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Foreclosure Nightmare - MERS -
No Legal Foundation

By Joel Skousen
Editor - World Affairs Brief 
Begin Excerpt -
The role of the Mortgage Electronic Registration System (MERS) throughout the foreclosure furor is interesting-mostly because there is no legal basis for its role. It was created out of whole cloth by the investment bankers who brought us the Mortgage Backed Securities fiasco, without any basis in law. Reuters explains what MERS is:
"The growing furor in the United States over improper foreclosure documents is focusing intense attention on MERS, a mortgage-record service company that tracks more than 60 million mortgages. Mortgage Electronic Registration Systems [MERS] has filed thousands of foreclosure actions around the country on behalf of lenders. Its right to do that is under challenge. Several courts around the country recently have ruled that MERS lacks the right to file such cases.
"MERS, based in Reston, Virginia, is a private company owned by leading banks and mortgage processors. They founded it in 1995 to speed up legal record-keeping of mortgages and sales of mortgage loans through securitizations. Its main purpose was to be an electronic registry that would keep track of repeated sales of mortgage loans as the number of new mortgages and refinancings boomed [without having to comply with the laws requiring a notarized document of transfer of title signed by the new and old owners-that's the problem]
"Homeowners' lawyers and advocacy groups contend that MERS has no right to initiate the actions because it doesn't own the mortgage loans. Lending laws specify that only the actual owner of the loan can file a foreclosure action. Lawyers also have alleged that MERS bypassed laws requiring mortgages and refinancings to be recorded in county recorders offices."
This is not a trivial issue, because mortgage title companies are on the hook for millions. When a foreclosed home is transferred, they have certified the titles, many of which are now subject to fraudulent conveyance. The Financial Times says they've uncovered fraud in Well Fargo filings­the sole big bank that claims they don't have any problems.
"Unlike Bank of America, JPMorgan Chase and GMAC, Wells Fargo has not halted foreclosures and has maintained that it has no problems with its procedures. Yet, a sworn deposition by one of its loan documentation officers suggests otherwise. Xee Moua said she signed as many as 500 foreclosure-related papers a day on behalf of the bank. Ms Moua said the only information she had verified was whether her name and title appeared correctly. Asked whether she checked the accuracy of the principal and interest that Wells Fargo claimed the borrower owed ­ an important step in banks' legal actions to foreclose ­ Ms Moua replied: 'I do not.' Ms Moua nevertheless signed affidavits, reviewed by the Financial Times, that said she had 'personal knowledge of the facts regarding the sums of money which are due and owing to Wells Fargo'. These affidavits were used in lawsuits brought by Wells Fargo to repossess homes."
Mish Shedlock tells of how this whole thing is mushrooming into a major problem for the courts. "The allegations raise the possibility that foreclosure proceedings nationwide could be subject to legal challenge. More than 2.5 million homes have been lost to foreclosure since the recession started in December 2007.
"In the wake of massive foreclosure fraud, attorneys general in all 50 states have launched a probe into problems with documents used in foreclosures. A joint investigation by every state and the District of Columbia could force mortgage companies to settle allegations that they used flawed documents to foreclose on hundreds of thousands of homeowners.
"It could take months, at least, for any settlement to be reached. The banks could also be subject to financial penalties and be forced to pay some people whose foreclosures were improperly handled. For banks, 'the most efficient way for them to get out from under this is to settle across the board,' said Kathleen Engel, a law professor at Suffolk University. 'It's quite possible that there will be insiders who come forward to reveal the inner workings of these 'boiler room' foreclosure mills, which likely won't be good for the banks.'
"Florida's Rocket Docket Grinds to a Halt: Home to more foreclosures than 47 U.S. states, Florida sought to clear out its backlog with a system of special court hearings that dispensed with cases quickly, sometimes in less than a minute. Florida's legislature appropriated $9.6 million this year to pay semi-retired judges and case managers to clear the backlog of foreclosures. The goal is to clear 62 percent of the backlog by next July... Now that Bank of America, JP Morgan and Ally Financial Inc. have put the brakes on foreclosures or evictions to look for irregularities, he said he's 'very doubtful' his courts can resolve that many cases. The circuit, which covers the area around Clearwater and St. Petersburg, has a backlog of 33,000 foreclosure cases, he said... We're still getting 1,000 cases a month.'" Wow.
Tyler Durden talks about the potential costs to banks: "the tab could reach $6 billion... Investigations of how banks are seizing homes may prolong foreclosures by as much as three months, at a rough cost of $1,000 per month for each property in the pipeline. The biggest firms likely need to add staff to comb through the files, costing them each $1 million a year." Sounds like a good excuse for the banks to cut a plea deal and settle for what the public thinks is a big fine­but it would be small change compared to losing the right to foreclose.
Personally, I don't hold out much hope that the financial Powers That Be (PTB) are going to let all those foreclosures go down the drain over a "technicality." The White House is already sending a message that it won't back any federal moratorium on foreclosures. The Washington Post wrote that "Federal regulators sought to prevent the growing furor over improper foreclosures from escalating, pressing mortgage lenders to replace flawed and fraudulent court documents while insisting that foreclosures continue apace." ­Business as usual.
Sadly, it's not just foreclosure technicalities that are wrong. Some banks are violating the laws in other ways, like using thugs to break into homes, change locks and evict delinquent owners before filing proper foreclosure proceedings-making bogus claims like "the power is off, and we have to safeguard the house from freezing." In the summertime? Sure.
End Excerpt
Commentary and Insights on a Troubled World.
Copyright Joel Skousen 2010 - All Rights Reserved
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