Bulletin: UT2010003

Date:
December 02, 2010
To:
All Utah Issuing Offices
RE:
Utah Attorney Challenges MERS
Dear Associates:

Along with the concern that has been raised in foreclosures conducted by institutional lenders and servicers, the class action challenges to foreclosures and actions taken by certain state Attorneys General, a number of members of the bar are leading a charge to challenge the validity of the lien of the mortgage or trust deed.

In Utah, an attorney freely advertises his expertise to relieve the borrower from the effects of the trust deed on his or her property. There are several known cases in which the attorney has obtained a judgment voiding the trust deed of the lender. Below is an outline of such a case which illustrates the method being used by the attorney.

In 2005 the borrower executed a trust deed in favor of the lender, a local title company as trustee and MERS as beneficiary, as a nominee for lender and lender's successors and assigns. The trust deed secured a note in the amount of $132,000. Borrower is a realtor in Utah.

In April 2010 counsel for borrower filed a complaint against lender, lender's purported assignee, the local title agent, and the title insurer. Personal service was obtained on all defendants. The local title agent, the purported assignee, and the title insurer were dismissed pursuant to a stipulation. (None of these defendants claimed any interest in the property.) The complaint alleged that neither the lender nor the assignee had any interest in the note, trust deed or the property due to the fact that MERS was assigned the trust deed and MERS has no interest in the note or the property. The complaint further alleged that MERS was a "tax evasion broker which has deprived local governments of essential funds by collecting fees otherwise necessary to properly record trust deeds and assignments of the same." The complaint quotes a statement attributed to the Salt Lake County Recorder who described MERS as potentially "the scam from hell".

The essence of the claim is that the note was assigned to different parties while the trust deed designated MERS as the Beneficiary, thus a split of the note and trust deed occurred and therefore the latter is a nullity.

A Summary Judgment Motion was filed by the plaintiff. The Motion was unopposed. In August 2010 the Third District Court in Salt Lake County Utah entered an Order Quieting Title to Real Property. The order stated that there was no opposition to plaintiff's motion for summary judgment and all defendants have either been dismissed or failed to appear after effective service. The lender filed a stipulation that it had no interest in the promissory note, trust deed or subject property, therefore the trust deed was declared a "Nullity and of no further force and effect." Plaintiff's attorney then filed an Attorney's Lien against the property for the attorney's fees incurred. The borrower proceeded to put the property on the market and subsequently sold it to a third party.

Based on the results of the above case, each order or judgment quieting title terminating the effects of a trust deed, mortgage or lien must be thoroughly examined. Do not insure a lender or purchaser based on the effects of any such order or judgment without Underwriter approval.
If you have questions related to this bulletin, please contact your local underwriting personnel or Stewart Legal Services.

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References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None