Scalia Sets Standard for Massive Mortgage Fraud Class Action Law Suit

There hasn't been much in the way of justice for the average citizen for quite a while. Often, those accused of crimes cannot afford adequate representation and are subject to "let's make a deal justice." If you're unfortunate enough to be sued or party to a divorce proceeding, you soon learn that the court system is an entitlement program for attorneys, not a civilized means of settling disputes. (Image)

The last decade has been devastating for what many thought were inviolable fundamental rights. The Bush administration dismantled as much of the Constitution as time allowed including habeas corpus which prevents detention without a charge. Through a presidential directive, an even older legal tradition went by the way, the right to be indicted and tried before facing capital punishment. I am, of course, referring to President Obama's declared option to assassinate citizens of the United States identified as terrorists by anonymous bureaucrats.

The Scalia opinion in Wal-Mart Stores, Inc. v. Dukes seems like another brick in the wall that protects the powerful against the intrusions of civil rights and equal treatment sought by the rest of us. Brought in behalf of Wal-Mart's female employees, the suit sought compensation for 1.5 million women subjected to wage discrimination.

Scalia's opinion killed the case before the evidence was considered. He argued that the group of women suing failed were not a true "class" that met the requirements for a class action lawsuit. The women bring suit needed to show that Wal-Mart had a discriminatory evaluation procedure or "operated under a general policy of discrimination" (Wal-Mart v Dukes, pages 16-27).

Outcomes don't matter to Scalia. The very real disparities in income highly correlated with gender were not relevant. Never mind that there was evidence of massive financial discrimination. It was all about a lack of evidence for specific prior acts by the company. Is he serious?

This doesn't sound very good for class action law suits in general. What company has openly discriminatory assessments for promotion or an explicitly documented "general policy of discrimination?" Were Scalia any more obvious as a blocking back for the corporate elite, he'd have to wear company logos on his judicial robe while rendering decisions.

Lenders had a Specific Uniform Policy to Commit Illegal Acts against Borrowers

The Mortgage Electronic Registration System (MERS) was created by Fannie Mae, the Mortgage Bankers Association, and key big bank lenders in the real estate finance industry. Gretchen Morgenson reported that MERS is involved in 60 million mortgages. MERS created the electronic recording system and operates it through a subsidiary. It neither loans nor collects mortgage payments. You'd never know that reading a majority of mortgages.

Professor Christopher L. Peterson of the law school at the University of Utah noted the pervasive presence of MERS in United States mortgages:

"In boilerplate security agreements included in mortgages all around the country, lenders include this clause:

"MERS is Mortgage Electronic Registration Systems, Inc. MERS is a separate corporation that is acting solely as a nominee for Lender and Lender’s 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 …" Peterson, September 19, 2010

This language represents a legal contradiction, clearly stated by lenders when they included this boilerplate in mortgages, notes and other lending documents. You are either a "nominee" (proxy) for the lender or the lender. This is a misrepresentation on its face. MERS could never be the mortgagee because it didn't fund the mortgage, collect payments, or service the loans. Professor Peterson provided a detailed review of the flaws I MERS claims of legal standing in 2010. (Also see ForeclosureGate Deal - The Mandatory Cover Up re Peterson's analysis)

The foundation of over of the 60 million MERS tainted mortgages is based on misrepresentation. MERS was not what said it was. It was something entirely different. The misrepresentation represents the most basic form of contract fraud.

On June 7, the Supreme Court of the State of New York, Appellate Division: Second Judicial Department dismissed a foreclosure action by the Bank of New York (Bank of New York, etc., respondent, v Stephen Silverberg, et al., appellants, et al., defendants). The New York Court stated: "In sum, because MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the corrected assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to the plaintiff. Consequently, the plaintiff failed to show that it had standing to foreclose." (Decided June 7, 2011)

In the opening line of the Wal-Mart decision, Justice Scalia noted, "We are presented with one of the most expansive class actions ever."

How about a class action brought by tens of millions of citizens, Mr. Justice (sic)?

Had the homeowner signed a name other than his or hers, the contract would be deemed null and void. The same applies to the misrepresentation of MERS as the mortgagee.

The behavior of MERS was and remains fraudulent. The lender contracts through MERS should all be declared null and void.

Proof that the Misrepresentation was Intentional

As mortgage backed securities (MBS) were taking off, Moody's investment issued an opinion on the legal risk to mortgage backed securities (MBS) investors faced form investments based on MERS. This was the green light for the orgy of derivative trading based on mortgages, including the subprime fiasco.

Without citing one single court case or authority and absent any contradiction from lenders or MERS, Moody's argued that "common law principles" supported the use of MERS. Moody's predicted that foreclosures would not be "materially impacted" and that, after an "adjustment period," courts and attorneys would "get familiar with MERS."

This was wrong at the time it was published. The stunning inaccuracy has been demonstrated in court decisions across the country. But the Moody's opinion of 1999 was issued, ex cathedra, as it were. It stood unchallenged by the lenders. They knew or should have known that there was no legal support for this arrangement.

MERS and lender behavior during foreclosure proceedings provides another powerful demonstration of illegal intent. Even though it was not entitled to do so as the mortgagee and note holder, MERS was the named party in tens of thousands of foreclosure actions.

The lenders also showed a clear pattern of knowing disregard for the law by filing defective claims in bankruptcy courts. Professor Katherine Porter of the University of Iowa and Harvard University law schools examined 1700 Chapter 13 bankruptcy filings. The study reported that over half of foreclosure claims lacked "one or more of the required pieces of documentation for a bankruptcy claim." Lender fees were "poorly identified" and "seemed unreasonable." Porter concluded:

"The bankruptcy data reinforce concerns about the overall reliability of the mortgage service industry to charge homeowners only the correct and legal amount of the debt and to comply with applicable consumer protection laws." Katherine M. Porter, 2008

With all of their resources, lenders filing mortgage claims in court should be expected to make very few mistakes and almost never leave out documents required by law to make the foreclosure enforceable. They knew or should have known that this was happening. Their behavior shows major contempt for the law and is likely illegal.

MERS Mortgage Holders Meet Scalia's Requirement for a "Class"

They have a common grievance, the fraudulent misrepresentation by MERS that it was the mortgagee.

They can prove specific violations of law prior, during, and after the fact. The contract contained a fundamental misrepresentation; one that MERS and lenders knew was a misrepresentation. For a subclass, those who were subject to foreclosure proceedings as part of a MERS contract, the illegality is demonstrated by the pattern of repeated incomplete filings while attesting to the court that the filings were complete.

Will the court ever hear a class action by millions of homeowners demanding the cancellation of mortgages contracted through MERS?

Will it cancel existing mortgages and reverse foreclosures with damages paid? Of course not. But it should. It meets the Scalia standard for class actions to a tee.


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Excellent analysis in detail

You mentioned this possibility earlier, and now you draw it detail.

I suppose that the Court will say that the class is too big for the courts to fashion adequate and just remedies. It's like too big to fail, only it's become too big to take responsibiilty.

Apologists for the Court will say that the remedy could be like Brown v. Board, all kinds of things being tried by different district courts all over the country, and maybe ultimately there would even by 'bussing' involved as plaintiffs were bussed from courthouse to courthouse.

But let's wait and see. Smaller scale, more targeted cases should still be possible.

Your analysis is sound, as to what should be done .... but also, unfortunately, sound as to what the probable outcome is.

Once again we may well find that, according tot the Court,

"All dollars are equal but some dollars are more equal than others."


It's a helluva way to run a country.

Thank you sir!

This is proof positive that the system is on life support in a lousy hospital.

How about you nominate me to go sign your mortgage and promissory note in your name. What would happen? It would harsh. The banks did the sam thing with MERS. In the NY Appellate decision I referenced (June 7), the justice writing for the majority said something like, 'We realize the implications of our decision'. He meant what I struggle to make clear in the article. None of these contracts involving MERS stand, not just the ones in bankruptcy court but all of them - FRAUD. The effort to cover this up is huge but they have to throw out contract law that is the basis for business. Allow lenders to commit fraud and what are the standards for other contracts? It's a whole lot different than Brando sending a Native American princess to pick up his Oscar. That was actually cool. The behavior of the banks with MERS is contempt of the court and the larger culture of people who try to live by the rules.

SCOTUS disaster

Very good point that Foreclosuregate now has even less chance at justice through class action from the part of the Walmart 5-4 ruling where Scalia wrote the opinion. See Supreme Court Lands Blow to Women where I pulled out that very section you are referring to and how it damages any chance of justice, especially when there is a systemic pattern of whatever a class action suit is about.

While MERS is systemic, uniform and a pattern, it wouldn't surprise me to see this interpreted as somehow there is too much variance in something to be classified as a class action, simply because the court ignored the statistical findings of Walmart can seemingly hunted for variance to claim the case could not be.

Would MERS be the same?

This is America?

MERS and defrauding all County Recorders out of Billions!!

Listen up people....

MERS has not only misrepresented itself in millions of foreclosures, not also defrauded every County Recorders in every State in the country and is the very reson all the States are broke!!!

MERS is's a computer!! Thus, no filing of all the important land titles, assignments, transfers and sales and illegally moving millions of loans into their phony "pools" and selling this "pools" to foreign investors over and over and over!!

Go to your County Recorders and pull every documents that is there on your address....if, and it's not a big if, MERS is on your DEED OF TRUST, then your loan is part of their scheme!! Stop paying your mortgage and sue them in your Superior Court!! The Judges took many years to "get it" but too many people all claiming the same issues and has given them that light bulb moment. The courts are the only way to fight this mess...the Government will not stop them...they are part of it and have deceived we AMericans to believe in a big fat lie.

If we don't fight this, we will become a homeless country living in tents and eating scraps from wherever we can get food...

Wake Up!! We are being deceived!!
Want more?

We are headed there

Homeless nation. Maybe they'll revert to having "company towns" or tent cities with the right to squat offered in return for our labor. It's absurd. By destroying the system, The Money Party destroys the value of its assets. Now that's crazy.

Money Party's safe haven

The Money Party keeps their assets elsewhere than in US dollar-denominated anything.

Their strategy now is to keep pulling money out of the U.S., intentionally participating in undermining of the U.S. dollar and the U.S. economy. The plan is to buy it all back later for pennies on the dollar, investing only "when blood runs in the streets."

Meanwhile they are trusting in the ignorance of the American people, the cupidity of the RNC, and, the stability of the PRC!

How to find if your mortgage is MERS recorded

Go to your tax record and click on the book/page. In Palm Beach County, you will then click on image. It will bring up a .pdf of the mortgage. It will say MERS at the bottom of the FIRST Page.

this was a wonderful

this was a wonderful read!!!!.....I would love to be part of a class action suit against the crooked bankers!.....Also is their any case law in New Jersey...for cases that have won their homes back

Thank you

We could call it "the people's class action"

This would be one time when a lawyer would be most welcome soliciting work;)