) all amounts previously distributed to the Purchaser with
respect to the related Mortgage Loan representing payments or recoveries of principal or
advances in lieu thereof.

A3. The term termination fee when used herein means the amount paid to the Servicer
by the Purchaser in the event of the Servicers termination without cause, as servicer. Such
fee shall equal 2% of (a) the then current unpaid principal balance of the Mortgage Loans,
and (b) in the case of REO Property, the lesser of (i) 100% of the Stated Principal Balance
of the Mortgage Loan encumbering the Mortgaged Property at the time such Mortgaged
Property was acquired and became REO Property or (ii) the Fair Market Value of the REO
Property at the time of termination.

B3. The term treasury mortgage loan when used herein means any individual
Adjustable Rate Mortgage Loan purchased pursuant to this Agreement which contains a
provision whereby the interest rate on such Mortgage Loan is adjusted annually based upon
the weekly average yield on U.S. Treasury securities.

C3. The term updated loan-to-value ratio when used herein means with respect to any
Mortgage Loan, the outstanding principal balance of such Mortgage Loan as of the date of
determination divided by the Value of the related Mortgaged Property as determined by the
16
appraisal made for the originator at the time of origination of the Mortgage Loan or in the
event that an appraisal was made since the origination of the Mortgage Loan then the latest
appraisal of the Mortgaged Property. Such appraisal shall (i) be in a form acceptable to
FNMA and FHLMC and (ii) meet the then current guidelines for the Sellers so called full
documentation program.

D3. The term whole loan agreement when used herein means any Reconstitution
Agreement in respect of a Whole Loan Transfer.

E3. The term whole loan transfer when used herein means the sale or transfer by
Purchaser of some or all of the Mortgage Loans in a whole loan or participation certificate
format pursuant to a Reconstitution Agreement retaining the Servicer as servicer
thereunder.

INSTRUCTIONS

F3. If the space provided below each interrogatory is not sufficient for your answer, then
use additional sheets, numbered consecutively after each such interrogatory, and inserted
in the proper order of all copies filed and served. For example, in the case of Interrogatory
number 1, any additional sheets for your answers would be numbered as 1-A, 1-B, 1-C, etc.

G3. Each of the following requests for production of documents and interrogatories is
intended to be a continuing request to produce and answer. As a result, the Plaintiffs
hereby demand that, in the event that at any later date you obtain any additional facts, or
form any conclusions, opinions or contentions different from those set forth in your
responses herein, then you shall amend your answers to such responses and document
production promptly and sufficiently in advance of any trial date, to fully set forth such
differences and to produce and documents in connection therewith.
17

INTERROGATORIES AND REQUEST
FOR PRODUCTION OF DOCUMENTS

1. Provide the original Note, Mortgage, Riders, HUD-1 Settlement
Statement, Notice of Right to Cancel, Truth in Lending Disclosure Statement,
and all other documents executed by the Mortgagors at closing for in camera
inspection.

RESPONSE:

2. Provide the name, address, corporate registration information, and
I.R.S. Employer Identification Number for the Originator.

RESPONSE:

I.R.S. Employer Identification Number for the Seller.

RESPONSE:

I.R.S. Employer Identification Number for the Document Custodian.

RESPONSE:

I.R.S. Employer Identification Number for the Purchaser.

RESPONSE:

I.R.S. Employer Identification Number for the Master Servicer.

RESPONSE:

I.R.S. Employer Identification Number for the Depositor.
18

RESPONSE:

I.R.S. Employer Identification Number for the Insurer.

RESPONSE:

I.R.S. Employer Identification Number for the Registrant along with the SEC
Registration Number, CUSIP Number for the pool of loans securitized, etc.

RESPONSE:

I.R.S. Employer Identification Number for the Trust Fund.

RESPONSE:

11. Identify the Securities Series deposited into the Trust Fund.

RESPONSE:

12. Provide the fully executed Mortgage Loan Purchase Agreement.

RESPONSE:

13. Provide the Certificate Register.

RESPONSE:

14. Provide the Mortgage Loan Schedule.

RESPONSE:

19
I.R.S. Employer Identification Number for the Underwriter.

RESPONSE:

I.R.S. Employer Identification Number for the Ratings Agency that rated the
subject securities.

RESPONSE:

I.R.S. Employer Identification Number for the Owners of the Class CE, Class
P and Class R Certificates.

RESPONSE:

18. Provide information on whether the subject loan was drawn out of the
original pool of securities and swapped, traded, leveraged, or sold to another
entity; if so, provide all SEC Accession Numbers along with detailed contact
information for each successor in interest along with the dates of each
transaction.

RESPONSE:

Dated this the __________ day of __________________, 2008.

__________________________
O. Max Gardner III
Law Offices of O. Max Gardner III
Attorney for Plaintiffs
PO Box 1000
PH 704.487.0616

20

O. MAX GARDNER III, attorney for the Plaintiffs, hereby certifies to the Court as
follows:

1. I am not a party for the foregoing proceeding;
3. I have this day served a copy of the foregoing FIRST INTERROGATORIES
AND FIRST REQUEST FOR PRODUCTION OF DOCUMENTS on all parties in interest by
placing the same in an envelope, first-class mail, postage prepaid, and addressed to each
person at his dwelling house or usual place of abode or to the place where he or she
regularly conducts his business or profession as follows:

DEBTORS

And via the Courts Electronic Case Filing System to:

ATTY FOR DEFENDANT

Steven G. Tate, Trustee
P.O. Box 1778
Statesville, NC 28687-1778

John Bramlett, Bankruptcy Admin.
402 W. Trade St., Room 200

4. To the best of my knowledge, information and belief, the parties in interest
are not infants or incompetent persons;

Dated this the _____ day of _______________, 2008.

________________________________________
O. Max Gardner III
Law Offices of O. Max Gardner III
Attorney for the Plaintiffs
N.C. State Bar No. 6164
P.O. Box 1000
Shelby, NC 28151-1000
(704) 487-0616 / FAX (704) 487-0619


REQUEST FOR PRODUCTION OF DOCUMENTS

Definitions

As used in these Requests the following terms have the meanings ascribed to them below:

The term borrower means any person who is obligated on the note, whether the note
has one, or more than one obligor.

The terms loan and this loan refer to your loan number <NUMBER> on which
<NAME> is a borrower.

The term mortgage means the mortgage, deed of trust, or other security instrument
that your records indicate secures this loan.

The term note means the promissory note referred to in the mortgage.

The term assignment of mortgage means any document, either recorded or intended
to be in recordable form, that purports on its face to be or effect an assignment of rights
in, to, or under the mortgage.

The term endorsement means any writing, print, or stamp located on the face of the
note, an allonge, or other writing attached, fastened, or otherwise fastened to the note that
purports to effect a negotiation or other transfer or rights in, to, or under the note.

1. Provide copies of all property preservation or inspection reports prepared since the
filing of the Chapter 13 case and within 12 months before the filing date.

2. Provide a statement of the name and address of all companies or individuals
providing such property preservation or inspection services.

3. Please state the amount of the fees charged and the fees paid for such property
preservation or inspection services.

4. Provide copies of all checks and payment receipts in payment of all such property
inspections.

5. Provide copies of all Broker Price Opinions for the subject property since the


petition date.

6. Provide copies of all Broker Price Opinions for 12 months before the petition date.

7. Provide copies of all statements and/or invoices for all such Broker Price Opinions
and copies of all checks in payment thereof.

8. Provide a statement of all fees and expenses paid or advanced to the mortgage loan
for such Broker Price Opinions since the petition and for 12 months before the petition
date.

9. Provide copies of all digital photos on file with respect to the subject property.

10. Provide copies of all digital photos on file for comparable properties.

11. Provide a printout of all data entries for tracking property preservations, property
inspections, and Broker Price Opinions for timeliness and for consistency of data.

12. Provide copies of all operational guidelines for your mortgage software programs.

13. Provide copies of all rules and procedures for the electronic ordering of property
preservations, property inspections, and Broker Price Opinions.

14. Provide copies of all documents and data related to the electronic payment of
invoices for property preservations, property inspections and Broker Price opinions.

15. Provide copies of any documents related to any type of Bankruptcy Inspection and
all charges and fees related thereto.

16. Provide copies of all collection notes and other entries in any files related to this
mortgage. Also, provide copies of all images related to this file entered in the Newlmage
Express system or any other similar system or data storage or imaging transfer system.

17. Provide copies of all data entries in any restricted corporate advance accounts or
files related to this mortgage.

18. Provide copies of all applications for employment submitted by any Vendor who has
performed any services related to this mortgage.

19. Provide copies of all documents related to any legal services provided or rendered
with respect to this mortgage since the petition date, including bills, statements and
payment invoices, and time and expense records.

20. Provide copies of any statement, invoice, or bill containing the name and address of
each and every attorney and/or law firm providing such services.


21. Provide copies of any data regarding the amount of money paid for legal fees and
expenses to any attorney and/or law firm, or any other entity, since the petition date
including the amount and date of each payment. This question includes any type of
document release or document acquisition or document preparation fee. In addition, if
any legal fees have been shared between or among lawyers or lawyers and third-party
vendors then attach copies of all agreements or written understandings with respect
thereto.

22. Provide copies of any transactional history (i.e., showing the date and amount of
payment) related to the source of funds used to pay for property preservation services,
property inspection services, Broker Price Opinions, and legal services and any other
expenses.

23. Provide copies of any transactional history indicating how the payments identified in
the documents produced in number 21 above relate to the subject mortgage loan.

24. Provide copies of any guidelines related to any type of bankruptcy tracking system
used with respect to the subject mortgage.

25. Provide copies of all payment records related to the receipt of post-petition mortgage
payments from the Chapter 13 Trustee. Also, if such payments are placed in any
suspense or unapplied funds account then identify the amount and date of each such
transaction and identify by date and amount of all funds removed from such account or
accounts and state exactly how the removed funds were applied.

26. Provide copies of the Key Loan Transaction history for the subject mortgage loan.
Also, if you have an XLS spreadsheet for the subject loan please produce the same.

27. Provide a copy of the Pooling and Servicing Agreement for the subject mortgage.

28. Provide a complete life of loan transactional history for the subject mortgage
beginning with the origination date and ending with the date of production. This
document
must include all debits, including any restricted corporate advances, and credits of any
nature made at any time with respect to the subject mortgage loan, whether or not such
transactions resulted in additions to the outstanding principal balance.

29. Provide copies of all documents included in the initial bankruptcy referral package
to the attorney in this case and state whether or not a fee had to be paid to any party for
this package. If such a fee had to be paid, then state the amount of the fee, the name of
the payee, and the date of the payment.

30. Provide copies of any documents related to any type of review of Schedules A and B
in this case.


31. Provide copies of any documents related to any type of review of Schedules D, E
and F in this case.

32. Provide copies of any documents related to any type of review of Schedules 22C and
I & J in this case.

33. Provide copies of any documents related to any fees or charges related to the
preparation and filing of the proof of claim in this case.

34. Provide copies of any documents related to any fees or charges related to the review
of the bankruptcy plan in this case.

35. Provide copies of any documents related to any fees or charged related to attending
the 341 meeting in this case.

36. Provide copies of any documents related to any loss mitigation activities in this case
from the petition date up to and including the date of the response to this request to
produce.

37. Provide copies of all monthly reports received from your bankruptcy lawyer or
lawyers regarding the loss management efforts pursued during the pendency of this
Chapter 13 case.

38. Provide copies of all rules or guidelines related to the amount of the post-petition
contractual default that must occur before referring the file to the bankruptcy attorney for
filing a motion for relief from stay.

39. Provide copies of any documents related to post-petition remittances to the investor
that owns this mortgage that were related to the subject mortgage.

40. Provide copies of any documents related to post-petition advances related to the
subject mortgage loan.

41. Provide copies of any documents related to any pool buy-out requirements related to
the subject mortgage loan or to any limitations on loan modification options imposed by
any of the securitization instruments.

42. Provide copies of any and all servicing guides related to the amount of approved
legal fees for any post-petition legal service.

43. Provide copies of any and all servicing guides related to the source of funding for
the payment of post-petition legal fees.

44. Provide copies of all cash disbursement request forms in this case related to the


payment of post-petition legal fees.

45. Provide copies of any and all documents related to any standard rule or procedure
that provides for the payment of a legal fee to a lawyer or lawyers for post-petition
services in a Chapter 13 bankruptcy case.

46. Provide copies of any and all documents that describe the legal services that are to
be provided for the legal fee.

47. Provide copies of any and all documents related to any additional legal fees that
may be paid post-petition for a lawyer sending a default letter to the debtor's bankruptcy
counsel that results in a cure of a post-plan confirmation delinquency.

48. Provide copies of any and all documents related to how legal fees are charged to,
advanced against, or assessed to the subject mortgage.

49. Provide copies of any and all documents related to the procedures to be used in
Chapter 13 bankruptcy cases for court approval of the legal fees.

50. Provide copies of any and all documents related to written notices to be provided to
the debtor or debtors counsel in a Chapter 13 bankruptcy case with respect to legal fees.

51. Provide copies of any and all guidelines or policies related to the application of
court-approved legal fees in Chapter 13 bankruptcy cases that are less than $1,000.00.

52. Provide copies of any and all accounting rules and procedures related to the receipt
of post-petition legal fees included in a Chapter 13 plan (either pre or post-confirmation)
and the relation of such fees to the legal fee or any other type of fixed fee paid to a
bankruptcy lawyer.

53. Provide copies of any and all guidelines related to the retention of a local
bankruptcy attorney by your general bankruptcy attorney, including the amount and
procedures for the payment of and accounting for fees and expenses paid to the said local
bankruptcy counsel.

54. Please produce a copy of the Master Document Custodial Agreement for the Trust
that owns the mortgage loan in this case.

55. Please produce a copy of the Master Document Custodian Guidebook for the Trust
that owns the mortgage loan in this case.

56. Please produce copies of all records maintained by the document custodian
indentified herein that confirm the proper unbroken chain of assignments of the mortgage


or deed of trust from the originator to the Trustee for the Trust that owns the mortgage
loan in this case.

57. Please produce copies of all records maintained by the document custodian
identified herein that confirm the proper unbroken chain of negotiations and transfers of
the mortgage note from the originator to the Trustee for the Trust that owns the mortgage
loan in this case.

2. For each and every such transaction identified in Request Number 1, please provide
the date it was posted to or associated with the debtors' account, the amount thereof, the
type of charge or debit, the resulting balance due and owing on the account or any
attached accounts, suspense accounts, or any other related account after the transaction,
and any and all information sufficient to identify the purpose for each such transaction.

3. For each and every such payment transaction, provide the date it was posted to the
debtors' account, the amount thereof, and the resulting balance due and owing on the
account.

4. For each and every such credit transaction (other than from payments), provide the
date
it was posted to the debtors' account or any sub-account, suspense account or associated
account, the amount thereof, and the resulting balance due and owing on the account.

5. For each and every payment, provide:

a. The manner of the payment, whether by personal check, money order, cashier's
check, bank check or otherwise; and

b. Any number or other information in your control that would further identify the
payment, as for instance, and without limitation to the type of payment or type of
information, check numbers, money order numbers, etc.

6. A legend and/or detailed explanation sufficient to allow for a layman's full
understanding of all the data provided including but not limited to the accounting
transaction codes used with your mortgage servicing software and the appropriate
English definition of each such code.

7. A copy of the written notice, required by N.C.G.S. 58-35-85 (10), sent by the
insurer that previously provided insurance coverage to the debtors, to you, indicating that
the debtors' insurance has lapsed and/or been cancelled.


8. All contracts or agreements with third-party vendors providing foreclosure and/or
bankruptcy processing or administrative services in effect at any time from January of
2000 to the present.

9. All documents regarding Compensation paid to such third-party vendors in
connection with the subject bankruptcy case and/or and contested case or adversary
proceedings filed herein, and copies of checks, wire transfers or debit/credit memos
evidencing all such payments.

10. Copies of all contract documents and/or agreements with all attorneys involved at
any time in the subject bankruptcy case.

11. Copies of all time and billing records prepared by any attorney involved at any time
in the subject bankruptcy case.

12. Copies of all attorney performance reports for the attorneys involved in the subject
bankruptcy case.

13. Documentation of any internal benchmarks used for grading the performance of
outside counsel in the processing of the subject bankruptcy case.

14. All documents relating to your internal processes for preparing proofs of claim and
Motions for Relief from Stay in the consumer bankruptcy cases. Please state the full
name and address of the party or entity that actually drafted the proof of claim and
motion for relief from stay filed in this case.

15. All Guidelines, manuals, bulletins and/or policies governing the servicing
procedures for the mortgage loan involved in the subject bankruptcy case.

16. All Guidelines, manuals, bulletins and/or policies governing the servicing
procedures for defaulted loans serviced by you in effect from January of 200 to the
present.

17. Documentation of any and all guidelines you have prepared governing allowable
legal fees and timelines for foreclosure and bankruptcy processing that apply to the
subject mortgage loan or to any consumer bankruptcy case.

18. Documentation of all Management Assertions, Management Representation Letters,
and Independent Accountant's Reports concerning your compliance with the minimum
servicing standards identified in the Mortgage Bankers Association of America's Uniform
Single Attestation Program for Mortgage Bankers, plus all documents you provided to
the accountants documenting these conclusions.

19. Copies of any internal audit, review or special investigation of yours default
management and escrow procedures from January of 2000 to the present.


20. Copies of performance reviews of your escrow management department and escrow
procedures from January of 2000 to the present.

21. A current itemized payoff statement for the mortgage loan involved in this case.

22. The operations guidelines or manuals used in your payoff department for generating
the statement referred to in Request Number 21.
23. The written protocols for the treatment of a corporate advance account, restricted
corporate advance account, suspense account, or any other similar account for purposes
of generating the payoff statement referred to in Request Number 21.

24. Any documentation regarding the type of accounts used in connection with any
consumer bankruptcy loan, the use of those accounts, and the implementation of any
procedures regarding those accounts.

25. All documents regarding the referral of the mortgage loan in this case to any party
for the filing of a motion for relief from stay.

26. All operational manuals available to your attorneys that allow them to access any of
the account data regarding the mortgage loan in this case or in any other consumer
bankruptcy case.

27. All documents used, relied upon or available to your attorney in connection with the
preparation of the motion for relief from stay in this case.

28. All documents used, relied upon or available to the person who signed the affidavit
attached to the motion for relief from stay filed in this case. Please also state the full
name of such party, the address of such party, and the full name and address of the
employer of such party.

29. The job descriptions and names of all of your employees who were involved in the
servicing of the mortgage loan in this case subsequent to the filing of the bankruptcy
petition.

30. Any documents or notices received from the provider of the mortgage servicing
software used in connection with your loans involved in consumer bankruptcy cases
related to any problems or common errors regarding the proper application and
accounting for payments received from debtors, bankruptcy trustees or other parties.

31. Any and all electronic records in the Newlmage system regarding this loan.

32. Any and all electronic records in the NewTrack system regarding this loan.

33. Any and all electronic records in the Newlnvoice system regarding this loan.


34. Any and all electronic mail messages regarding this mortgage loan.

35. Please state the name of the entity that paid the law firm that filed the motion for
relief from stay in this case.

36. State the amount of any fees or charges that the law firm that filed the motion for
relief from stay had to pay to any third-party for any documents in this case and identify
any and all such documents.

37. Please itemize and identify by date and amount any reimbursement payments you
received from any party other than the debtors for expenses advanced in connection with
this loan.

38. Please identify all national law firms you use in connection with consumer
bankruptcy cases and identify the firm used in this case.

39. State the amount and date of all fees paid by you to the national law firm in this
case.

40. Please produce copies of any all documents you have provided to any third-party
that purports to give such party any authority to sign documents on your behalf (such as,
for example, a power of attorney form).

41. Please provide an itemized payoff statement for this mortgage pursuant to North
Carolina General Statute 45-36.7. Pursuant to N.C.G.S. 45-36.7(e), the payoff
statement must contain the following information:

(a) The date on which it was prepared and the payoff amount as of
that date, including the amount by type of each fee, charge, or
other sum included within the payoff amount;

(b) The information reasonably necessary to calculate the payoff
amount as of the requested payoff date, including the per diem
interest amount; and

(c) The payment cutoff time, if any, the address or place where
payment must be made, and any limitation as to the authorized
method of payment.

42. Provide an itemized statement of the amount needed to fully reinstate this
mortgage loan.

43. Provide a detailed itemization of all fees incurred, including the date each fee was
incurred, the nature of the fee, a copy of the bill or invoice for such fee, and a copy of


each check or wire transfer in payment thereof.

44. Copies of all statements or notices you have mailed to the consumers named
herein pursuant to N.C.G.S. 45-91(1)b.

45. Copies of all statements or notices you have mailed to the consumers named
herein pursuant to N.C.G.S. 45-91(2).

46. A full and complete explanation of any default in the mortgage payments and
the date the account went into default as required by N.C.G.S. 45-93(1)a.

47. The current balance due on the mortgage loan pursuant to N.C.G.S. 45-
93(a)b.

48. The current amount of any funds held in any suspense account and the source
of such funds held in suspense as provided for in N.C.G.S. 45-93(1)b.

a statement of all post-petition account activity that is readable, reasonably
understandable, and stated in plain English. [Emphasis supplied]. Please provide
me with a complete post-petition transaction history with a definition of the
transaction codes

1. A complete and itemized statement of the loan history covering the entire life
of this loan including, but not limited to, all receipts by way of payment or otherwise
and all charges to the loan in whatever form. This life of the loan transactional
history should include the date of each and every debit and credit to any account
related to this loan, whether restricted or not restricted, the nature and purpose of
each such debit and credit, and the name and address of the payee of any type of
disbursement related to this loan.

2. A complete and itemized statement of all advances or charges against this
loan, restricted or unrestricted, recoverable or non-recoverable, and for any purpose
that are not reflected on the life of loan history transaction statement provided in
answer to question #1.

3. A complete and itemized statement of the escrow account of the loan, if any,
covering the entire life of this loan, including, but not limited to, any receipts or
disbursements with respect to real estate property taxes, fire or hazard insurance,
flood insurance, mortgage insurance, credit insurance, purchase mortgage insurance,
or any other type of insurance product.

4. Have you purchased and charged to the account any Force-Placed Insurance?

5. A complete and itemized statement covering the entire life of this loan of the
amounts charged for any forced-placed insurance, the date of the charge, the name


of the insurance company, the relation of the insurance company to you or a related
company, the amount of commission you received for each force-placed insurance
event, and an itemized statement of any other expenses related thereto.

6. A complete and itemized statement covering the entire life of this loan of any
suspense account entries and/or any corporate advance entries related in any way to
this loan.

property inspection fees, property preservation fees, broker opinion fees, appraisal
fees, bankruptcy monitoring fees, or other similar fees or expenses related in any
way to this loan.

8. Identify the provision under the Deed of Trust and/or note that authorizes
charging each and every such fee against the loan of the debtors.

9. Please attach copies of all property inspection reports and appraisals, broker
price opinions of value, bills and invoices, and checks or wire transfers in payment
thereof.

10. A complete copy of any Key Loan Transaction report or reports and any
reports indicating any charges for any "add on products" sold to the debtors in
connection with this loan at any time.

11. A complete and itemized statement of any and all post-petition arrears
including each month in which the default occurred, and the amount of each monthly
default.

12. A complete and itemized statement of any late charges added to this loan at
any time.

fees incurred to modify, extend, or amend the loan or to defer any payment or
payments due under the terms of the loan.

14. An itemized statement of the current amount needed to pay-off the loan in
full.

15. A full and complete comprehensible definitional dictionary of all transaction
codes and other similar terms used in any of the documents or records requested or
referred to herein.

16. A complete and itemized statement of any funds deposited in any post-
petition suspense account(s) or corporate advance account(s), including, but not
limited to, the balance in any such account or accounts and the nature, source and
date of any and all funds deposited in such account or accounts.

17. A complete and itemized statement from the date of this loan to the date of
your reply to this letter of the amount, payment date, purpose and recipient of all
foreclosure expenses, NSF check charges, legal fees, attorney fees, professional fees


and other expenses and costs that have been charged against or assessed to this
loan and whether or not such charge or fee is recoverable or non-recoverable.

18. A complete and itemized statement of the amount, payment date, purpose
and recipient of all fees for the preparation and filing of the original proof of claim,
any amended proofs of claim or any supplemental proofs of claim in this case.

19. The full name, address and telephone number of the current holder of the
original mortgage note including the name, address and phone number of any
Trustee under the Trust or other fiduciary. This request is being made pursuant to
Section 1641(f)(2) of the Truth In Lending Act, which requires the servicer to identify
the holder of the debt.

20. The name, address and telephone number of any master servicers, servicers,
sub-servicers, contingency servicers, back-up servicers or special servicers for this
mortgage loan.

21. A copy of any mortgage Pooling and Servicing Agreement and all Disclosure
Statements provided to any Investors with respect to any mortgage-backed security
trust or other special purpose vehicle related to the said Agreement and any and all
Amendments and Supplements thereto.

22. If a copy of the Pooling and Servicing Agreement has been filed with the SEC,
provide a copy of SEC Form 8k and the Prospectus Supplement, SEC Form 424b5.

23. The name, address and telephone number of any Trustee under any pooling
or servicing agreement related to this loan.

24. A copy of the Prospectus offered to investors in the trust.

25. Copies of all servicing, master servicing, sub-servicing, contingency servicing,
special servicing, or back-up servicing agreements with respect to this loan.

26. All written loss-mitigation rules and work-out procedures and loan
modifications options or programs related to any defaults regarding this loan and
similar loans.

27. A summary of all fixed or standard legal fees approved for any form of legal
services rendered in connection with this loan.

28. Is this a MERS Designated Mortgage Loan? If the answer is yes, then identify
the electronic MERS number assigned to this loan. Please attach a copy of the MERS
Milestone Reports.

29. Please state the full name and address of any attorney you have retained to
provide any legal services in this case within six (6) months of the petition date or at
any time post-petition.

30. A copy of your Key Loan Transaction history, bankruptcy work form, or XLS
spreadsheet of all accounts associated with this mortgage loan.


31. Copies of all collection notes, collection records, communication files or any
other form of recorded data with respect to any communications between you and
the debtor.

32. An itemized statement of the full amount needed to reinstate the mortgage as
of the date of your response.

33. Copies of all written or recorded communications between you and any non-
lawyer third parties regarding this mortgage.

34. All P-309 screen shots of the history all of the accounts (principal, interest,
escrow, late charges, legal fees, property inspection fees, broker price opinion fees,
statutory expense fees, miscellaneous fees, corporate advance fees, etc.) associated
with this loan.

1

UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF NORTH CAROLINA
SHELBY DIVISION

IN RE:

CASE NO. 08-xxxxx
SSN xxx xx xxxx (Chapter 13)

SSN xxx xx xxxx

Debtors.

DEBTORS, AND
STEVEN G. TATE, STANDING
TRUSTEE,

Plaintiffs.

vs. ADVERSARY PROCEEDING
NO. 08-xxxxx

DECISION ONE MORTGAGE
COMPANY, L.L.C.; MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS INC.;
AS AND ONLY AS
SUBSTITUTE TRUSTEE IN THAT
CERTAIN DEED OF TRUST RECORDED
IN BOOK AT PAGE OF THE
CLEVELAND COUNTY PUBLIC REGISTRY;
CWABS ASSET-BACKED CERTIFICATES
TRUST 2005-BC1; THE BANK OF NEW
YORK AS TRUSTEE FOR THE
CERTIFICATE HOLDERS CWABS
ASSET-BACKED CERTIFICATES
SERIES 2005-BC1; AND LITTON
LOAN SERVICING, L.P.

Defendants.

PLAINTIFFS FIRST REQUEST FOR ADMISSIONS TO
DEFENDANT THE BANK OF NEW YORK AS TRUSTEE FOR THE CERTIFICATE HOLDER
CWABS ASSET-BACKED CERTIFICATES SERIES 2005-BC1

Pursuant to Rule 36 of the Federal Rules of Civil Procedure, which is made applicable
to this Adversary Proceeding by Rule 7036 of the Federal Rules of Bankruptcy Procedure,
2

the plaintiffs hereby demand that the defendant The Bank Of New York As Trustee For The
Certificate Holder CWABS Asset-Backed Certificates Series 2005-BC1 (The Bank of New
York) within 30 days after service hereof, admit or specifically deny for the purposes of the
above-captioned Adversary Proceeding and subject to all pertinent objections as to
admissibility which may be interposed in further proceedings, the truth of the following
facts.

In the event that any request is denied in whole or in part, you should set forth the
reasons for such denial and identify the persons having knowledge thereof and the
documents related thereto.

REQUEST FOR ADMISSIONS

1. That the plaintiffs and (the Debtors) filed a
voluntary Chapter 13 case in the United States Bankruptcy Court for the Western District of
North Carolina, Shelby Division, on May 21, 2008.

RESPONSE:

2. That the United States Bankruptcy Court for the Western District of North Carolina,
Shelby Division has jurisdiction of this Adversary Proceeding pursuant to 28 U.S.C. 157.

RESPONSE:

3. That this Adversary Proceeding is a core proceeding as that term in defined in 28
U.S.C. 157(b)(2).

RESPONSE:

4. That the female debtor, , is the owner of real property and
improvements located thereon at , Shelby, North Carolina, 28150 (the Real
Property).

RESPONSE:

5. That on November 24, 2004 the Debtors executed a Deed of Trust to as
Trustee, Mortgage Electronic Registration Systems, Inc., (MERS) as beneficiary (acting
solely as a nominee for Lender and Lenders successors and assigns,) and Decision One
Mortgage Company, LLC (Decision One) as Lender, which was recorded on November 24,
2004 at Book at Page of the Cleveland County Public Registry (the Deed of
Trust).

RESPONSE:

6. That attached hereto as Exhibit A is a true copy of the Deed of Trust.

3

RESPONSE:

7. That the Deed of Trust purportedly secures the owner and holder of an Adjustable
Rate Note executed by the female debtor, on November 24, 2004 payable to
Decision One in the original principal amount of $84,000.00 ( the Note).

RESPONSE:

8. That attached hereto as Exhibit D is a true copy of the Note.

RESPONSE:

9. That Litton is the servicer of the loan evidenced by the Note.

RESPONSE:

10. That in their Chapter 13 schedules, the Debtors listed Litton as a creditor under
account number 12345 in the principal sum of $81,077.00 for the loan transaction involving
the Note and Deed of Trust.

RESPONSE:

11. That in their Chapter 13 plan, the Debtors provided for a claim serviced by Litton
pursuant to the Note by including within the plan a 3 month payment arrears of $2082.00
and providing for post-petition payments of $694.00 per month to be paid directly to Litton
outside of the Chapter 13 plan.

RESPONSE:

12. That on May 27, 2008 The Bank of New York as Owner and Holder of the Note
caused to be filed in the Cleveland County Public Registry in Book at Page an
Appointment of Substitute Trustee naming as Substitute Trustee under
the Deed of Trust.

RESPONSE:

13. That attached hereto as Exhibit B is a true copy of the Appointment of Substitute
Trustee referred to in the previous request.

RESPONSE:

14. That the Appointment of Substitute Trustee referenced in the previous request was
executed by Renee Hertzler as Vice President of Bank of New York.
4

RESPONSE:

15. That on May 27, 2008, MERS caused to be filed in the Cleveland County Public
Registry in Book at Page an Assignment of Deed of Trust.

RESPONSE:

16. That attached hereto as Exhibit C is a true copy of the Assignment of Deed of Trust
referenced in the previous request.

RESPONSE:

17. That the Assignment of Deed of Trust referenced in the previous request was
executed by Denise Bailey as Vice President of M.E.R.S.

RESPONSE:

18. That both the Assignment of Deed of Trust and the Appointment of Substitute
Trustee referenced above state that they were drawn by The Law Firm P.A.

RESPONSE:

19. That on July 2, 2008 Litton, as servicing agent for The Bank of New York, filed in the
Debtors bankruptcy case a proof of claim (the Proof of Claim) alleging a secured claim of
$86,148.03 and a pre-petition arrearage claim of $6,481.47.

RESPONSE:

20. That attached hereto as Exhibit 1" is a true copy of the Proof of Claim.

RESPONSE:

21. That Litton has assessed fees and charges to the Debtors account after the filing of
the bankruptcy petition without obtaining prior approval of the bankruptcy court.

RESPONSE:

22. That on July 8, 2008 Litton assessed the Debtors account $17.00 for Recording
Cost Loan Assignment.

RESPONSE:

5

23. That on July 8, 2008 Litton assessed the Debtors account $275.00 for Attorneys
Fees Allowable.

RESPONSE:

24. That on July 8, 2008 Litton assessed the Debtors account $350.00 for Title Costs
Title Search.

RESPONSE:

25. That on July 8, 2008 Litton assessed the Debtors account $100.00 for Title Costs
Title Report.

RESPONSE:

26. That on July 8, 2008 Litton assessed the Debtors account $17.00 for Recording
Costs Appointment of Substitute Trustee.

RESPONSE:

27. That on July 8, 2008 Litton assessed the Debtors account $50.00 for Attorney Fees
Preparation of Loan Assignment.

RESPONSE:

28. That on July 23, 2008 Litton assessed $115.00 to the Debtors account for
Modification Expense.

RESPONSE:

29. That Exhibit A attached to the Proof of Claim entitled Itemization of Claim and
Summary of Supporting Documents includes an entry for Interest from Last Paid
Installment of $3526.51.

RESPONSE:

Summary of Supporting Documents includes an entry for Late Charges of $269.40.

RESPONSE:

6

Summary of Supporting Documents includes an entry for Pre-petition Attorneys Fees and
Costs of $1299.78.

RESPONSE:

Summary of Supporting Documents includes entries for Other amounts for Inspection
Fees, Appraisal Fees, NSF Check Charges, and Other Charges in the sum of $634.17.

RESPONSE:

Summary of Supporting Documents includes entries for Regular Monthly Installments
October 24, 2007, through June 24, 2008" in the sum of $4,533.63.

RESPONSE:

Summary of Supporting Documents includes an entry for Funds Advanced for Delinquent
Taxes / Hazard Insurance in the sum of $494.49.

RESPONSE:

35. That the Interest from Last Paid Installment entry on Exhibit A to the Proof of
Claim in the sum of $3526.51 is false.

RESPONSE:

36. That the Late Charges of $269.40 entry on Exhibit A to the Proof of Claim is false.

RESPONSE:

37. That Litton received some of the Debtors pre-petition monthly payments upon the
subject account prior to the payment due date.

RESPONSE:

38. That Litton did not post some of the Debtors payments to their account that it
received prior to the due date until after the payment due date.

RESPONSE:

39. That the Pre-petition Attorneys Fees and Costs in the amount of $1299.78 as an
7

entry to Exhibit A of the Proof of Claim is false.

RESPONSE:

40. That the Other amounts for Inspection Fees, Appraisal Fees, NSF Check Charges,
and Other Charges in the sum of $634.17 stated on Exhibit A to the Proof of Claim is
false.

RESPONSE:

41. That the entry for Funds Advanced for Delinquent Taxes / Hazard Insurance of
$494.49 listed on Exhibit A to the Proof of Claim is false.

RESPONSE:

42. That taxes and insurance are not escrowed as part of the Debtors loan account
serviced by Litton.

RESPONSE:

43. That the Bank of New York is not a creditor of the female Debtor.

RESPONSE:

44. That the Proof of Claim does not contain a copy of the Note.

RESPONSE:

45. That the Proof of Claim does not contain a copy of any endorsements to the Note.

RESPONSE:

46. That the Proof of Claim does not contain an explanation of why the Note was not
attached.

RESPONSE:

47. That the Proof of Claim does not contain documents such as invoices to substantiate
the charges listed on Exhibit A to the Proof of Claim.

RESPONSE:

8

48. That the Statement of alleged legal fees on Exhibit A to the Proof of Claim does not
include any itemized statement of the actual time expended and the services rendered by
any licensed attorney at law.

RESPONSE:

49. That on May 21, 2008 Litton was holding $750.00 of the Debtors funds in a
suspense account balance.

RESPONSE:

50. That neither the Note or the Deed of Trust authorized the holding of the Debtors
monthly payments in a suspense account for more than a reasonable period of time.

RESPONSE:

51. That since the date of the Note Litton has not paid any insurance premium for any
coverage related to the Real Property.

RESPONSE:

52. That since the date of the Note Litton has not paid any taxes related to the Real
Property.

RESPONSE:

53. That Litton regularly assesses fees and charges to debtors in Chapter 13 cases in this
District without obtaining prior court approval therefor.

RESPONSE:

54. That the Proof of Claim contains false statements.

RESPONSE:

55. That attached hereto as Exhibit E is a true copy of a Billing Statement from Litton
to the Debtors dated April 7, 2008.

RESPONSE:

56. That The Bank of New York did not have physical possession of the Note on or before
May 21, 2008.

9

RESPONSE:

57. That the Note is negotiable instrument as that term is defined in Article 3 of the
North Carolina Uniform Commercial Code.

RESPONSE:

58. That the Note had not been endorsed to The Bank of New York on or before May 21,
2008.

RESPONSE:

59. That the Deed of Trust had not been assigned to The Bank of New York on or before
May 21, 2008.

RESPONSE:

60. That the Note was never in The Bank of New Yorks actual possession on May 21,
2008.

RESPONSE:

61. That The Bank of New York is not the named payee of the Note.

RESPONSE:

62. That MERS has no right to receive payments under the Note.

RESPONSE:

63. That MERS does not process payments under the Note.

RESPONSE:

64. That MERS does not have physical possession of the Note.

RESPONSE:

65. That MERS keeps no records of payments made or not made under the Note.

RESPONSE:

10

66. That as of May 21, 2008, there was not recorded in the Office of the Register of Deed
of Cleveland County, North Carolina, an assignment of the Deed of Trust to The Bank of
New York.

RESPONSE:

Dated this the _____ day of , 2009.

Attorney for Debtors/Plaintiffs
NC State Bar #6164
P.O. Box 1000
Shelby, NC 28151-1000
(704) 487-0616
FAX (704) 487-0619
e-mail: maxgardner@maxgardner.com

11


O. MAX GARDNER III, attorney for the Plaintiffs/Debtors, hereby certifies to the
Court as follows:
1. I am not a party for the foregoing proceeding;
3. I have this day served a copy of the foregoing PLAINTIFFS FIRST
REQUEST FOR ADMISSIONS TO DEFENDANT THE BANK OF NEW YORK AS TRUSTEE
FOR THE CERTIFICATE HOLDER CWABS ASSET-BACKED CERTIFICATES SERIES
2005-BC1 on all parties in interest by placing the same in an envelope, first-class mail,
postage prepaid, (or by certified mail, return receipt, postage prepaid, as indicated below),
addressed to each person at his dwelling house or usual place of abode or to the place
where he regularly conducts his business or profession as follows:

Debtors

Attorney for Bank of New York

And via the Courts Electronic Case Filing System to:

Steven G. Tate
Standing Trustee

John Bramlett
Bankruptcy Administrator
402 W. Trade St., Room 200

4. To the best of my knowledge, information and belief, the parties in interest
are not infants or incompetent persons;

Dated this the _____ day of , 2009.

Attorney for the Debtors/Plaintiffs
NC State Bar #6164
P.O. Box 1000
Shelby, NC 28151-1000
(704) 487-0616
FAX (704) 487-0619
e-mail: maxgardner@maxgardner.com
ShortSaleAgreement(ExhibitA) Page1of7
[NameofServicer] [NameofBorrower]
[AddressofServicer] [NameofCoBorrower]
[AddressofBorrower]
[Loan#]
[ServicerFAX] [BorrowerPhone]
[ServicerEmail] [BorrowerEmail]
[Date]

Dear[borrowerandcoborrowername(s)]:
Ifyouarelookingforhelpsellingyourhomeandavoidingforeclosure,thefederalgovernmenthasintroducedthe
HomeAffordableForeclosureAlternatives(HAFA)Programtohelpyou.Asyourmortgageservicer,weareoffering
youtheopportunitytoparticipateinthisprogrambyutilizingHAFAsshortsaleoption.
HomeAffordableForeclosureAlternativesProgramShortSale
Ashortsaleisspecificallydesignedtohelpborrowerswhoareunabletoaffordtheirfirstmortgageandwanttosell
theirhometoavoidforeclosure,evenifthesalepricemaynotpayofftheamountowedontheirmortgage.Ashort
salerequiresanumberofparties(you,thebuyer,yourrealestatebroker,andsometimesmortgageinsurance
companiesandotherlenders)toworktogethertomakethisoptionsuccessful.However,itcouldbeagoodsolutionfor
yourcurrentsituation.
HowDoesaShortSaleWork?
PreSaleWewillstartbyapprovingalistpriceforyourhomeorgiveyoutheacceptablesaleproceeds(the
minimumamountthatwemustreceiveaftersalescosts)fromthesaleofyourhome.Wewillalsoidentifythe
salescosts(brokercommissionsandclosingcosts)thatmaybedeductedfromthefinalsalesprice.Youthenlist
yourproperty(likeanyhomesale)withalocalrealestatebrokerattheapprovedprice.
OfferWhenyougetanofferonyourhome,youwillsubmittherequireddocumentationandwewillapprovethe
saleifitisinlinewithwhatweagreedto.
ClosingOncethesalecloses,wewillreleaseyoufromallresponsibilitiesforrepayingyourmortgage.Plus,you
willreceive$1,500tohelppaysomeofyourmovingexpenses.(Thecheckwillbepaidtoyoubythesettlement
agentaspartoftheclosing.)Intheeventthereisanymoneyleftoverfromthesaleafterpayingtheentireamount
youoweonthemortgageplustheapprovedsalecosts,youwillnotbeeligibletoreceivethe$1,500.
ToParticipateintheShortSaleProgram
Pleasenote,thereisnoguaranteethatyourhomewillsellunderthisprogram,andyouareresponsiblefordetermining
whetheryouwanttosellyourhomeforthepriceandtermsdescribedinthisletter.Thefollowingpagesdetailyour
responsibilities,additionalinformationontheshortsaleprocessandtheTermsandConditions.Additionally,thisletter
constitutesanagreementbetweenusandyou(Agreement)sopleasereaditcarefullyandcompletely.
IfyouagreetothetermsoftheAgreementandwanttoproceedwithashortsale,youmustcomplete,signandreturn
theAgreementbacktous.Ifyouhavequestions,pleasecontactusdirectlybetweenthehoursof[inserthours]at
[inserttollfreenumber.]
Sincerely,
[ServicerName]
ShortSaleProgramYourResponsibilities
Youhaveuntil[insertdate120calendardaysfromthedateofthisletter]tosellyourhouse.Afterthatdate,this
Agreementterminates,unlessitisextendedbyus.Duringthistimeyouhavecertainresponsibilities.Youmust:
Keepyourhouseandyourpropertyingoodconditionandrepairandcooperatewithyourbrokertoshowitto
potentialbuyers.
[Insertonlyifapplicable:]Makepartialmortgagepaymentsof$_________bythefirstdayofeachmonth
beginningon__________1,20___untilyourhouseissoldandtitleistransferred.Whileyouaresellingyour
house,youstilllegallyowethefullamountofyourcurrentmonthlymortgagepayment.However,aspartofthis
Agreement,wewillacceptthisreducedpaymentuntilthehouseissoldandclosesorthisAgreementexpires.
Thesepaymentsdonotconstituteamodificationofyourmortgage.
Beabletoprovidethebuyerofyourhomewithcleartitle.Tostart,determineifyouhaveotherloans,judgments
orlienssecuredbyyourhome,suchasahomeequitylineofcreditorasecondmortgage.Iftherearesuchliens,
youwillneedtoeitherpaytheseloansoffinfullornegotiatewiththelienholderstoreleasethembeforethe
closingdate.Underthisprogram,youmustmakesureotherlienholderswillagreenottopursueotherlegalaction
relatedtothepayoffoftheirlien,suchasadeficiencyjudgment.Youcangethelpfromyourbrokertonegotiate
withtheotherlienholders.
Wewillallowupto3%oftheunpaidprincipalbalanceofeachloan(nottoexceedanaggregateof$3,000forall
theloansintotal)tobepaidfromthesaleproceedstohelpgetalienrelease.Ifyouhavethesetypesofliensor
loansonyourhome,pleasegatheranypaperworkyouhave(suchasyourlaststatement)andsendittouswhen
youreturnthissignedAgreement.Remember,clearingtheseotherliensanddeliveringclearandmarketabletitle
isyourresponsibility.
Atseveralstagesoftheshortsaleprocess,suchasafteranofferisreceived,youwillneedtocompletesome
paperwork.YouareresponsibleforreturningalldocumentswithinthetimeallowedinthisAgreement.
Ifyoufulfilltheseresponsibilities,wewillpostponeanyforeclosuresaleduringtheperiodofthisAgreement.
ToAcceptThisOffer
PleasesignandreturnthisAgreement.AllownersofthepropertymustsignthisAgreement.
ObtainyourbrokerssignaturetoacknowledgethisAgreement,becauseyourbrokerplaysanimportantrole
sellingyourproperty.TheShortSaleProgramsections(pages24)containimportantinformationthatyou
andyourbrokerwillneedtoreviewanddiscuss.
Includeacopyofyoursignedlistingagreement.
Includeinformationonotherlienssecuredbyyourhome(suchashomeequityloans,homeowner
associationliens,taxliensorjudgments).
[Insertonlyifapplicable:]CompleteandsigntheHardshipAffidavitform.
Wemusthavethesedocumentsby[insertdate14calendardaysfromthisrequest].Pleasesendusthese
documentsatthefollowingaddress:[insertserviceraddress].
ShortSaleProgramAdditionalInformation
Youcantlistthepropertywithorsellittoanyonethatyouarerelatedtoorhaveaclosepersonalorbusiness
relationshipwith.Inlegallanguage,itmustbeanarmslengthtransaction.Ifyouhavearealestatelicense,you
cantearnacommissionbylistingyourownproperty.Youmaynothaveanyagreementstoreceiveaportionof
thecommissionorthesalespriceafterclosing.Anybuyerofyourpropertymustagreetonotsellthehomewithin
90calendardaysofthedateitissoldbyyou.Youmaynothaveanyexpectationthatyouwillbeabletobuyor
rent[servicermaydeleteorrentinaccordancewithinvestorguidelines]yourhousebackaftertheclosing.Any
knowingviolationofthearmslengthtransactionprohibitionmaybeaviolationoffederallaw.
Wewillneedtotalktoyourbrokerandothersinvolvedinthesale.BysigningthisAgreement,youareauthorizing
ustocommunicateandsharepersonalfinancialinformationaboutyourmortgage,credithistory,subordinate
liens,andplansforrelocationwithyourbrokerandotherthirdpartiesthatcouldbeinvolvedinthetransaction
includingemployeesoftheUnitedStatesTreasuryanditsfinancialagents,FannieMaeandFreddieMac.
Thedifferencebetweentheremainingamountofprincipalyouoweandtheamountthatwereceivefromthesale
mustbereportedtotheInternalRevenueService(IRS)onForm1099C,asdebtforgiveness.Insomecases,debt
forgivenesscouldbetaxedasincome.Theamountwepayyouformovingexpensesmayalsobereportedas
income.WesuggestthatyoucontacttheIRSoryourtaxpreparertodetermineifyoumayhaveanytaxliability.
Wewillfollowstandardindustrypracticeandreporttothemajorcreditreportingagenciesthatyourmortgage
wassettledforlessthanthefullpayment.Wehavenocontrolover,orresponsibilityfortheimpactofthisreport
onyourcreditscore.Tolearnmoreaboutthepotentialimpactofashortsaleonyourcredit,youmaywanttogo
tohttp://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre24.shtm.
[InsertoptionalDeedinLieulanguageifapplicable:
IfbytheterminationdateofthisAgreement,youhavecompliedwithallyourresponsibilitiesbutareunabletosell
yourhome,wewillallowyoutoconveyownershipofyourhomeandallrealpropertysecuredbyyourmortgageloan
(yourProperty).Whilethisaction,calledadeedinlieuofforeclosure,willnotallowyoutokeepyourProperty,itwill
preventyoufromgoingthroughaforeclosuresaleanditwillreleaseyoufromallresponsibilitytorepaythemortgage
debt.Additionally,youwillstillbeeligibletoreceive$1,500tohelpwithyourmovingexpenses.
YouandallotheroccupantsmustvacateyourPropertyandprovideclearandmarketabletitlewithageneralwarranty
deedorlocalequivalentby[insertdateatleast30daysafterthedateofthisAgreement].Youmustleavethehousein
broomcleancondition,freeofinteriorandexteriortrash,debrisordamage,andallpersonalbelongingsmustbe
removedfromtheProperty.Theyardmustbecleanandneatandyoumustdeliverallthekeysandcontrols,suchas
garagedooropeners,tous.Youmayberequiredtosignstandardpreclosingdocumentsaswellasattendaclosingof
theconveyanceofyourPropertywhereallborrowersonthemortgagemustbepresent.
Youmustalsobeabletodelivermarketabletitlefreeofanyotherliens.Wewillallowuptothreepercent(3%)ofthe
unpaidprincipalbalanceofeachsubordinatelien,inorderofpriority,nottoexceed$3,000inaggregateforall
subordinateliens,tobedeductedfromthesaleproceedstopaysubordinatelienholderstoreleasetheirliens.We
requireeachsubordinatelienholdertoreleaseyoufrompersonalliabilityfortheloansinorderforthesaletoqualify
forthisprogram,butwedonottakeanyresponsibilityforensuringthatthelienholdersdonotseektoenforce
personalliabilityagainstyou.Therefore,werecommendthatyoutakestepstosatisfyyourselfthatthesubordinate
lienholdersreleaseyoufrompersonalliability.
Bysigningthisletter,youareagreeingnotonlytoashortsalebutalsotoadeedinlieuofforeclosureifashortsaleis
notsuccessful.Ifyouhaveanyquestionsaboutthedeedinlieuofforeclosure,pleasecallusbeforesigningand
returningthisletter.]
ShortSaleProgramReceiving/AcceptinganOffer
Whenyoureceiveanofferonyourhome,youwillsendusaRequesttoApproveaShortSale(RASS)form,acopyof
whichisattachedtothisAgreementasExhibitA1.Youwillalsoneedtosendalongacopyofthesignedpurchaseoffer
andevidencethatthebuyerhasfundstopurchasethehome,suchasaletterthatthebuyerisapprovedfora
mortgageloan.Within10businessdaysofourreceiptofthesedocuments,wewillapprovethesaleifitiswithinthe
termsandconditionsofthisAgreementandanyotherliensarereleased.
WhenthesaleclosesinaccordancewiththisAgreement,wewillacceptthenetsaleproceeds(allthefundsthat
remainaftertheapprovedsalescostshavebeenpaid)infullsatisfactionofyourmortgagewithusandwillreleaseyou
fromallfutureliability.
Wehopeyoudecidetotakeadvantageofthisshortsaleoption.Ifyouoryourbrokerhaveanyquestionsaboutthis
Agreement,pleasecallusat[insertservicerphonenumber].
Ifyouwouldliketospeakwithacounseloraboutthisprogram,calltheHomeownersHOPEHotline1888995HOPE
(4673).TheHomeownersHOPEHotlineoffersfreeHUDcertifiedcounselingservicesandisavailable24/7inEnglish
andSpanish.Otherlanguagesareavailablebyappointment.
ShortSaleAgreementTermsandConditions
1. ListPriceorAcceptableSaleProceeds.[Chooseoneanddeleteunnecessarytext.][Youagreetolisttheproperty
inasisconditionfor[dollaramount].]OR[Wewillacceptasalescontractwheretheproceedsfromthesale,
lesstheexpensesstatedinparagraph5.AllowableCosts,nets[dollaramount].]Wearenotresponsibleforthe
accuracyofthelistpriceandhavenoresponsibilitytoyouintheeventthepropertyisnotsold.Wemayrequire
youtoadjustthelistpriceorotherofferterms.
2. ListingAgreement.Thelistingagreementmustincludethefollowingclauses:
a. CancellationClause.
b. SellermaycancelthisAgreementpriortotheendingdateofthelistingperiodwithoutadvancenoticeto
thebroker,andwithoutpaymentofacommissionoranyotherconsideration,ifthepropertyisconveyedto
themortgageinsurerorthemortgageholder.
c. ListingAgreementContingencyClause.Saleofthepropertyiscontingentonwrittenagreementtoallsale
termsbythemortgageholderandthemortgageinsurer(ifapplicable).
3. PropertyMaintenanceandExpenses.Youareresponsibleforallpropertymaintenanceandexpensesduring
thelistingperiodincludingutilities,assessments,associationduesandcostsforinteriorandexteriorupkeep
requiredtoshowthepropertytoitsbestadvantage.Additionally,untilownershipistransferred,youmust
reportanyandallpropertydamagetousandfileahazardinsuranceclaimforcovereddamage.Unlessinsurance
proceedsareusedtopayforrepairsorpersonalpropertylossesasprovidedinthemortgagedocuments,we
mayrequirethattheybeappliedtoreducethemortgagedebt.
4. [Insertonlyifapplicable:]PartialMortgagePayments.Beginningon___________1,20___,youwillbe
requiredtomakepartialmortgagepaymentsof$_________bythefirstdayofeachmonthduringthetermof
theAgreementandpendingtransferofpropertyownership.Youarelegallyobligatedtomakethefullamountof
yourcurrentmonthlymortgagepayments.However,wewillacceptthisreducedpartialpaymentuntilthehouse
issoldorthisAgreementexpires.Thepartialmortgagepaymentsdonotconstituteamodificationofyour
mortgage.
5. AllowableCoststhatMaybeDeductedfromGrossSaleProceeds
a. ClosingCosts.Theclosingcostspaidbyyouoronyourbehalfassellermustbereasonableandcustomary
forthemarket.[Chooseoneanddeleteunnecessarytext.][Acceptableclosingcosts,includingthe
commission,whichmaybedeductedfromthegrosssaleproceedsmaynotexceed$__________.]OR
[Acceptableclosingcosts,includingthecommission,whichmaybedeductedfromthegrosssaleproceeds
maynotexceed____%ofthelistprice.]OR[Closingcostswhichmaybedeductedfromthegrosssale
proceedsarelimitedtotitlesearchandescrowexpensesusuallypaidbytheseller;reasonablesettlement
escrow/attorneysfees;transfertaxesandrecordingfeesusuallypaidbytheseller;termiteinspectionand
treatmentasrequiredbylaworcustom;proratedrealpropertytaxes;and,negotiatedrealestate
commissionsnottoexceedsixpercent(6%)ofthecontractsalesprice[addotherclosingcoststhatmaybe
included].]
b. SubordinateLiens.Wewillallowuptothreepercent(3%)oftheunpaidprincipalbalanceofeach
subordinatelieninorderofpriority,nottoexceedatotalof$3,000,tobedeductedfromthegrosssale
proceedstopaysubordinatelienholderstoreleasetheirliens.Werequireeachsubordinatelienholderto
releaseyoufrompersonalliabilityfortheloansinorderforthesaletoqualifyforthisprogram,butwedo
nottakeanyresponsibilityforensuringthatthelienholdersdonotseektoenforcepersonalliabilityagainst
you.Therefore,werecommendthatyoutakestepstosatisfyyourselfthatthesubordinatelienholders
releaseyoufrompersonalliability.
c. RealEstateCommissions.Wewillpayrealestatecommissionsasstatedinthelistingagreementbetween
youandyourbroker,nottoexceedsixpercent(6%)ofthecontractsalesprice,tobepaidtothelistingand
sellingbrokersinvolvedinthetransaction.Neitheryounorthebuyermayreceiveacommission.Any
commissionthatwouldotherwisebepaidtoyouorthebuyermustbereducedfromthecommissiondue
onsale.[Optionaltext:]Pleasenote:Wehaveretainedavendortoassistyourlistingbrokerwiththesale,
andthisvendormustbepaid____%[or$____]fromthecommission.
d. BorrowerRelocationAssistance.IftheclosingoftheshortsaleoccursinaccordancewiththisAgreement,
youwillbeentitledtoanincentivepaymentof$1,500toassistwithrelocationexpenses.Wewillinstruct
thesettlementagenttopayyoufromthesaleproceedsatthesametimethatallotherpayments,including
thepayoffofourfirstmortgage,aredisbursedbythesettlementagent.Onlyonepaymentperhouseholdis
providedfortherelocationassistance,regardlessofthenumberofborrowers.
6. SalesContracts.Withinthreebusinessdaysofabonafidepurchaseoffer,youmustsubmitaRequestfor
ApprovalofaShortSale,whichisattachedasExhibitA1,alongwithacopyofafullyexecutedSalesContract,
alladdendaandBuyersdocumentationoffundsorBuyerspreapprovalorcommitmentletteronletterhead
fromalender.
7. PartiestotheSale.TheSalesContractmustcontainthefollowingclauses:SellerandBuyereachrepresent
thatthesaleisanarmslengthtransactionandtheSellerandBuyerareunrelatedtoeachotherbyfamily,
marriageorcommercialenterprise.TheBuyeragreesnottosellthepropertywithin90daysofclosingof
thissale.
8. Closing.Theclosingmustoccurwithin____calendardaysoftheSalesContractexecutiondate.
9. ForeclosureSaleSuspension.Wemayinitiateorcontinuetheforeclosureprocessaspermittedbythe
mortgagedocuments;however,wewillsuspendanyforeclosuresaledateuntiltheexpirationdateofthis
Agreementorthedateofclosingofanapprovedshortsale,whicheverislater,providedyoucontinuetoabide
bythetermsandconditionsofthisAgreement.
10. SatisfactionandReleaseofLiability.IfallofthetermsandconditionsofthisAgreementaremet,uponsale
andsettlementoftheproperty,servicerwillprepareandsendforrecordingalienreleaseinfullsatisfactionof
themortgage,foregoingallrightstopersonalliabilityordeficiencyjudgment.
11. [Insertonlyifapplicable.]MortgageInsurerorGuarantorApproval.Thetermsandconditionsofthesaleare
subjecttothewrittenapprovalofthemortgageinsurerorguarantor.
12. TerminationofthisAgreement.Unlessotherwiseagreedbytheparties,thisAgreementwillterminateon
[insertdate].WemayalsoterminatethisAgreementatanytimeif:
a. Yourfinancialsituationimprovessignificantly,youqualifyforloanmodification,youbringtheaccount
currentoryoupayoffthemortgageinfull.
b. Youoryourbrokerfailstoactingoodfaithinmarketingand/orclosingonthesaleoftheproperty,or
otherwisefailstoabidebythetermsofthisAgreement.
c. Asignificantchangeoccurstothepropertyconditionorvalue.
d. Thereisevidenceoffraudormisrepresentation.
e. YoufileforbankruptcyandtheBankruptcyCourtdeclinestoapprovetheAgreement.
f. Litigationisinitiatedorthreatenedthatcouldaffecttitletothepropertyorinterferewithavalid
conveyance.
g. [Insertonlyifapplicable:]YoudonotmakethepaymentsrequiredunderthisAgreement.
13. SettlementofaDebt.Theproposedtransactionrepresentsourattempttoreachasettlementofthe
delinquentmortgage.YouarechoosingtoenterintothisAgreementeventhoughthereisnoguaranteethat
thetransactionwillbesuccessful.Intheeventthistransactionisunsuccessful,wemayexerciseourremedies
underthemortgage,includingforeclosure.

SignatureofServicerRepresentative Title
PrintedNameofServicerRepresentative Date
ShortSaleAgreement
PLEASEREADTHISAGREEMENTCAREFULLYBEFOREYOUSIGN,BECAUSEITAFFECTSYOURLEGALRIGHTS.
BorrowerAcknowledgementofRisks,ConditionsandContingencies.InsigningandreturningthisShortSale
Agreement,I/weagreetoallthestatedtermsandconditions.

BorrowerSignature Date CoBorrowerSignature Date
PrintedName PrintedName
AcknowledgementbyListingBroker
Theundersignedlistingbroker(Broker)isnotapartyoftheShortSaleAgreement(Agreement)above,but
acknowledgesthattheBroker:
1. Hasbeenretainedbytheborrowerforthesaleoftheproperty.
2. HasreviewedthetermsandconditionsoftheAgreementabove.
4. Agreesthatintheeventofaconflictbetweenthetermsofthelistingagreementandthetermsagreedtobythe
borrowerintheAgreementabove,thelistingagreementwillbedeemedamendedtoconformtothetermsofthe
Agreement.
5. AcknowledgesthatpursuanttotheAgreement,theServicerwillnotreviewasalescontractunlessaRequestfor
ApprovalofShortSale,attachedasExhibitA1,iscompleted.

ListingBrokerName ListingBrokerSignature
Address:
License#:
OfficePhone:
CellPhone:
Date:
EmailAddress:
Ifyouhavequestions,pleasecontactusdirectlybetweenthehoursof[inserthours]at[inserttollfreenumber].
Ifyouwouldliketospeakwithacounseloraboutthisprogram,calltheHomeownersHOPEHotline1888995HOPE
(4673).TheHomeownersHOPEHotlineoffersfreeHUDcertifiedcounselingservicesandisavailable24/7inEnglish
andSpanish.Otherlanguagesareavailablebyappointment.

NOTICETOBORROWER
Beadvisedthatbysigningthisdocumentyouunderstandthatanydocumentsandinformationyousubmittoyourservicerinconnectionwiththe
MakingHomeAffordableProgramareunderpenaltyofperjury.Anymisstatementofmaterialfactmadeinthecompletionofthesedocuments
includingbutnotlimitedtomisstatementregardingyouroccupancyinyourhome,hardshipcircumstances,and/orincome,expenses,orassetswill
subjectyoutopotentialcriminalinvestigationandprosecutionforthefollowingcrimes:perjury,falsestatements,mailfraud,andwirefraud.The
informationcontainedinthesedocumentsissubjecttoexaminationandverification.Anypotentialmisrepresentationwillbereferredtothe
appropriatelawenforcementauthorityforinvestigationandprosecution.Bysigningthisdocumentyoucertify,representandagreethat:Under
penaltyofperjury,alldocumentsandinformationIhaveprovidedtoLenderinconnectionwiththeMakingHomeAffordableProgram,including
thedocumentsandinformationregardingmyeligibilityfortheprogram,aretrueandcorrect.
Ifyouareawareoffraud,waste,abuse,mismanagementormisrepresentationsaffiliatedwiththeTroubledAssetReliefProgram,pleasecontact
theSIGTARPHotlinebycalling1877SIG2009(tollfree),2026224559(fax),orwww.sigtarp.gov.MailcanbesentHotlineOfficeoftheSpecial
InspectorGeneralforTroubledAssetReliefProgram,1801LSt.NW,Washington,DC20220.
RequestforApprovalofShortSale(ExhibitA1) Page1of4
[AddressofBorrower]
[Loan#]
[Date]
RE: RequestforApprovalofShortSalePursuanttoAgreementDated[DateofSSA]

ThisisaRequestforApprovaloftheShortSalePursuanttoAgreementDated[DateofSSA]betweentheabove
referencedServicer(Servicer)andtheborrowerandcoborrower(Borroweroryou).Underpenaltyof
perjuryyoucertifythat:
1) thesaleofthepropertyisanarmslengthtransaction,betweenpartieswhoareunrelatedandunaffiliated
byfamily,marriage,orcommercialenterprise;
2) therearenoagreementsorunderstandingsbetweenyouandtheBuyerthatyouwillremainintheproperty
asatenantorlaterobtaintitleorownershipoftheproperty;
3) neitheryounortheBuyerwillreceiveanyfundsorcommissionsfromthesaleoftheproperty;and
4) therearenoagreementsoroffersrelatingtothesaleorsubsequentsaleofthepropertythathavenotbeen
disclosedtotheServicer.
Pleasecomplete,signandreturntheTermsofSaleonthefollowingpage.

Ifyouwouldliketospeakwithacounseloraboutthisprogram,calltheHomeownersHOPEHotline1888995
HOPE(4673).TheHomeownersHOPEHotlineoffersfreeHUDcertifiedcounselingservicesandisavailable24/7
inEnglishandSpanish.Otherlanguagesareavailablebyappointment.
Ifyouhavequestions,pleasecontactusdirectlybetweenthehoursof[inserthours]at[inserttollfreenumber.]

TermsofSale[AllblankstobecompletedbyBorrower]:
1. ContractSalesPrice $ 6. ClosingDate:
2. LessTotalAllowableClosingCosts $
a. Commissions $
b. SettlementEscrow/AttorneyFees $
7. ApprovedBuyer(s):
c. SellersTitleandEscrowFees $
d. SubordinateLienPayoff $
e. RealPropertyTaxes $
8. SettlementAgent:
f. RealPropertyTaxes $
g. TermiteInspection/Repair $
h. BorrowerRelocationAssistance $ 1,500
i. Other(attachexplanation) $
3. NetProceedstoServicer $
9. SettlementAgentsAddress:
4. EarnestMoneyDeposit $ 10. SettlementAgentsOfficePhone:
5. DownPayment $ 11. SettlementAgentsOfficeFax:
AsrequiredbytheShortSaleAgreement,copiesofthefollowingdocumentsareattached:
Salescontractandalladdenda
BuyersdocumentationoffundsorBuyerspreapprovalorcommitmentletteronletterheadfromlender
TheBorrowerrepresentsthattheinformationprovidedinthisRequestistrueandaccurateandauthorizesthe
ServicertodisclosetotheU.S.DepartmentoftheTreasuryorothergovernmentagency,FannieMaeand/orFreddieMac
anyinformationprovidedinconnectionwiththeMakingHomeAffordableprogram.

NOTICETOBORROWER
TobeCompletedbyYourServicer
ApprovalofShortSaleTheServicerconsentstothisRequestforApprovalofShortSaleandagreestoacceptall
netproceedsfromthesettlementasfullandfinalsatisfactionofthefirstmortgageindebtednessonthe
referencedproperty.Thisagreementissubjecttothefollowing:
A. TermsThesaleandclosingcomplywithalltermsandconditionsoftheShortSaleAgreementbetween
theServicerandtheBorroweraswellasalltermsandrepresentationsprovidedhereinbytheBorrower.
B. ChangesAnychangetothetermsandrepresentationscontainedinthisRequestforApprovalofShort
SaleortheattachedsalescontractbetweenyouandthebuyermustbeapprovedbytheServicerin
writing.TheServicerisundernoobligationtoapprovesuchchanges.
C. SubordinateLiensPriortoreleasinganyfundstoholdersofsubordinateliens/mortgages,theclosing
agentmustobtainawrittencommitmentfromthesubordinatelienholderthatitwillreleaseBorrower
fromallclaimsandliabilityrelatingtothesubordinatelieninexchangeforreceivingtheagreedupon
payoffamount.
D. HUD1AHUD1SettlementStatement,whichwillbesignedbyyouandthebuyeratclosing,mustbe
providedtotheServicernotlaterthanonebusinessdaybeforethedateindicatedinLine4,ClosingDate.
E. BankruptcyIfyouarecurrentlyinbankruptcyoryoufilebankruptcypriortoclosing,youmustobtain
anyrequiredconsentorapprovaloftheBankruptcyCourt.
F. TaxConsequencesAshortpayoffofthemortgagemayhavetaxconsequences.Youareadvisedto
contactataxprofessionaltodeterminetheextentoftaxliability,ifany.
G. CreditBureauReportingWewillfollowstandardindustrypracticeandreporttothemajorcredit
reportingagenciesthatyourmortgagewassettledforlessthanthefullpayment.Wehavenocontrol
overorresponsibilityfortheimpactofthisreportonyourcreditscore.Tolearnmoreaboutthepotential
impactofashortsaleonyourcredityoumaywanttogoto
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre24.shtm.
H. PaymentInstructionsPayofffundsandafinalHUD1SettlementStatementmustbereceivedbythe
Servicerwithin48hoursofclosinginaccordancewiththeattachedwiringinstructions.[include
instructions]
I. ClosingInstructions[includeproprietaryclosinginstructions,ifany]

DisapprovalofShortSaleTheServicerdisapprovesthisRequestforApprovalofShortSale,forthefollowing
reasons(checkallapplicablereasons):
YoudidnotcomplywithalltermsandconditionsoftheShortSaleAgreementbetweenServicerandBorrowerdated_____/______/_______asitrelatestosection/s:
__________________________________
________________________________________________________________________________________
________________________________________________________________________________________
TheRequestforApprovalofShortSalewasnotcompleteand/orfullyexecuted.
Failuretoprovideexecutedsalescontractoraddenda
Failuretoprovidebuyersdocumentationoffundstocloseorbuyerspreapprovalor
commitmentletteronletterheadfromlender
Thenetproceedsavailabletopayoffthefirstmortgageloanareinsufficient,dueto:
ContractsalespriceisbelowlistpricestatedinShortSaleAgreement
NetproceedsamountislessthanacceptablenetproceedsstatedinShortSaleAgreement
Excessivefinancialconcessions
Excessivecommissions
Excessiveclosingcosts
Excessivepaymentstosubordinateliens/mortgagesORreleaseofsubordinateliensdidnotoccur
Themortgageinsurerdidnotapprovetheshortsale.
Other:

AlternativeRequestforShortSaleApproval(ExhibitB) Page1of6
Page D-1
[AddressofBorrower]
[Loan#]
[Date]
RE: RequestforApprovalofShortSale

Youhavetakenanimportantsteptowardsellingyourhomeandavoidingforeclosurebyparticipatinginthe
federalgovernmentsHomeAffordableForeclosureAlternatives(HAFA)Program.ThisletterisaRequestfor
ApprovalofaShortSaleandcontainsimportantinformation.
Readthefollowingpagescarefullyandcomplete,signandreturntheTermsandConditions.
Ifyouhavenotpreviouslycontactedusregardingeligibilityforaloanmodification,youshouldconsiderthis
alternative.UndertheHomeAffordableModificationProgram(HAMP),youmayqualifyforamodificationwith
affordableandsustainablemonthlypaymentsthatwouldallowyoutokeepyourhome.Pleasecontactusby
[insertdate14calendardaysfromdateofthisrequest]ifyouwishtobeconsideredforaloanmodification.
Sincerely,
[ServicerName]
Page D-2
Theborrowerandcoborrower,ifapplicable(Borroweroryou),oftheaboveloancontactedtheServicer
(Servicerorwe)becauseyourmortgagepaymentsarenolongeraffordableandyouwouldliketoavoid
foreclosure.Afterlistingyourhouseforsale,anofferwasreceived.However,thesalemaynotbesufficienttopay
offtheloan.ThisisaRequestforApprovalofaShortSale(Request)ofthesubjectproperty,thenetsale
proceedsfromwhichweagreetoacceptasthepayoffofthemortgageloaneventhoughtheproceedsare
expectedtobelessthanthefullamountdue.
ShortSaleProgramTermsandConditionsoftheRequestareasfollows:
1.AllowableCoststhatMaybeDeductedfromGrossSalePrice
a. ClosingCosts.Theclosingcostspaidbyyouoronyourbehalfassellermustbereasonableandcustomary
forthemarket.[Chooseoneanddeleteunnecessarytext.][Acceptableclosingcosts,includingthe
commission,whichmaybedeductedfromthegrosssaleproceedsmaynotexceed$__________.]OR
[Acceptableclosingcosts,includingthecommission,whichmaybedeductedfromthegrosssaleproceeds
maynotexceed____%ofthelistprice.]OR[Closingcostswhichmaybedeductedfromthegrosssale
proceedsarelimitedtotitlesearchandescrowexpensesusuallypaidbytheseller;reasonablesettlement
escrow/attorneysfees;transfertaxesandrecordingfeesusuallypaidbytheseller;termiteinspection
andtreatmentasrequiredbylaworcustom;proratedrealpropertytaxes;and,negotiatedrealestate
commissionsnottoexceedsixpercent(6%)ofthecontractsalesprice[addotherclosingcoststhatmay
beincluded].]
b. SubordinateLiens.Wewillallowuptothreepercent(3%)oftheunpaidprincipalbalanceofeach
subordinatelieninorderofpriority,nottoexceedatotalof$3,000,tobedeductedfromthegrosssale
proceedstopaysubordinatelienholderstoreleasetheirliens.Werequireeachsubordinatelienholderto
releaseyoufrompersonalliabilityfortheloansinorderforthesaletoqualifyforthisprogram,butwedo
nottakeanyresponsibilityforensuringthatthelienholdersdonotseektoenforcepersonalliability
againstyou.Therefore,werecommendthatyoutakestepstosatisfyyourselfthatthesubordinatelien
holdersreleaseyoufrompersonalliability.
a. RealEstateCommissions.Wewillpayrealestatecommissionsasstatedinthelistingagreement
betweenyouandyourbroker,nottoexceedsixpercent(6%)ofthecontractsalesprice,tobepaidtothe
listingandsellingbrokersinvolvedinthetransaction.Neitheryounorthebuyermayreceivea
commission.Anycommissionthatwouldotherwisebepaidtoyouorthebuyermustbereducedfromthe
commissiondueonsale.[Optionaltext:]Pleasenote:Wehaveretainedavendortoassistyourlisting
brokerwiththesale,andthisvendormustbepaid____%[or$____]fromthecommission.
b. BorrowerRelocationAssistance.Iftheclosingoftheshortsaleoccursinaccordancewiththis
Agreement,youwillbeentitledtoanincentivepaymentof$1,500toassistwithrelocationexpenses.We
willinstructthesettlementagenttopayyoufromthesaleproceedsatthesametimethatallother
payments,includingthepayoffofourfirstmortgage,aredisbursedbythesettlementagent.Onlyone
paymentperhouseholdisprovidedfortherelocationassistance,regardlessofthenumberofborrowers.
2. PropertyMaintenanceandExpenses.Youareresponsibleforallpropertymaintenanceandexpensesofyour
homeuntilyouconveyyourPropertytous,includingutilities,assessments,associationdues,andcostsfor
interiorandexteriormaintenance.Additionally,youmustreportanyandallpropertydamagetousandfilea
hazardinsuranceclaimforcovereddamage.Unlessinsuranceproceedsareusedtopayforrepairsorpersonal
propertylosses,wemayrequirethattheybeappliedtoreducethemortgagedebt.
3. [Insertonlyifapplicable:]PartialMortgagePayments.Beginningon___________1,20___,youwillbe
requiredtomakepartialmortgagepaymentsof$_________bythefirstdayofeachmonthduringthetermof
theRequestandpendingtransferofpropertyownership.Youarelegallyobligatedtomakethefullamountof
yourcurrentmonthlymortgagepayments.However,wewillacceptthisreducedpartialpaymentuntilthe
houseissoldorthisAgreementexpires.Thepartialmortgagepaymentsdonotconstituteamodificationof
yourmortgage.
Page D-3
4. PartiestotheSale.TheSalesContractmustincludethefollowingclauses:SellerandBuyereachrepresent
thatthesaleisanarmslengthtransactionandtheSellerandBuyerareunrelatedtoeachotherbyfamily,
marriageorcommercialenterprise.TheBuyeragreesnottosellthepropertywithin90daysofclosingof
thissale.
mortgagedocuments;however,wewillsuspendanyforeclosuresaledateuntiltheexpirationdateofthis
Requestorthedateofclosingofanapprovedshortsale,whicheverislater,providedthatyouabidebyits
termsandconditions.
6. SatisfactionandReleaseofLiability.IfallofthetermsandconditionsofthisRequestaremet,uponsaleand
settlementoftheproperty,wewillprepareandsendtothesettlementagentforrecording,alienreleasein
fullsatisfactionofthemortgage,foregoingallrightstopursueadeficiencyjudgment.
7. [Insertonlyifapplicable.]MortgageInsurerorGuarantorApproval.Thetermsandconditionsofthe
purchasecontractaresubjecttothewrittenapprovalofthemortgageinsurerorguarantor.
8. TerminationofThisRequest.Unlessotherwiseagreedbytheparties,thisRequestwillterminateon[insert
date]ifthesaledoesnotclose.ThisRequestmaybeterminatedearlierif:
a. Youfailtoprovidealltherequireddocumentslistedabove.
b. Yourfinancialsituationimprovessignificantly,youqualifyforamodification,youbringtheaccount
currentoryoupayoffthemortgageinfull.
c. Youoryourbrokerfailstoactingoodfaithinclosingonthesaleofthepropertyorotherwisefailsto
abidebythetermsofthisRequest.
d. Asignificantchangeoccurstothepropertyconditionorvalue.
e. Thereisevidenceoffraudormisrepresentation.
f. YoufileforbankruptcyandtheBankruptcyCourtdeclinestoapprovetheRequest.
g. Litigationisinitiatedorthreatenedthatcouldaffecttitletothepropertyorinterferewithavalid
conveyance.
h. [Insertonlyifapplicable:]YoudonotmakethepaymentsrequiredunderthisRequest.
9. SettlementofaDebt.TheproposedtransactionrepresentstheServicersattempttoreachasettlementof
thedelinquentmortgage.Youarechoosingtoenterintothistransactioneventhoughthereisnoguarantee
thatthetransactionwillbesuccessful.Intheeventthistransactionisunsuccessful,theServicermayexercise
allremediesunderthemortgage,includingforeclosure.
Underpenaltyofperjury,youcertifythat:
1. thesaleofthepropertyisanarmslengthtransaction,betweenpartieswhoareunrelatedand
unaffiliatedbyfamily,marriage,orcommercialenterprise;
2. therearenoagreementsorunderstandingsbetweenyouandtheBuyerthatyouwillremaininthe
propertyasatenantorlaterobtaintitleorownershipoftheproperty;
3. neitheryounortheBuyerwillreceiveanyfundsorcommissionsfromthesaleoftheproperty;and
4. therearenoagreementsoroffersrelatingtothesaleorsubsequentsaleofthepropertythathavenot
beendisclosedtotheServicer.

Page D-4
TheBorrowerrepresentsthattheinformationprovidedinthisRequestistrueandaccurateandauthorizesthe
ServicertodisclosetotheU.S.DepartmentoftheTreasuryorothergovernmentagency,FannieMaeand/or
FreddieMacanyinformationprovidedinconnectionwiththeMakingHomeAffordableprogram.

TermsofSale[AllblankstobecompletedbyBorrower]:
1. ContractSalesPrice $ 6. ClosingDate:
2. LessTotalAllowableClosingCosts $
a. Commissions $
b. SettlementEscrow/AttorneyFees $
7. ApprovedBuyer(s):
c. SellersTitleandEscrowFees $
d. SubordinateLienPayoff $
e. RealPropertyTaxes $
8. SettlementAgent:
f. RealPropertyTaxes $
g. TermiteInspection/Repair $
h. BorrowerRelocationAssistance $ 1,500
i. Other(attachexplanation) $
3. NetProceedstoServicer $
9. SettlementAgentsAddress:
4. EarnestMoneyDeposit $ 10. SettlementAgentsOfficePhone:
5. DownPayment $ 11. SettlementAgentsOfficeFax:
AsrequiredbytheShortSaleProgram,copiesofthefollowingdocumentsareattached:
SignedRequest;
Copyofasignedlistingagreementwitharealestatebroker,ifapplicable;
Executedcopyofthesalescontractandalladdenda;
BuyersdocumentationoffundsorBuyerspreapprovalorcommitmentletteronletterheadfromalender;
Informationaboutotherlienssecuredbyyourhomesuchashomeequityloans;
[Insertonlyifapplicable:]CompletedandsignedHardshipAffidavitform;and
Servicermusthavethesedocumentsnolaterthan[insertdate14calendardaysfromdateofthisrequest]orwewill
notbeabletorespondtothisrequest.Pleasesendusthesedocumentsatthefollowingaddress:[insertservicer
address].
NOTICETOBORROWER
Page D-5
ApprovalofShortSaleTheServicerconsentstothisRequestforApprovalofShortSaleandagreestoacceptall
netproceedsfromthesettlementasfullandfinalsatisfactionofthefirstmortgageindebtednessonthe
referencedproperty.Thisapprovalissubjecttothefollowing:
A. TermsThesaleandclosingcomplywithalltermsandconditionsoftheRequestaswellasalltermsand
representationsprovidedhereinbytheBorrower.
B. ChangesAnychangetothetermsandrepresentationscontainedintheRequestortheattachedsales
contractbetweenyouandthebuyermustbeapprovedbytheServicerinwriting.TheServicerisunderno
obligationtoapprovesuchchanges.
C. SubordinateLiensPriortoreleasinganyfundstoholdersofsubordinateliens/mortgages,theclosing
agentmustobtainawrittencommitmentfromthesubordinatelienholderthatitwillreleaseBorrower
fromallclaimsandliabilityrelatingtothesubordinatelieninexchangeforreceivingtheagreedupon
payoffamount.
D. HUD1AHUD1SettlementStatement,whichwillbesignedbyyouandthebuyeratclosing,mustbe
providedtotheServicernotlaterthanonebusinessdaybeforethedateindicatedinLine4,ClosingDate.
E. BankruptcyIfyouarecurrentlyinbankruptcyoryoufilebankruptcypriortoclosing,youmustobtain
anyrequiredconsentorapprovaloftheBankruptcyCourt.
F. TaxConsequencesAshortpayoffofthemortgagemayhavetaxconsequences.Youareadvisedto
contactataxprofessionaltodeterminetheextentoftaxliability,ifany.
G. CreditBureauReportingWewillfollowstandardindustrypracticeandreporttothemajorcredit
reportingagenciesthatyourmortgagewassettledforlessthanthefullpayment.Wehavenocontrol
overorresponsibilityfortheimpactofthisreportonyourcreditscore.Tolearnmoreaboutthepotential
impactofashortsaleonyourcredityoumaywanttogoto
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre24.shtm.
H. PaymentInstructionsPayofffundsandafinalHUD1SettlementStatementmustbereceivedbythe
Servicerwithin48hoursofclosinginaccordancewiththeattachedwiringinstructions.[include
instructions]
I. ClosingInstructions[includeproprietaryclosinginstructions,ifany]

Page D-6
TobeCompletedbyyourServicer
DisapprovalofShortSaleTheServicerdisapprovesthisRequestforApprovalofShortSale,forthefollowing
reasons(checkallapplicablereasons):
YoudidnotcomplywithalltermsandconditionsoftheRequestforApprovalofShortSaleasitrelatesto
section/s:__________________________________
________________________________________________________________________________________
________________________________________________________________________________________
TheRequestforApprovalofShortSalewasnotcompleteand/orfullyexecuted.
Failuretoprovideexecutedsalescontractoraddenda
Failuretoprovidebuyersdocumentationoffundstocloseorbuyerspreapprovalor
commitmentletteronletterheadfromlender
Thenetproceedsavailabletopayoffthefirstmortgageloanareinsufficient,dueto:
ContractsalespriceisbelowlistpricestatedinShortSaleAgreement
NetproceedsamountislessthanacceptablenetproceedsstatedinShortSaleAgreement
Excessivefinancialconcessions
Excessivecommissions
Excessiveclosingcosts
Excessivepaymentstosubordinateliens/mortgagesORreleaseofsubordinateliensdidnotoccur
Themortgageinsurer,investororguarantoroftheloandidnotapprovetheshortsale.
Other:


DILAgreement(ExhibitC) Page1of3 Page D-1
[AddressofBorrower]
[Loan#]
[Date]

Dear[borrowerandcoborrowername(s)]:
Asyourmortgageservicer,weareofferingyoutheopportunitytoparticipateinthefederalgovernmentsHome
AffordableForeclosureAlternatives(HAFA)ProgrambyutilizingtheDeedinLieuofForeclosure(DIL)optiontoavoid
foreclosure.
HomeAffordableForeclosureAlternativesProgramDeedinLieuofForeclosure
Adeedinlieuofforeclosureisspecificallydesignedtohelpborrowerswhoareunabletoaffordtheirfirstmortgage
andwanttoavoidforeclosure.WithaDIL,youvoluntarilytransferownershipofyourhomeandallrealproperty
securedbyyourmortgageloan(Property)toustosatisfythetotalamountdueonthefirstmortgage.
[Includeordeleteasappropriate.]WhileyoupreviouslyenteredintoaShortSaleAgreement(andyoucompliedwith
allyourresponsibilities),yourPropertydidnotsell.TheDILoptionwillnotallowyoutokeepyourProperty,however,it
willpreventyoufromgoingthroughaforeclosuresaleanditwillreleaseyoufromallresponsibilitytorepaythe
mortgagedebt.Additionally,youwillbeeligibletoreceiveanassistancepaymentof$1,500tohelpwithyourmoving
expenses.
HowDoesaDILWork?
TitleYouandallotheroccupantsmustvacateyourPropertyandprovideclearandmarketabletitlewitha
generalwarrantydeedorlocalequivalentby[insertdateatleast30daysafterthedateofthisAgreement].
o Youmustalsobeabletodelivermarketabletitlefreeofanyotherliens.Wewillcontributeuptothree
percent(3%)oftheunpaidprincipalbalanceofeachsubordinatelien,nottoexceedatotalof$3,000,toward
payingoffanysubordinatelienholders.
o Werequireeachsubordinatelienholdertoreleaseyoufrompersonalliabilityfortheloansinorderforthe
saletoqualifyforthisprogram,butwedonottakeanyresponsibilityforensuringthatthelienholdersdonot
seektoenforcepersonalliabilityagainstyou.Therefore,werecommendthatyoutakestepstosatisfyyourself
thatthesubordinatelienholdersreleaseyoufrompersonalliability.
PropertyConditionYoumustleavethehouseinbroomcleancondition,freeofinteriorandexteriortrash,debris
ordamage,andallpersonalbelongingsmustberemovedfromtheProperty.Theyardmustbecleanandneatand
youmustdeliverallthekeysandcontrols(e.g.,garagedooropeners)tous.
Transfer/ClosingYoumayberequiredtosignstandardpreclosingdocumentsaswellasattendaclosingofthe
transferofyourPropertywhereallborrowersonthemortgagemustbepresent.
Thefollowingpagesdetailyourresponsibilities,additionalinformationontheDILprocessandtheTermsand
Conditions.Additionally,thisletterconstitutesanagreementbetweenusandyou(Agreement).Ifyouagreetothe
termsoftheAgreementandwanttoproceedwithaDIL,youmustcomplete,signandreturntheAgreementbackto
us.Ifyouhavequestions,pleasecontactusdirectlybetweenthehoursof[inserthours]at[inserttollfreenumber.]
Sincerely,
[ServicerName]
DILProgramTermsandConditions
OthertermsandconditionstotheDeedinLieuAgreement(Agreement):
1. PropertyMaintenanceandExpenses.Youareresponsibleforallpropertymaintenanceandexpensesof
yourPropertyuntilyouconveyittousincludingutilities,assessments,associationdues,andcostsfor
interiorandexteriormaintenance.Additionally,youmustreportanyandallpropertydamagetousand
fileahazardinsuranceclaimforcovereddamage.Unlessinsuranceproceedsareusedtopayforrepairs
orpersonalpropertylosses,wemayrequirethattheybeappliedtoreducethemortgagedebt.
2. [Insertonlyifapplicable:]PartialMortgagePayments.Youwillberequiredtomakepartialmortgage
paymentsof$_________bythefirstdayofeachmonth,beginningon__________1,20___,untiltitleto
yourhouseistransferredtous.Youarelegallyobligatedtomakethefullamountofyourcurrentmonthly
mortgagepayments.However,wewillacceptthenewpartialpaymentuntilyouhaveconveyedyour
Property.Thepartialmortgagepaymentsdonotconstituteamodificationofyourmortgage.
3. BorrowerRelocationAssistance.IfyoucomplywithallyourresponsibilitiesundertheAgreement,you
willbeentitledtoanincentivepaymentof$1,500toassistwithrelocationexpenses.Ifthereisaformal
closingandyouhavevacatedyourProperty,youwillreceiveyourincentivepaymentatclosing.Ifatthe
timeofclosingyouhavenotvacatedyourProperty,wewillmailyouacheckwithin5businessdaysfrom
whenyouvacateyourPropertyanddeliverthekeystous.Similarly,ifaformalclosingisnotconducted,
wewillmailyouacheckwithin5businessdaysfromthelaterofwhenyouexecutethedeedtousor
whenyouvacateyourPropertyanddeliverthekeystous.Onlyonepaymentperhouseholdisprovided
fortherelocationassistance,regardlessofthenumberofborrowers.
mortgagedocuments;however,wewillsuspendanyforeclosuresaledateuntiltheconveyanceofyour
Propertyhasbeencompleted,providedyoucontinuetoabidebythetermsandconditionsofthis
Agreement.
5. SatisfactionandReleaseofLiability.IfallofthetermsandconditionsofthisAgreementaremet,upon
conveyanceofyourPropertytousbyGeneralWarrantydeedortheequivalentinthestatewhereyour
Propertyislocated,wewillprepareandrecordalienreleaseinfullsatisfactionofthemortgage,foregoing
allrightstopursueadeficiencyjudgment.
6. [Insertonlyifapplicable]MortgageInsurerorGuarantorApproval.Thetermsandconditionsofthe
Agreementaresubjecttothewrittenapprovalofthemortgageinsurerorguarantor.
7. TerminationofThisAgreement.WemayterminatethisAgreementatanytimeif:
a. Yourfinancialsituationimprovessignificantly,youqualifyforloanmodification,youbringthe
accountcurrentoryoupayoffthemortgageinfull.
b. YoufailtoactingoodfaithwiththeAgreement.
c. Asignificantchangeoccurstothepropertyconditionorvalue.
d. Thereisevidenceoffraudormisrepresentation.
e. YoufileforbankruptcyandtheBankruptcyCourtdeclinestoapprovetheagreement.
f. Litigationisinitiatedorthreatenedthatcouldaffecttitletothepropertyorinterferewithavalid
conveyance.
g. [Insertonlyifapplicable:]YoudonotmakethepaymentsrequiredunderthisAgreement.
8. SettlementofaDebt.Theproposedtransactionrepresentsourattempttoreachasettlementofthe
delinquentmortgage.YouarechoosingtoenterintothisAgreementeventhoughthereisnoguarantee
thatthetransactionwillbesuccessful.Intheeventthistransactionisunsuccessful,wemayexerciseour
remediesunderthemortgage,includingforeclosure.
9. PossibleIncomeTaxConsiderations.Thedifferencebetweentheremainingamountofprincipalyouowe
andthecurrentmarketvalueofthepropertymustbereportedtotheInternalRevenueService(IRS)on
Form1099Casdebtforgiveness.Insomecases,debtforgivenesscouldbetaxedasincome.Theamount
wepayyouformovingexpensesmayalsobereportedasincome.WesuggestthatyoucontacttheIRSor
yourtaxpreparertodetermineifyoumayhaveanytaxliability.
CreditBureauReporting.Wewillfollowstandardindustrypracticeandreporttothemajorcreditreportingagencies
thatyourmortgagewassettledforlessthanthefullpayment.Wehavenocontrolover,orresponsibilityforthe
impactofthisreportonyourcreditscore.Tolearnmoreaboutthepotentialimpactofadeedinlieuonyourcredit,
youmaywanttogotohttp://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre24.shtm.
DILProgramAgreement
BysigningthisAgreement,youareagreeingtoadeedinlieuofforeclosure.Ifyouhaveanyquestionsaboutthe
deedinlieuofforeclosure,pleasecallusbeforesigningandreturningthisAgreement.
PLEASEREADTHISAGREEMENTCAREFULLYBEFOREYOUSIGN,BECAUSEITAFFECTSYOURLEGALRIGHTS.
BorrowerAcknowledgementofRisks,ConditionsandContingencies.InsigningandreturningthisDeedinLieu
Agreement,I/weagreetoallthestatedtermsandconditions.


NOTICETOBORROWER
Beadvisedthatbysigningthisdocumentyouunderstandthatanydocumentsandinformationyousubmittoyourservicerinconnection
withtheMakingHomeAffordableProgramareunderpenaltyofperjury.Anymisstatementofmaterialfactmadeinthecompletionofthese
documentsincludingbutnotlimitedtomisstatementregardingyouroccupancyinyourhome,hardshipcircumstances,and/orincome,
expenses,orassetswillsubjectyoutopotentialcriminalinvestigationandprosecutionforthefollowingcrimes:perjury,falsestatements,
mailfraud,andwirefraud.Theinformationcontainedinthesedocumentsissubjecttoexaminationandverification.Anypotential
misrepresentationwillbereferredtotheappropriatelawenforcementauthorityforinvestigationandprosecution.Bysigningthis
documentyoucertify,representandagreethat:Underpenaltyofperjury,alldocumentsandinformationIhaveprovidedtoLenderin
connectionwiththeMakingHomeAffordableProgram,includingthedocumentsandinformationregardingmyeligibilityfortheprogram,
aretrueandcorrect.
Ifyouareawareoffraud,waste,abuse,mismanagementormisrepresentationsaffiliatedwiththeTroubledAssetReliefProgram,please
contacttheSIGTARPHotlinebycalling1877SIG2009(tollfree),2026224559(fax),orwww.sigtarp.gov.MailcanbesentHotlineOfficeof
theSpecialInspectorGeneralforTroubledAssetReliefProgram,1801LSt.NW,Washington,DC20220.
Some Recent MERS Cases (not intended to be exhaustive)

Cases against MERS
Bellistri v. Ocwen Loan Servicing LLC, 284 S.W.3d 619, Mo.App. E.D., March 03, 2009
(NO. ED91369). Since MERS never held the promissory note, its assignment of the deed of trust
to the assignee separate from the note had no force. Therefore the assignee had no legal interest
in the deed of trust and could not commence foreclosure. If the note and its deed of trust are
separated and not held by the same person, then the note becomes unsecured.
Landmark National Bank v. Kesler, 289 Kan. 528, 216 P.3d 158, Kan., August 28, 2009
(NO. 98,489). In Landmark, MERS was acting as the nominee mortgagee for a second mortgage.
When the first lienholder filed a petition to foreclose, neither MERS nor its principal noteholder
were named parties or given notice of the litigation. The Supreme Court found that since MERS
did not have any tangible interest in the mortgage (i.e., it was not a beneficiary, did not issue the
loan and was not entitled to collect on the debt), it was not entitled to notice.
Question: If MERS as nominee does not have an interest in the mortgage to entitle it to notice,
how can it have the right to foreclose?
In Re Hawkins, Slip Copy, 2009 WL 901766, Bkrtcy.D.Nev. 2009,
March 31, 2009. MERS did not produce sufficient evidence that it was the holder of the note or
a nonholder in possession with the rights of the holder. Under Nevada law a negotiable
promissory note is enforceable by: (1) the holder of the note, or (2) a nonholder in possession of
the note who has the rights of a holder. Thus if MERS is not the holder of the note, then to
enforce it MERS must be a transferee in possession who is entitled to the rights of a holder or
have authority under state law to act for the holder. Simply being a beneficiary or having an
assignment of a deed of trust is not enough to be entitled to foreclose on a deed of trust. For there
to be a valid assignment for purposes of foreclosure both the note and the deed of trust must be
assigned.
In order to enforce rights as the agent of the holder, MERS must establish that its principal is
entitled to enforce the note. Motions brought by MERS as nominee could meet the threshold test
of standing, and MERS might be the real party in interest under FED.R.CIV.P. 17, if MERS is
the actual nominee of the present Member who is entitled to enforce the note.

Cases favoring MERS
Ramos v. Mortgage Elec. Registrations System, Inc., Slip Copy, 2009 WL 5651132, D.Nev.,
March 05, 2009 (NO. 2:08-CV-1089-ECR-RJJ) Nevada law permits a deed of trusts beneficiary
to foreclose. Since the deed of trust expressly named MERS as its beneficiary, MERS was
legally empowered and contractually authorized by the borrower to foreclose and appoint a
substitute foreclosure trustee.

Jackson v. Mortgage Electronic Registration Systems, Inc., 770 N.W.2d 487, Minn., August
13, 2009 (NO. A08-397) Supreme Court of Minnesota. This case attacked MERS procedure of
intentionally failing to record assignments of mortgages. The court held that recording of an
assignment, satisfaction, release, or power of attorney to foreclose is sufficient to commence
foreclosure by advertisement.
An assignment of the ownership of the underlying indebtedness for which the mortgage serves as
security is not an assignment that must be recorded prior to the commencement of a mortgage
foreclosure by advertisement under Minn.Stat. ch. 580. An assignment of only the promissory
note, which carries with it an equitable assignment of the security instrument, is not an
assignment of legal title that must be recorded. Minnesota Legislature passed an amendment to
the Recording Act that expressly permits nominees to record [a]n assignment, satisfaction,
release, or power of attorney to foreclose. Act of Apr. 6, 2004, ch. 153, 2, 2004 Minn. Laws
76, 76-77 (codified at Minn.Stat. 507.413 (2008)). The amendment, frequently called the
MERS statute, went into effect on August 1, 2004. Id., 2, 2004 Minn. Laws at 76-77.
Minnesota law apparently allows legal title to be split from the promissory note for purposes of
foreclosure. The right to foreclose in Minnesota follows the security interest.

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Sunday, May 2, 2010

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Some Recent MERS Cases (not intended to be exhaustive)

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