From: Sent: To: Cc: Subject:

Jack Wolfe Monday, April 18, 2011 5:30 AM Deanne Dissinger john hooge UCC vs. Residential Real Estate

Mr. Dissinger: Please see attached letter for your review and comment. I look forward to the latter. I believe the greatest issue facing the UCC right now is not so much the ruling in Ibanez as the impact of MERS as to Article 3 requirements to endorsing the note in bearer when possession alone allows enforcement. Sincerely, Jack B. Wolfe, Esq. Wolfe Law Group, PLLC 24901 Northwestern Hwy, Suite 212 Southfield, MI 48075 Phone:(248) 809-2005 Cell: (248) 229-1187 Fax: (248) 809-9969 IRS Circular 230 Notice: We are required to advise you that no person or entity may use any tax advice in this communication or any attachment to (i) avoid any penalty under federal tax law or (ii) promote, market or recommend any purchase or investment. CONFIDENTIALITY NOTICE: This transmission is intended only for the addressee shown above. It may contain information that is privileged, confidential, or otherwise protected from disclosure. If you are not the intended recipient, please do not read, copy, or use it, and do not disclose it to others. Please notify the sender of the delivery error by replying to this message and then delete it from your system. **All communications are confidential and are not to be filed with a Court, made part of a public record, or otherwise shared with anyone other than the recipient.**

6/2/2011

Mr. Dissinger: I am a licensed attorney in Michigan who represents many distressed homeowners trying to prevent being evicted from their homes where they closed on a Mortgage Electronic Registration Systems, Inc. ("MERS") originated Mortgage (affectionately referred to by MERS as the "MOM") and a note in the name of the lender. My position is that because the note and mortgage are split or separated at closing, and given that the mortgage is ancillary to the note, the mortgage is rendered void by this disconnection. It is important to note that MERS own internal policies require an endorsed note in blank to lift a stay in bankruptcy and to foreclose a mortgage. My analysis that an endorsed note in blank is required with the MOM is based upon UCC 3-301, which requires that a "person entitled to enforce an instrument" (i.e., note), means the holder of the instrument. Holder would typically mean the person to whom the note is specifically endorsed; however, where the note is endorsed in blank, it can be transferred by possession alone. See UCC 3-205(2). Accordingly, viewing this in the reverse, at the closing, if the split or separation of the mortgage obligations is not to render the mortgage void, then MERS must be able to enforce the MOM through the note. To do so, MERS must be a "holder" of the note, which requires, at a minimum, possession of the note. MERS allegedly possesses the note because it has created a "network" wherein a member/ lender elect a qualifying officer in its company to act on behalf of MERS, which would apparently satisfy the dominion aspect of "holder-ship" but not the endorsement requirement. As a matter of MERS operating policy, the note is never specifically endorsed to MERS (MERS does not collect payments) so that pursuant to the interplay between UCC sections 3-205 and 3301, the only way the MERS Network can connect the MOM to the note is if the note is endorsed in blank AND THIS NEVER OCCURS. The result should be an unsecured note which can be enforced potentially through judicial foreclosure by arguing an equitable lien but the lender or servicer should not be able to access non-judicial foreclosure statutes given the split of the mortgage obligations at the closing. MERS tries to overcome this simple black letter UCC legal reality, the impact of which would affect 62 million mortgages, by asserting that it acts as the "master agent" for its Network and is connected to the note through principles of principal and agency law. However, principal and agency law has always existed with mortgage loans or you could not have servicing by third parties on behalf of the owners of the instruments or investors therein. See UCC 1-103. MERS further argues that mortgage obligations can be split between beneficial and legal interests--which is true or you could not have a secondary market--and since the lender is the legal and beneficial owner of the note and the beneficial owner of the mortgage (MERS is the alleged legal owner of the mortgage as the "nominee of the lender"), this creates a sufficient nexus which does not require endorsement to negotiate and enforce a note. An interesting theory [completely refuted by Professor Peterson in his article, Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System, 78 U. Cinn. L. Rev. 1359 (Summer 2010)] and certainly new law. Moreover, to agree with these MERS connection theories will

completely emasculate the requirement of endorsement under the UCC and directly contradicts UCC provisions on point and would, therefore, be contrary to UCC 1-103. MERS created for the first time in secured real estate closings a lender who was not the mortgagee and that this dramatic change of relationship between the mortgage obligations only exacerbated the cavaliar attitude toward the entire origination side of the industry. MERS had two primary business objectives which were to speed up securitizations by eliminating the recorded assignment and saving money to its members by eliminating the need to pay the assignment recording fee of approximately $22.00; however, what likely drove most membership in the Network by most mortgage bankers was the saving of the $22.00 fee. If that fee savings was compromised by having to deal with an endorsed note and the extra security and precautions which would naturally exist when you posses a negotiable instrument, then this additional cost would likely dwarf the fee savings and many would not have joined the Network. Where a note is possessed or transferred and it is not endorsed in blank there is no fear of negotiation and no need to become more cautious with possessing the instrument. In my empirical opinion, the underlying policy of the UCC to require the endorsement of the note was to create both a relationship to the note and accountability. Without the endorsement, there is neither accountability nor relationship with the result being an unenforceable mortgage noit to mention a completely cavalier attitiude toward the note. I read with considerable intrigue the March 29, 2011, Memorandum to John A. Sebert, Chair, Permanent Editorial Board for the Uniform Commercial Code (PEB), given that in the afternoon of April 14, 2011, before Federal Judge Marianne Battani of the Eastern District of Michigan, Southern Division, Case No. 2:10-cv-13175-MOB, counsel for MERS stated that the UCC does not apply to mortgage transactions and that MERS under UCC 3-3301 could be a non-holder in possession, which is preposterous. In addition, and as important, he said that the efficacy of the UCC as to notes and their negotiation is no longer relevant given commerce today which protects against the unlawful negotiation and/or enforcement of notes and gave as an example The Fair Debt Collections Act. The Judge ruled in MERS favor. I intend to attach your Memo to my motion for reconsideration and will appeal the decision. Here is my interest and queries: While Ibanez may have been the motivating force behind the aforementioned Memo to Mr. Sebert, the MERS split issue has much greater impact and true change to the mortgage banking industry and homeowners. To this end, first, are you aware of the MERS split issue? Second, do you believe that the UCC has impact on the enforcement of mortgage obligations? Third, does the UCC or principles of agency control the enforcement of the note and, by its ancillary relationship to the note, a mortgage? Fourth, do you analyze the UCC as requiring that in order for the MOM to have ancillary power to enforce the note, should there be an endorsement in blank to MERS on the note? Fifth, does not the UCC require that the note in a servicing or third party enforcement relationship be possessed by the servicer or enforcer and that the note be endorsed in blank? The latter is the classic secondary market transaction between either FNMA or FHLMC and their seller/servicer. The UCC must stand up against the big lie being promoted by MERS. The MERS business plan was an untested private response for the need for speed in private securitizations and either mistakenly or intentionally eliminated the need for an endorsed note. In my opinion, the latter

occurred based upon an incorrect reliance on agency law and/or that, since mortgage obligations can be split between legal and beneficial ownership, it follows that the actual instruments can be split or separated at closing. The result of the MOM without endorsement should be a void mortgage; however, lenders will not be without a remedy in that they can still sue on the note, seek coverage of the unsecured note by suing the title insurers who issued first lien letters or sue the homeowner under judicial foreclosure asserting an equitable lien [however, see Phyllis K. Slesinger & Daniel McLaughlin, Mortgage Electronic Registration System, 31 Idaho L. Rev 805 (1995), which promoted no need to endorse the note if no enforcement action]. Under the latter application of the UCC to residential loan mortgage closings to require an endorsed note when closing with the MOM, courts could now restate mortgages to current fair market values without the need for statutory authority. The economy would positively explode as this would put an end to the bank dominated foreclosure process of failed loan modifications and short sales to third parties but not homeowners. The courtesy of your reply and thoughts are greatly appreciated as this issue demands a position taken by the PEB no different then Ibanez. I have carbon copied the author of an excellent article on this topic, Mr. Hooge, Mortgage Electronic Registration Systems, Inc.: A Survey of Cases Discussing MERS Authority to Act, Hodge, John R. and Williams, Laurie, Norton Bankruptcy Law Advisor, Issue No. 8 (August, 2010), as this issue of the UCC vs. MERS must be thoughtfully explored and he with his co-author are scouring the local and national court systems to find and analyze cases on this issue.
The courtesy of your reply is requested. Thank you. Jack B. Wolfe, Esq.

From: Sent: To:

Jack Wolfe Monday, July 25, 2011 11:29 AM Deanne Dissinger

Subject: Re: Comments on Draft PEB Report

Ms. Dissinger: Yes, by all means, make my April 18, 2011, letter publicly available on the condition that the below may or will be used to supplement my comments as these cases and rulings occurred after my April 18, 2011 letter to you, and are very pertinent to the discussion: "The Michigan Court of Appeals in the landmark decision of Residential Funding Co, LLC v Saurman, Docket No. 290248, and the companion case of Bank of New York Trust Co v Messner, Docket No. 291443, on April 21, 2011 (RFC Opinion ) held that MERS did not have standing to pursue non-judicial foreclosure in Michigan as MERS had no interest whatsoever in the note, which was required under the applicable Michigan non-judicial foreclosure statute. In footnote 6 of the RFC Opinion, it appeared, though, that the Court would allow a non-judicial foreclosure if, prior to the sheriff sale, MERS assigned to the foreclosing lender, who had standing. However, on June 7, 2011, the New York Court of Appeals for the Second Division issued an opinion in Bank of New York v Silverberg, 2011 NY Slip OP 05002 (June 7, 2011), that an assignment of MERS to an assignee for the purpose of foreclosing is a nullity where MERS had no interest in the note distinguishing Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d 674 (NY 2007), as the latter case also involved a MERS assignment but, at the time of the assignment, the relevant note was indorsed in blank to MERS, wherein the Silverberg case, there was no endorsement of the note whatsoever. Simply put, if the note in RFC or Silverberg had been endorsed in blank when MERS was mortgagee, then both decisions would have been in favor of the foreclosing lender. The need to endorse notes to enforce mortgages requires a UCC analysis. The UCC requires that at the time of inception, the MERS mortgage is a nullity unless the originating note was indorsed in blank or bearer. This presumes for the sake of argument that the MERS Network created the necessary "possession" of the note. Possession is not a word defined in the UCC but, in the event the endorsement argument is deemed not to aply to the MERS mortgage contrary to the recent case law cited herein, the issue of whether the MERS Network accomplished possession, as intended in commercially reasonable transactions, we would assert is extremely suspect." Thank you. Jack B. Wolfe, Esq. Wolfe Law Group, PLLC 24901 Northwestern Hwy, Suite 212 Southfield, MI 48075 Phone: (248) 809-2005 Cell: (248) 229-1187 Fax: (248) 809-9969 IRS Circular 230 Notice: We are required to advise you that no person or entity may use any tax advice in this communication or any attachment to (i) avoid any penalty under federal tax law or (ii) promote, market or recommend any purchase or investment.
7/26/2011