- 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
- 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
- "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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