322.016, the breakdown

1.201 3.302(a) 7.501 9.330

3.302(c)

3.106(d)

3.306

3.305(a)

3.104(a)

3.104(c)

3.104(d)

Electronic Promissory Note, A.k.a. eNote, A.k.a. Transferable record

322.016

The MERS® eRegistry is the legal system of record that identifies the owner (Controller) and

custodian (Location) for registered eNotes and that provides greater liquidity, transferability

and security for lenders.

Source: https://www.mersinc.org/join-mers/mers-eregistry

Why the MERS® eRegistry?

The MERS® eRegistry is essential in

the eMortgage world. It saves

money and prevents confusion

about who owns the eNote.

Lenders today are closing eNotes

and selling them into the secondary

market through the MERS®

eRegistry. When selling eNotes to

Fannie Mae and Freddie Mac, both

agencies require that lenders use the

MERS® eRegistry. The MERS®

eRegistry fulfills the “Safe Harbor”

requirements in the state-led

Uniform Electronic Transactions

Act (UETA) and E-SIGN

(Electronic Signatures in Global

and National Commerce Act of

2000) adopted by Congress.

The MERS system is "an electronic mortgage registration system and clearinghouse that tracks

beneficial ownerships in, and servicing rights to, mortgage loans." In re Mortg. Elec. Registration Sys.

(MERS) Litig., 659 F. Supp. 2d 1368, 1370 (J.P.M.L. 2009). “Secured” Mortgage loan

https://www.mersinc.org/join-mers/mers-eregistry





http://scholar.google.com/scholar_case?case=2326234578174833020&q=mers+clearinghouse&hl=en&as_sdt=6,44










322.016


Sec. 322.016. TRANSFERABLE RECORDS.

(a) In this section, "transferable record" means an electronic record that:

(1) would be a note under Chapter 3, or a document under Chapter 7, if the electronic record were in writing; and

(2) the issuer of the electronic record expressly has agreed is a transferable record.

(b) A person has control of a transferable record if a system employed for evidencing the transfer of interests in the transferable record reliably

establishes that person as the person to which the transferable record was issued or transferred.

(c) A system satisfies Subsection (b), and a person is deemed to have control of a transferable record, if the transferable record is created,

stored, and assigned in such a manner that:

(1) a single authoritative copy of the transferable record exists which is unique, identifiable, and, except as otherwise provided in

Subdivisions (4), (5), and (6), unalterable;

(2) the authoritative copy identifies the person asserting control as:

(A) the person to which the transferable record was issued; or

(B) if the authoritative copy indicates that the transferable record has been transferred, the person to which the transferable

record was most recently transferred;

(3) the authoritative copy is communicated to and maintained by the person asserting control or its designated custodian;

(4) copies or revisions that add or change an identified assignee of the authoritative copy can be made only with the consent of the

person asserting control;

(5) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and

(6) any revision of the authoritative copy is readily identifiable as authorized or unauthorized.

(d) Except as otherwise agreed, a person having control of a transferable record is the holder, as defined in Section 1.201, of the transferable

record and has the same rights and defenses as a holder of an equivalent record or writing under the Uniform Commercial Code, including, if

the applicable statutory requirements under Section 3.302(a), 7.501, or 9.330 are satisfied, the rights and defenses of a holder in due course, a

holder to which a negotiable document of title has been duly negotiated, or a purchaser, respectively. Delivery, possession, and indorsement are

not required to obtain or exercise any of the rights under this subsection.

(e) Except as otherwise agreed, an obligor under a transferable record has the same rights and defenses as an equivalent obligor under

equivalent records or writings under the Uniform Commercial Code.

(f) If requested by a person against which enforcement is sought, the person seeking to enforce the transferable record shall provide reasonable

proof that the person is in control of the transferable record. Proof may include access to the authoritative copy of the transferable record and

related business records sufficient to review the terms of the transferable record and to establish the identity of the person having control of

the transferable record.

Added by Acts 2007, 80th Leg., R.S., Ch. 885 (H.B. 2278), Sec. 2.01, eff. April 1, 2009.

http://www.legis.state.tx.us/tlodocs/80R/billtext/html/HB02278F.HTM

1.201 3.302(a) 7.501 9.330

3.302(c)

3.106(d)

3.306

3.305(a)

3.104(a)

3.104(c)

3.104(d)

Sec. 1.201. GENERAL DEFINITIONS

(21) "Holder" means:

(A) the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in

possession;

(B) the person in possession of a negotiable tangible document of title if the goods are deliverable either to bearer or to the order of

the person in possession; or

(C) a person in control of a negotiable electronic document of title.

322.016


1.201 3.302(a) 7.501 9.330

3.302(c)

3.106(d)

3.306

3.305(a)

3.104(a)

3.104(c)

3.104(d)

Sec. 3.302. HOLDER IN DUE COURSE.

(a) Subject to Subsection (c) and Section 3.106(d), "holder in due course" means the holder of an instrument if:

(1) the instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not

otherwise so irregular or incomplete as to call into question its authenticity; and

(2) the holder took the instrument:

(A) for value;

(B) in good faith;

(C) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to

payment of another instrument issued as part of the same series;

(D) without notice that the instrument contains an unauthorized signature or has been altered;

(E) without notice of any claim to the instrument described in Section 3.306; and

(F) without notice that any party has a defense or claim in recoupment described in Section 3.305(a).

322.016


1.201 3.302(a) 7.501 9.330

3.302(c)

3.106(d)

3.306

3.305(a)

3.104(a)

3.104(c)

3.104(d)

Sec. 3.302. HOLDER IN DUE COURSE.

(c) Except to the extent a transferor or predecessor in interest has rights as a holder in due course, a person does not acquire rights of a

holder in due course of an instrument taken:

(1) by legal process or by purchase in an execution, bankruptcy, or creditor's sale or similar proceeding;

(2) by purchase as part of a bulk transaction not in ordinary course of business of the transferor; or

(3) as the successor in interest to an estate or other organization.

322.016


1.201 3.302(a) 7.501 9.330

3.302(c)

3.106(d)

3.306

3.305(a)

3.104(a)

3.104(c)

3.104(d)

Sec. 3.106. UNCONDITIONAL PROMISE OR ORDER.

(d) If a promise or order at the time it is issued or first comes into possession of a holder contains a statement, required by applicable

statutory or administrative law, to the effect that the rights of a holder or transferee are subject to claims or defenses that the issuer could

assert against the original payee, the promise or order is not thereby made conditional for the purposes of Section 3.104(a); but if the

promise or order is an instrument, there cannot be a holder in due course of the instrument.

322.016


1.201 3.302(a) 7.501 9.330

3.302(c)

3.106(d)

3.306

3.305(a)

3.104(a)

3.104(c)

3.104(d)

Sec. 3.104. NEGOTIABLE INSTRUMENT.

(a) Except as provided in Subsections (c) and (d), "negotiable instrument" means an unconditional promise or order to pay a fixed amount

of money, with or without interest or other charges described in the promise or order, if it:

(1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder;

(2) is payable on demand or at a definite time; and

(3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the

payment of money, but the promise or order may contain:

(A) an undertaking or power to give, maintain, or protect collateral to secure payment;

(B) an authorization or power to the holder to confess judgment or realize on or dispose of collateral; or

(C) a waiver of the benefit of any law intended for the advantage or protection of an obligor.

322.016


1.201 3.302(a) 7.501 9.330

3.302(c)

3.106(d)

3.306

3.305(a)

3.104(a)

3.104(c)

3.104(d)


(c) An order that meets all of the requirements of Subsection (a), except Subdivision (1), and otherwise falls within the definition of "check" in Subsection (f) is a negotiable instrument and a check.

322.016


1.201 3.302(a) 7.501 9.330

3.302(c)

3.106(d)

3.306

3.305(a)

3.104(a)

3.104(c)

3.104(d)


(d) A promise or order other than a check is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains

a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this

chapter.

322.016


1.201 3.302(a) 7.501 9.330

3.302(c)

3.106(d)

3.306

3.305(a)

3.104(a)

3.104(c)

3.104(d)

Sec. 3.306. CLAIMS TO AN INSTRUMENT.

A person taking an instrument, other than a person having rights of a holder in due course, is subject to a claim of a property or

possessory right in the instrument or its proceeds, including a claim to rescind a negotiation and to recover the instrument or its

proceeds. A person having rights of a holder in due course takes free of the claim to the instrument.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1, 1996.

322.016


1.201 3.302(a) 7.501 9.330

3.302(c)

3.106(d)

3.306

3.305(a)

3.104(a)

3.104(c)

3.104(d) Sec. 3.305. DEFENSES AND CLAIMS IN RECOUPMENT. (a) Except as otherwise provided in this section, the right to enforce the

obligation of a party to pay an instrument is subject to the following:

(1) a defense of the obligor based on:

(A) infancy of the obligor to the extent it is a defense to a simple contract;

(B) duress, lack of legal capacity, or illegality of the transaction that, under other law, nullifies the obligation of the obligor;

(C) fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or

its essential terms; or

(D) discharge of the obligor in insolvency proceedings;

(2) a defense of the obligor stated in another section of this chapter or a defense of the obligor that would be available if the person entitled to

enforce the instrument were enforcing a right to payment under a simple contract; and

(3) a claim in recoupment of the obligor against the original payee of the instrument if the claim arose from the transaction that gave rise to the

instrument; but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the

instrument at the time the action is brought.

322.016


1.201 3.302(a) 7.501 9.330

Sec. 7.501. FORM OF NEGOTIATION AND REQUIREMENTS OF DUE NEGOTIATION. (a) The following rules apply to a negotiable

tangible document of title:

(1) If the document's original terms run to the order of a named person, the document is negotiated by the named person's indorsement and

delivery. After the named person's indorsement in blank or to bearer, any person may negotiate the document by delivery alone.

(2) If the document's original terms run to bearer, it is negotiated by delivery alone.

(3) If the document's original terms run to the order of a named person and it is delivered to the named person, the effect is the same as if the

document had been negotiated.

(4) Negotiation of the document after it has been indorsed to a named person requires indorsement by the named person as well as delivery.

(5) A document is duly negotiated if it is negotiated in the manner stated in this subsection to a holder that purchases it in good faith, without

notice of any defense against or claim to it on the part of any person, and for value, unless it is established that the negotiation is not in the

regular course of business or financing or involves receiving the document in settlement or payment of a monetary obligation.

(b) The following rules apply to a negotiable electronic document of title:

(1) If the document's original terms run to the order of a named person or to bearer, the document is negotiated by delivery of the document

to another person. Indorsement by the named person is not required to negotiate the document.

(2) If the document's original terms run to the order of a named person and the named person has control of the document, the effect is the

same as if the document had been negotiated.

(3) A document is duly negotiated if it is negotiated in the manner stated in this subsection to a holder that purchases it in good faith, without

notice of any defense against or claim to it on the part of any person, and for value, unless it is established that the negotiation is not in the

regular course of business or financing or involves taking delivery of the document in settlement or payment of a monetary obligation.

(c) Indorsement of a nonnegotiable document of title neither makes it negotiable nor adds to the transferee's rights.

(d) The naming in a negotiable bill of lading of a person to be notified of the arrival of the goods does not limit the negotiability of the bill or

constitute notice to a purchaser of the bill of any interest of that person in the goods.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1, eff. Sept. 1, 1967.

Amended by: Acts 2005, 79th Leg., Ch. 122 (S.B. 1593), Sec. 1, eff. September 1, 2005.

322.016


http://www.legis.state.tx.us/tlodocs/79R/billtext/html/SB01593F.HTM

1.201 3.302(a) 7.501 9.330

Sec. 9.330. PRIORITY OF PURCHASER OF CHATTEL PAPER OR INSTRUMENT. (a) A purchaser of chattel paper has priority over a

security interest in the chattel paper that is claimed merely as proceeds of inventory subject to a security interest if:

(1) in good faith and in the ordinary course of the purchaser's business, the purchaser gives new value and takes possession of the chattel paper

or obtains control of the chattel paper under Section 9.105; and

(2) the chattel paper does not indicate that it has been assigned to an identified assignee other than the purchaser.

(b) A purchaser of chattel paper has priority over a security interest in the chattel paper that is claimed other than merely as proceeds of

inventory subject to a security interest if the purchaser gives new value and takes possession of the chattel paper or obtains control of the

chattel paper under Section 9.105 in good faith, in the ordinary course of the purchaser's business, and without knowledge that the purchase

violates the rights of the secured party.

(c) Except as otherwise provided in Section 9.327, a purchaser having priority in chattel paper under Subsection (a) or (b) also has priority in

proceeds of the chattel paper to the extent that:

(1) Section 9.322 provides for priority in the proceeds; or

(2) the proceeds consist of the specific goods covered by the chattel paper or cash proceeds of the specific goods, even if the purchaser's

security interest in the proceeds is unperfected.

(d) Except as otherwise provided in Section 9.331(a), a purchaser of an instrument has priority over a security interest in the instrument

perfected by a method other than possession if the purchaser gives value and takes possession of the instrument in good faith and without

knowledge that the purchase violates the rights of the secured party.

(e) For purposes of Subsections (a) and (b), the holder of a purchase-money security interest in inventory gives new value for chattel paper

constituting proceeds of the inventory.

(f) For purposes of Subsections (b) and (d), if chattel paper or an instrument indicates that it has been assigned to an identified secured party

other than the purchaser, a purchaser of the chattel paper or instrument has knowledge that the purchase violates the rights of the secured

party.

Added by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1, 2001.

322.016


1.201 3.302(a) 7.501 9.330

3.302(c)

3.106(d)

3.306

3.305(a)

3.104(a)

3.104(c)

3.104(d)

Sec. 322.003. SCOPE. (a) Except as otherwise provided in Subsection (b), this chapter applies to electronic records and electronic signatures

relating to a transaction.

(b) This chapter does not apply to a transaction to the extent it is governed by:

(1) a law governing the creation and execution of wills, codicils, or testamentary trusts; or

(2) the Uniform Commercial Code, other than Sections 1.107 and 1.206 and Chapters 2 and 2A.

(c) This chapter applies to an electronic record or electronic signature otherwise excluded from the application of this chapter under

Subsection (b) when used for a transaction subject to a law other than those specified in Subsection (b).

(d) A transaction subject to this chapter is also subject to other applicable substantive law.

Added by Acts 2007, 80th Leg., R.S., Ch. 885 (H.B. 2278), Sec. 2.01, eff. April 1, 2009.

322.016 Why the MERS® eRegistry?




















http://www.legis.state.tx.us/tlodocs/80R/billtext/html/HB02278F.HTM

1.201 3.302(a) 7.501 9.330

3.302(c)

3.106(d)

3.306

3.305(a)

3.104(a)

3.104(c)

3.104(d)

So, how does the Deed of Trust lien attach to an eNote?

322.016 Why the MERS® eRegistry?




















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Error?

Sec. 3.203. TRANSFER OF INSTRUMENT; RIGHTS ACQUIRED BY TRANSFER.

(a) An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving

to the person receiving delivery the right to enforce the instrument.

(b) Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of

the transferor to enforce the instrument, including any right as a holder in due course. The transferee cannot

acquire rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the

transferee engaged in fraud or illegality affecting the instrument.

(c) Unless otherwise agreed, if an instrument is transferred for value and the transferee does not become a

holder because of lack of indorsement by the transferor, the transferee has a specifically enforceable right to

the unqualified indorsement of the transferor, but negotiation of the instrument does not occur until the

indorsement is made.

(d) If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not

occur. The transferee obtains no rights under this chapter and has only the rights of a partial assignee.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1, 1996.

What is Missing?

322.016, the breakdown

Documents