- Mortgage notes were not typically transferred to the trusts, as required by law. Further, there is no clear "chain of title" for these notes--which are actually presented for endorsement only on foreclosure (if then).
- MERS recommended that mortgage servicers retain the notes.
- MERS "deputized" employees of the servicers, pretending that these became MERS employees. This allowed the fiction that MERS had the notes so that it could foreclose.
I will discuss in part two the implications for the REMICs and the mortgage backed securities. Here I will focus only on the failure to comply with the requirement to properly endorse notes and to transfer them each time a mortgage was sold -- up to a dozen times over the course of the life of a mortgage through to foreclosure. Rather than following well-established law, MERS plainly directed mortgage servicers to retain the notes. Since most mortgage lenders and servicers are members of MERS, the plan was to pretend that transactions were "in-house", hence did not require transfers of notes or reporting of sales to the county recorders.