Here are the concepts in a nutshell.

• You sit down to sign the note for purchase or resell. Unbeknownst to you, the note has already been securitized. Your signature fulfilled a quota which needed to be filled because of the demands of the Repo and Reverse Repo market. Nearly all of what you are about to read happens upon the instant of your signature.

• In order to actually make it into a trust, your note and the security instrument corresponding to it (mortgage or deed of trust), has to go through a series of transactions regulated by a Pooling and Servicing Agreement (PSA) all of which should be registered individually at the Recorder’s office in the County Courthouse. Instead, they are registered at the county courthouse in the name of MERS thereby avoiding multiple recording fees. MERS is a data base and nominee for all the members of the MERS system. All of the participants in the system of origination and securitization of mortgages are, of course, members of the MERS system.

• The MERS system is not unlike the DTCC of Naked Shorts fame. In fact, the designers of the MERS system took the DTCC as their model. It is a private repository of information accessible only by its high priests. If you want to know who and what MERS really is, you must understand that when you ask them, their answer always seems to depend upon who is asking and even more importantly, why? IMHO, MERS is a 1031 Exchange. Literally, a Bourse; privately owned and accessed. It is the curtain behind which all the shenanigans in the MBS market occurs and it is that curtain which allows it to happen.

• Upon your signature at closing, your note is headed towards some accounting legerdemain. They pool the loans (choose a random number of 1000 notes in a pool) in order to fund the issuance of millions of stock certificates traded, of course, on the DTCC. The cash flow from the notes (supposedly) secured by a mortgage or deed of trust, becomes the asset of interest. Not the note itself.

• The problem is, you can’t double book an asset. It’s either a note, or it is a stock. It can’t be both. In order to accomplish this, the note must be de-recognized on the general ledger as an asset. Your individual note ceases to exist. The cash flow it represents, collected with the cash flow represented by the other 999 in the Stock issue is what they use to bring value to the underlying stock. They sold ownership of the cash flow from America’s mortgage debt service to the rest of the world where it is freely traded and electronically manipulated in a totally unregulated secondary market.

• This de-recognition process also explains Robo-signing. There are very few (if any) paper trails showing how any individual note made its way into any particular trust upon which certificates are issued even though that registration trail may be called for in the PSA for that particular trust. Since there is no paper trail showing how your note became de-recognized, upon foreclosure, the path has to be reconstructed in order to pull an individual note out of the cash flow system, into a Mortgage Backed Security, re-recognize it into a note and foreclosed upon using computer generated documents, compiled by computer algorithms, signed by $10 an hour employees. Robo-signing. I believe that upon close examination we shall find all the trusts are empty.

• The con, the Ponzi, isn’t discovered until foreclosure, which, of course, renders the victim discredited. Seriously, why would you look if you didn’t know you had to? You make your payment on time to the person they tell you, right? Upon foreclosure, if you bother to investigate, you find what I just described to you above. You are left knowing you were had. Not only that, you are left knowing the entire country has been had. Should you try to raise a fuss, you are dismissed as a bum wanting a free house.

• As the system progresses, life gets ever more confusing. The buyer of the foreclosure is left staring at an Ibanez or Bevilaqua situation (rulings attached). Ibanez and Bevilaqua are two court cases out of the MA Supreme Court pointing out the fact that title has been irretrievably broken. You only have to read “Living in a Post Ibanez World” and “The Destruction of Economic Fact” to understand what the future holds. It certainly isn’t all that far fetched if you ask me.

Here are the takeaways:

1) It’s about your title. You don’t have one. And as if that weren’t funny enough, there’s always the punch line
2) It’s also about your title insurance. You don’t have any of that either. Don’t believe me? Go take a look at the POLICY. What’s that? Don’t have a copy of the POLICY? Only a “Commitment to Title”? Hmmmm.
3) Unless you take action to clear things up, the title to your home will remain hopelessly clouded. No one can buy, no one can sell, no one can deliver clear title at the end of a mortgage obligation. Title is absolute. Just like being pregnant, you can’t have a little bit of title. What is a clouded title worth to you?

It ain’t about what you buy, it’s that you buy. It’s all about the cash flow. Your house payment, your car payment, your cell phone bill, your credit card bill, your student loan, your cable/satellite service, your commitment to a yellow pages contract … anything which represents a continued obligation to pay has been bundled and securitized and was, most likely, sold many times over.

But we’ll never know. It’s all behind the curtain of MERS.