Could 62 Million Homes be Foreclosure-Proof ?

[Hannah Bell]

Mortgages bundled into securities were a favorite investment of speculators at the height of the financial bubble leading up to the crash of 2008. The securities changed hands frequently, and the companies profiting from mortgage payments were often not the same parties that negotiated the loans. At the heart of this disconnect was the Mortgage Electronic Registration System, or MERS, a company that serves as the mortgagee of record for lenders, allowing properties to change hands without the necessity of recording each transfer.

MERS was convenient for the mortgage industry, but courts are now questioning the impact of all of this financial juggling when it comes to mortgage ownership. To foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. But MERS has acknowledged, and recent cases have held, that MERS is a mere “nominee”—an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. Recent court opinions stress that this defect is not just a procedural but is a substantive failure, one that is fatal to the plaintiff’s legal ability to foreclose.

That means hordes of victims of predatory lending could end up owning their homes free and clear—while the financial industry could end up skewered on its own sword.

http://www.counterpunch.org/brown08192010.html

[villager]

1. That would be an interesting "silent revolution" indeed.

Wonder how "leaders" from our "two" corporate parties would react...?>

[flvegan]

2. "The defaulting homeowners could wind up with free and clear title." Not so fast...

This is untrue and irresponsible to say. While the defaulting homeowner *may* have an encumbrance they may not be forced to pay, they have FAR from free and clear title. That mortgage/deed of trust is still out there as an encumbrance on their title. Neither MERS nor the lender is going to release nor satisfy it of public record. Therefore, no title examiner, lawyer, underwriter, etc is ever going to close and insure over that mortgage.

Potentially, the homeowner could attempt a Quiet Title action suit and get the mortgage wiped out, and I'd like to see a few folks try that.

[Better Today]

6. IF and only IF the bank filed proper papers at the county level, or

at least that's what I'm told here by three title company. Only liens properly filed are searched in a title search and since many/most counties require original paperwork to file a lien, the bank would have to either come up with the original or in some states are allowed to use the "dog ate my homework" excuse. Now the title companies have warned me that failure to honestly answer questions about to whom I have been paying mortgage to might put a kink in this, the stand by the "fact" as they tell it, that they only go by what a homeowner says and what is provable as actual liens against the property. MERS in and of itself is not utilized.

[flvegan]

10. The original mortgage/deed of trust is recorded at the time of closing.

That's not the issue raised here. The issue is if the foreclosing entity can provide proof of ownership of the Note, which is (depending on the state) rarely ever recorded. Also, any examiner that searches a property and doesn't find any mortgage may question that. At least the average home/homeowner. I recently underwrote a $5.5 million dollar loan that was taken out a property that's owned by a Trust of one of the DuPont family. Didn't find a mortgage, wasn't surprised.

[Better Today]

12. So you basically can't sell it, but you can stay in it?

Is this what I'm hearing you say?

[flvegan]

14. Pretty much.

Can't sell nor borrow money on it, but it's yours with no mortgage payments. Unless you take corrective action like a Quiet Title action. But, I'd leave that until I was starting to think about selling it. Why dig it up until you have to?

[Better Today]

15. I can live with that. I'll just keep it til I die or have an opportunity elsewhere

then I don't mind them getting it to sell. I can totally be okay with that.

[louis-t]

3. Boy, would that be poetic justice.

I've heard of lawyers that ask a lender to 'produce the instrument'. When they can't, it slows foreclosure down, but I have also heard that eventually they complete the chain of title in most cases. Banks certainly don't want anyone to know of this, and the media certainly isn't going to tell anyone.

[phantom power]

4. I think anybody confronted with nasty-grams from their mortgage "holder" should say...

"Show me hardcopy of the deed, or STFU."

[Better Today]

7. I'm doing that tomorrow after finding that the fifth in a succession of

banks who have taken over my loan but never filed at the county is threatening me. I've been unemployed two years and truly have nothing left to pay with, so I've got nothing to lose.

[Better Today]

8. Let me clarify, none of the previous four banks filed a lien either.

So hopefully that indicates a lack of paperwork.

[elehhhhna]

5. How do you find out if your mort is thru MERS?

please say if it was from Countrywide then B of A.

[flvegan]

11. Look at your documents.

If it's a MERS loan, it will be in favor of "Mortgage Electronic Registration Systems, as nominee, for..." and then the lender's name. Or, it may be assigned into the above. You'd have to search your public records to see any assignments, though they're supposed to notify you at any time of assignment.

And yes, I've seen loans from both Countrywide and Bank of America that were MERS loans.

[Xithras]

9. Maybe, but there are two things to keep in mind.

1) Homeowners still have signed mortgage contracts promising to pay a debt, and in many states the banks can still file civilly for a deficiency judgement even if the right to foreclose is removed. The typical mortgage contract contains two parts...a promise to pay, and a pledge of collateral. Exploiting the MERS problem may give homeowners title to the property and eliminates the banks foreclosure options as originally outlined, but it does nothing to the "promise to pay" portion of the debt. In most states, a failure to pay would still be actionable in civil court...essentially pursuing a deficiency judgement without a foreclosure.

In fact, it's theoretically possible, in some states, for a homeowner to gain free title through this method, only to later lose the home, or see wage garnishment, in order to pay off a court ordered deficiency judgement.

2) In all 50 states, including those where the creditor cannot sue for deficiency, they CAN list this on your credit report for the maximum period allowed by law, sell the debt to creditors, and harass you. None of the states have laws that require lenders to forgive the debt simply because they lost foreclosure rights.

[WillyT]

13. Hannah... There Was A Similar Story Several Months Ago, And...

somebody was advising people being foreclosed upon, to make the foreclosers (the banks) produce the deed. Physically produce the deed in court.

Because if they could not... they could not foreclose on the house.

And because of the situation described in your article... many, many banks cannot produce the deeds.

:evilgrin:

:hi: