The Mortgage Machine Backfires: MERS (Mortgage Electronic Registration System) under heavy scrutiny

[seafan]

Fair Game: The Mortgage Machine Backfires

By GRETCHEN MORGENSON
September 26, 2009

WITH the mortgage bust approaching Year Three, it is increasingly up to the nation’s courts to examine the dubious practices that guided the mania. A ruling that the Kansas Supreme Court issued last month has done precisely that, and it has significant implications for both the mortgage industry and troubled borrowers.
The opinion spotlights a crucial but obscure cog in the nation’s lending machinery: a privately owned loan tracking service known as the Mortgage Electronic Registration System. This registry, created in 1997 to improve profits and efficiency among lenders, eliminates the need to record changes in property ownership in local land records.

Dotting i’s and crossing t’s can be a costly bore, of course. And eliminating the need to record mortgage assignments helped keep the lending machine humming during the boom.
Now, however, this clever setup is coming under fire. Legal experts say the fact that the most recent assault comes out of Kansas, a state not known for radical jurists, makes the ruling even more meaningful.
Here’s some background: For centuries, when a property changed hands, the transaction was submitted to county clerks who recorded it and filed it away. These records ensured that the history of a property’s ownership was complete and that the priority of multiple liens placed on the property — a mortgage and a home equity loan, for example — was accurate.
During the mortgage lending spree, however, home loans changed hands constantly. Those that ended up packaged inside of mortgage pools, for instance, were often involved in a dizzying series of transactions.

To avoid the costs and complexity of tracking all these exchanges, Fannie Mae, Freddie Mac and the mortgage industry set up MERS to record loan assignments electronically. This company didn’t own the mortgages it registered, but it was listed in public records either as a nominee for the actual owner of the note or as the original mortgage holder.
Cost savings to members who joined the registry were meaningful. In 2007, the organization calculated that it had saved the industry $1 billion during the previous decade. Some 60 million loans are registered in the name of MERS.

As long as real estate prices rose, this system ran smoothly. When that trajectory stopped, however, foreclosures brought against delinquent borrowers began flooding the nation’s courts. MERS filed many of them.
“MERS is basically an electronic phone book for mortgages,” said Kevin Byers, an expert on mortgage securities and a principal at Parkside Associates, a consulting firm in Atlanta. “To call this electronic registry a creditor in foreclosure and bankruptcy actions is legal pretzel logic, nothing more than an artifice constructed to save time, money and paperwork.”

The system also led to confusion. When MERS was involved, borrowers who hoped to work out their loans couldn’t identify who they should turn to.
As cases filed by MERS grew, lawyers representing troubled borrowers began questioning how an electronic registry with no ownership claims had the right to evict people. April Charney, a consumer lawyer at Jacksonville Area Legal Aid in Florida, was among the first to argue that MERS, which didn’t own the note or the mortgage, could not move against a borrower.
Initially, judges rejected those arguments and allowed MERS foreclosures to proceed. Recently, however, MERS has begun losing some cases, and the Kansas ruling is a pivotal loss, experts say.

.....

Matt Taibbi is also working this story, and it will be an explosive one.



For once, it looks as if the industry just *might* have to eat this, to the tune of 60 million mortgages at risk of foreclosure. Hoisted on its own petard, indeed.


Stay tuned.

[Piewhacket]

1. PEOPLE -pay attention- this is a big story... a massive 6 trillion dollar fraud...

how it worked (or didn't work) and who is screwed.
the legal opinions are crystal clear, there is a serious
legal problem with these MERS loans.


HOMEOWNERS in ANY state of the US- if you have a MERS recorded
loan (check with the county recorder) your loan may not be enforceable.
see a lawyer.

if you are in trouble with your mortgage, you house has gone upside
down (mortgage more than house is worth), you lost your job, etc,
then BEFORE YOU DEAL, WALK AWAY, OR REFINANCE(!!!)

CHECK WITH A (real estate) LAWYER.


thanks seafan, off to the greatest with this.

[Selatius]

2. They are going to fight to have the federal gov't bail them out again.

They are not going to let 60,000,000 mortgages go away like that without a war because they lost the lien records.

[unkachuck]

3. "...how...

...an electronic registry with no ownership claims had the right to evict people..."

"...that MERS, which didn’t own the note or the mortgage, could not move against a borrower."

"...how an electronic registry with no ownership claims had the right to evict people..."

....makes sense, if you own your car and I don't, what right do I have to tell you what to do with it? This seems like a clear case of corporate fraud and racketeering to me.

[laughingliberal]

4. Hmmm, wonder if my mortgage is in this game

My loan was sold from the original lender to Citibank. Would be good to find out as I am very likely to be looking at foreclosure in the next month.

[ms.smiler]

5. I too wondered if my loan was in MERS, you can check here:

https://www.mers-servicerid.org/sis/

Dig out your mortgage papers and use the long MIN number to check. It would be wise to have a knowledgeable person check your paperwork because supposedly 80% of loans had Truth in Lending violations.

You can dig into this site which is helpful, http://livinglies.wordpress.com/

[laughingliberal]

6. Thanks!

[Piewhacket]

7. consult a lawyer. suggest your lawyer look at this webpage

once you get your basic facts together get an
initial consult with a real estate or bankruptcy
lawyer. should cost you nothing to $100.
then you'll know something.

hint : you can't do this stuff yourself.
and it has NOTHING to do with truth in lending violations
(although that may also be present... but this is way better)

for example possibly...
(a) you can wipe out your debt completely (!) NO, REALLY, or
(b) you can live in the house til hell freezes over
or the statute of limitations on the debt runs (4 yrs?)
and then owe them nothing
(c) or maybe they didn't screw up your paper. but then what are
the odds of that? remember what it was all about. massive fraud
plus PONZI. I'd be completely shocked if "shredding parties" weren't SOP.

this is the real deal. MERS is in trouble, but that is not the end of it.
DEUTCH BANK, is an actual beneficial holder but they are now barred from filing
ANY foreclosures in NJ until they can comply with discovery... they can't
produce the docs! MERS has got even bigger problems... they can't even
identify the beneficial holder of the note & they may have no standing to
enforce the note!!

serious: find out your situation re MERS then see a lawyer.
do NOT refinance before you know more.

http://foreclosuredefensenationwide.com/?p=159

[demwing]

8. How is it possible to have a statute of limitations on secured debt?

Is that really what you are saying?

[Piewhacket]

9. for legal advice, see your lawyer.

how is it possible?? who knows? uncharted waters.
but i'm not saying "rely on it", I'm saying if you're in that
boat "see a lawyer".

thanks for the interesting question. happy to consider your
view of it. just for fun,

perhaps it is because security agreements are contracts
which must comply with state laws governing contracts?

or perhaps it is simply that some manner of repose for
unenforced obligations is normally provided?

or perhaps it is that the title has
been legally severed from the right to receive payment,
and what remains is an "unsecured debt" with a
beneficial owner who can't be ascertained and who's
supposed sole agent has no standing to foreclose?
what a mess, eh?

please discuss. Happy to consider your view, if you have one.