MERS: This APPEARS To Be Unlawful!

This is interesting....

In mortgage foreclosure cases, the plaintiff has standing as the holder of the note and the mortgage. When MERS forecloses, MERS is the mortgagee and it is the holder of the note because a MERS officer will be in possession of the original note endorsed in blank, which makes MERS a holder of the bearer paper. MERS will not foreclose unless the note is endorsed in blank and held by MERS.

There's a key question as to whether those "assignments" by MERS are actually being performed by MERS, or whether they're effectively forgeries, as has been talked about before (e.g. it appears that the endorser is in fact an employee of the recipient of the note, not an officer of MERS), but we'll leave that one alone for now.

But....

The use of bearer bonds for avoiding taxation became more popular after World War I, and illegal activity involving bearer bonds continued over the following decades until various nefarious criminal activities involving bearer bonds resulted in the Tax Equity and Fiscal Responsibility Act of 1982, which outlawed any new issuance of bearer bonds in the United States.

Uh........

More specifically, for private bearer debt instruments:

The sanctions included disallowing the deduction of interest expense by issuers of bearer bonds and denying the holder of bear bonds the tax exemption for interest earned on the bonds. In addition, TEFRA imposed an excise tax equal to 1 percent of the principal amount of the debt multiplied by the number of years in the term of the bonds. These measures effectively ended the issuance of bearer debt instruments, and all debt securities are issued in registered form now.

Every such "endorsed" debt instrument that has been converted to bearer form by endorsement in blank appears, from this description, to have created an instant excise tax liability in the amount of 1% of the face value times the number of years in the term of the mortgage, and of course this excise tax as with all taxes must be declared and paid.

So exactly how is it, again, that MERS is in possession of Bearer Instruments, and is not the endorsement in blank of such an instrument by the originator (creating a bearer instrument) a prohibited act (unless the tax was declared and paid, and you know full well it wasn't) under Federal Law?

The IRS describes what is subject to tax:

Registration-Required Obligation - Section 4701 (b)(1) provides that the term "registration-required obligation" has the same meaning as when used in Section 163(f), except that such term shall not include any obligations required to be registered under section 149(a). Section 163(f) provides that the term “registered-required obligation” means any obligation (including any obligation issued by a government entity) other than an obligation which -

(i) is issued by a natural person,
(ii) is not of a type offered to the public,
(iii) has a maturity (at issue) of not more than 1 year, or
(iv) an obligation is issued where there are arrangements reasonably designed to ensure that such obligation will be sold (or resold in connection with the original issue) only to a person who is not a United States person, and
(v) in the case of an obligation not in registered form -
I. interest on such obligation is payable only outside the United States and its possessions, and
II. on the face of such obligation there is a statement that any United States person who holds such obligation will be subject to limitations under the United States income tax laws. (Internal Revenue Code Section 163(f) (2)).

Obligation - The term “obligation” includes bonds, debentures, notes, certificates, and other evidence of indebtedness regardless of how denominated. (Treasury Regulation §46.4701-1(b)(2))

Hmmmmm..... let's see, mortgages are "obligations" that are evidence of indebtedness, the mortgages in question were not issued by natural persons (they were issued by banks and other lending institutions), they all (or nearly all) have a maturity of more than one year, and they are in fact traded publicly.

Oh my... I wonder how much in uncollected taxes could potentially be due here?  Is anyone at the IRS paying attention?