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If you still think, like Shaun Donovan, that the crisis in the mortgage markets merely concerns foreclosure paperwork, you need to take a look at these two Law Review papers from Professor Christopher Lewis Peterson of the University of Utah (via). They provide, in excruciating detail, the story of MERS, short for Mortgage Electronic Registration System: the private corporation built by the mortgage lending industry, whose tool for electronically trading mortgages has thrown the entire housing market into turmoil. In the name of saving a buck, the mega-banks used this tiny company with almost no employees and entrusted it with 60 million of the nation’s mortgages on its system – 60% of all mortgages in the United States – to predictable results.
Starting in the early 1990s, the mortgage lending industry, seeking speed and the evasion of land title costs, decided to bypass the state and county registrars which would normally track and assign the title ownership of properties. Instead they created and used MERS, which operates a database to track that ownership. And they list MERS as the “mortgagee of record” with the county recorder – so that all the sales and resales and securitization of the mortgages will not result in the fees that follow the recording of mortgage assignments. Peterson explains that this saves the servicers a measly $22 a loan, which of course adds up when you consider the number of loans and trades per year.
Once again, MERS does not actually advance any loan principal to the homeowner, does not have the right to receive any payments from the borrower, and is not the actual party in interest in any foreclosure proceeding. Nevertheless, the actual mortgagee pays a fee to MERS to induce MERS to record the mortgage in MERS’s name. By eliminating the reference to an actual mortgagee or the actual assignee, MERS estimated it would save the originator an average of $22.00 per loan.
This saves the industry money in recording, but basically shields the county recorders from actually divining the owner of the loans. When a loan falls into delinquency and then foreclosure, MERS carries out the foreclosure process in their own name – despite the fact that they don’t own legal title to the mortgages on its database, and therefore lack standing to foreclose. MERS also doesn’t have the personnel (they have almost no employees) to engage in millions of these foreclosure operations or perform any of the other legal duties required of a mortgage owner. So they outsource this capacity in just about the most fraudulent manner possible, relying on the lack of public records and their role as a masked agent for the servicers.
In the wake of the subprime crisis, this decline in the informational value of the public records is already occurring. For example, in loans where MERS is listed as the mortgagee, virtually any company can show up, claim to own the note, and proceed to foreclose on a family that is in arrears. Because MERS has so many “certifying officers,” a court cannot easily verify whether the individual acting in MERS’s name is actually representing the real party in interest, given that the public records do not reveal who that party is.
Here’s more, from Peterson’s most recent paper:
To accommodate the massive amount of paperwork and litigation involved with its business model, MERSCORP simply farms out the MERS, Inc. identity to employees of mortgage servicers, originators, debt collectors, and foreclosure law firms. Instead, MERS invites financial companies to enter names of their own employees into a MERS webpage which then automatically regurgitates boilerplate “corporate resolutions” that purport to name the employees of other companies as “certifying officers” of MERS. These certifying officers also take job titles from MERS stylizing themselves as either assistant secretaries or vice presidents of the MERS, rather than the company that actually employs them. These employees of the servicers, debt collectors, and law firms sign documents pretending to be vice presidents or assistant secretaries of MERS, Inc. even though neither MERSCORP, Inc. nor MERS, Inc. pays any compensation or provides benefits to them. Astonishingly, MERS “vice presidents” are simply paralegals, customer service representatives, and foreclosure attorneys employed by other companies. MERS even sells its corporate seal to non-employees on its internet web page for $25.00 each. Ironically, MERS, Inc.—a company that pretends to own 60% of the nation’s residential mortgages—does not have any of its own employees but still purports to have “thousands” of assistant secretaries and vice presidents.
This must be one of these “financial innovations” I hear very serious people going on about.
So this is how you end up with multiple foreclosures by different servicers on the same home, or foreclosures on homes bought with cash. Basically, the servicer doing the foreclosing becomes whoever MERS wants it to be. And MERS, by standing in as the “mortgagee of record,” has made it impossible to determine the actual owner of record. Thus two centuries of land title operations in the United States have been outsourced to a shell company created by big banks so they could save a buck – and now they’re using it to forego legal processes and kick people out of their homes.
In the wake of this, you have companies like DOCX pop up, who can simply make up legal papers that then get used in court. The amount of fraud here is simply astonishing.
Tell me again that this is about notaries. The entire mortgage servicing market in the United States has, in a systematic way, become confused and muddled. If you’re the type of person given to protecting themself from the unexpected, you’ll type in wheresthenote.com into your browser, at the very least, for peace of mind. Because without that clarity, you, like every other homeowner in the United States, is exposed.
UPDATE: I should have provided the actual Law Review articles.
Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System
Two Faces: Demystifying the Mortgage Electronic Registration System’s Land Title Theory
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This is just astounding.
Had a psychic written about this twenty years ago and tried to get it published – even as science fiction – it would have just been too implausible.
This makes me nauseated. We are an Anglo Saxon country and the one thing, if nothing else, I would have thought impossible for us to lose is title to real property. Unbelievable.
Here`s a question. When you make a big purchase that requires a big debt — say something in excess of $400,000, wouldn`t you want to have a lawyer to look over the contract? Where I live we have notaries who are like lawyers who do that. It doesn’t come cheap, but you are required by law to do it. I thought in the US of A that people with big stakes always had them checked out by lawyers. I guess this isn’t the case.
Excellent work David; mucho gracias.
The note and trust instrument are delivered late in the process, with no time for review, and they are delivered by the lender on a take it or leave it basis.
The buyer get over 90 pages of documentation, and no one I’ve met in the business understand the documentation. Typically the buyer sits in from of a notary (notaries in the US are not able or allowed to give advice), and signs the paperwork.
I’ll repeat my dairy of friday. The summary:
1. We have to patch up the system, short term. In my view that means making the MERS shit a legitimated link between the not and its real property security, by act of congress.
2. Consumers need some concessions. Don’t let this crisis go to waste.
2. Then we have to repair it. Don’t know how.
3. Then, for the first time, we punish the guilty. Not by fineing banks, by sending bankers and bank executive to jail, for a very long time, and confiscating their assets. They are so motivated by money the greatest punishment is for them to have their money taken.
Well, I’ll wait until somebody like Donald Trump gets foreclosed on before I think any “serious” people are going to take this “seriously.” As long as the people getting foreclosed on are in the bottom 95%, Congress and the White House simply will not care. Besides, as I read on another blog recently, “We wipe our ass with the Constitution every day, now.” The rule of law has been a mere abstraction since Ford pardoned Nixon.
fyi – Enter the Monolines
9/10 – Bond Insurers to BOA: $10 – $20 Billion, pay up.
looks like it covers ‘exposure’ through 08
synoia, Dave’s post indicates exactly why we cannot give MERS any authority by act of Congress. MERS needs to be prosecuted for systematic fraud, not resurrected by Congress.
As far as knowing how to repair the system. Randy Wray and Bill Black know how to repair it. You’ve delivered a criticism of Randy’s platform here, and have suggested your own here. I’ve criticized both in various comments, none of which I’ve believed you’ve successfully answered, but still you peddle this MERS nonsense.
Why would anyone, Congress, wtc. want to backtrack and legitimize MERS which seems barely functional on the face ot it? Why would anyone replace hundreds of years of law and practice for a computer system that is rift with flaws?
MERS is an insecure and unvalidated database and that is all. It appears that a single employee from any member can have access and transfer notes without notification of the previous noteholder. There have been internal conflicts with MERS of members suing to have access to data trails that seem not to exist and of accusing one another of siphoning off notes improperly. Yeah, we really want to legitimize THAT.
Not to mention, no one has addressed the possibility for it’s malicious misuse. It seems completely possible to me that since the data is so easy to manipulate that it could have actually been used or could be used as a consciously sinister tool to grab property from the poor, the weak and the defenseless, or on second thought, ANYONE. Or to facilitate personal graft and corruption. What internal controls were in place to stop someone with access to the system from saying, “Oh look, there’s my mortgage, let’s just mark it paid and file it” ?
MERS needs a giant audit from the date of its inception. The last thing the American public needs is for this flawed system to supercede our property laws and recording and title systems and to upturn all existing UCC laws just to cover the crimes and frauds of crony capitalism.
Do we even have the will as a country to fight ANY crime, even when it is right in front of us? Have we just openly abandoned all Rule of Law if it is to be applied inconveniently to the power elite? Or are the only people prosecuted the ones who didn’t sit at the right dining halls in Harvard and Yale? The SEC will investigate Angelo Mozilo, but will they investigate Jamie Dimon? I think Dimon’s admission that JPM stopped using MERS “a while back” is an uninvestigated powderkeg.
Isn’t MERS on its face evidence of, and the platform for a huge conspiracy? At minimum it’s a conspiracy to defraud the recording system and localities of taxes. Like Al Capone, the tax evasion provides a tool for breaking up the syndicate.
David: Your writing on this (and everything else) is the best. I remember when you first showed up at dK, I made sure to read all of your diaries. Too bad the traditional media is so corrupted. OTOH, I get to read your work all day long!
mers reminds me of the enabling of blackwater, take a small company and turn it into world players
It depends what state you live in. Delaware requires that both the buyer and the seller in a real estate transaction are represented by attorneys. Across the line in PA, attorneys are optional.
And since the murderers of JFK got off scott free.
Any secure system can be manipulated by folks who know what they’re doing, let alone insecure systems.
We will see plenty of evidence of that on November 3.
Just incredible.
Great work here, David.
Now let’s see them try and convince me that the House and Senate Banking Committee members from the 1990′s on weren’t aware MER’s would be circumventing private property/proof of title laws. Convince me they didn’t give it their blessing. Go ahead, Shelby, Dodd, Frank, Garrett (my Radical Right wingnut), and try.
If you have any lawyer like the ones I’ve had for my closings, they’re just terrible. Their assistants do all the work, shit gets missed, they don’t return calls, and the day of closing they show up to get paid on the spot.
Three closings, three shysters.
MERS may not have standing but until recently, it was pretty tough to convince state court judges of that. Bankruptcy not so much.
This is where I’m going to make my money.
I hope there are some mortgage hackers out there. You could start by hacking any and every politician you don’t like and begin foreclosure proceedings against them.
Has anybody considered the possibility that MERS is basically a cut-out?
That their purpose is to hide the chain of title, not simply to save money on registration fees but to allow passing the mortgages around without detection.
In the espionage world, the cut-out insulates the parties from each other, so neither has enough information to testify against each other for instance.
The facts at this point are pretty clear: 1. The major banks have completely abandoned their obligations under the law and now commit fraud as their primary activity. 2. The federal government is well aware of this, and is now preparing to take action to protect the bank’s ability to commit fraud by gutting the most basic rules of law in America. Property rights and the obligation not to lie to a court are only two aspects of a complete abandonment of the rule of law. It’s not what you do, it’s simply who you are. Steal a loaf of bread in Cali, get jailed for life. Steal a billion, there is not a snowflake’s chance in hell you will serve a day in jail for it. Just ask Ken Ley.
Very interesting point,Watt4Bob.
I was just wondering if THIS is what the bailout money was really about…counterfeit mortgages,laundered by banks,as I read it termed elsewhere.
Hey, tell me about it.
I graduated from law school in the late 70′s, and no longer recognize our legal system. Beyond the staid old property law requirements, if anyone in any law school class in 1976 had said it would be perfectly legal for the government to arrest, torture, and imprison citizens (let alone order their assassination), they would have been hooted out of the room–and they would have been hooted by everyone, rightwing goppers or leftwing dems.
Typo:
Not “sixty million”.
Oh, you mean sixty million mortgages. Wow.
…though that would be illegal.
This is an interesting post.
It is alarming; yet, at one level reassuring – the problem is fixable.
As an attorney,pwf, if fraud HAS been committed in regard to the chain of title,would that make the actual physical properties themselves,criminal evidence?
But hackers are not created equal.
Yes. I always thought it was a way to deliberately hide how many people and how many ways they were screwing people.
No!
If it is also provides a unverifiable system for manipulating ownership of property, that is also a clear benefit.
Fred Schulte and Ben Protess, who work for the Huffington Post Investigative Fund, are reporting today that the Wall Street banks and hedge funds have been buying up millions of dollars in municipal tax liens against delinquent homeowners, running up the delinquencies into the stratosphere with excessive attorney’s fees, interest, and penalties, and then foreclosing on the properties.
This is a multi-billion dollar scam, folks.
Link.
That’s the whole point – in the first place hiding the true ownership of both property and the right to collect on debt and in the second place making possible anyone with access to MERS paperwork being able to take anyone else’s property.
In short, it’s not about saving a buck. The cost savings on recording fees were a collateral benefit to the MOTUs – both in terms of the money they didn’t have to lay out and in strangling local governments.
What it was about was basically “land reform in reverse” – facilitating the rich and powerful to take everyone’s property. More neofeudalism; you can’t create a feudal society if individuals can own realty independent of the feudal lords.
i always thought a lot of bailout money that went to bonuses was basically hush-money.
Allen Stanford Loses Bid for $100 Million of Lloyd’s Directors … – 4 days ago
Indicted financier R. Allen Stanford arrives at the Bob Casey Federal Courthouse in Houston, Texas. Photographer: F. Carter Smith/Bloomberg Oct. 14 …
Bloomberg – 151 related articles
The Lloyd’s policy set forth a five-part definition of money laundering, including “the acquisition, use or possession of criminal property,” according to the ruling.
Lloyd’s of London’s lawyers asserted that the funds from Stanford bank CD purchasers, obtained by misleading the investors, were criminal property.Judge Atlas agreed.
‘Very Stylized Definition’
“This was a very stylized definition of money laundering,” Kevin LaCroix, a directors and officers insurance consultant, said in a telephone interview. He said the Lloyd’s policy exclusion was unlike any other money laundering clause he’d seen in his 27-year career as an attorney and insurance expert.“It’s a highly unusual exclusion,” LaCroix said of the Lloyd’s clause, because it allowed for a civil determination of potential wrongdoing prior to the criminal trial. “It’s a very policy specific, very fact-specific determination.”
NOTE: I don’t know if any here remember,or have been following the Allen Stanford case, but this is an excerpt -from four days ago-about a court hearing regarding Stanford. Quite amazing that so little is being said,considering the depth and breadth of the scope of his Ponzi scheme.As I read about the deliberate obfuscation,and lack of governmental enforcement of regs,I always think of Madoff and Stanford.
Two things:
1. Knut — the mortgage documents one signs (I did actually sit and read them the last time) permit the entity granting the mortgage to sell that mortgage. The contract provides only that sufficient notice be given of a change of payment recipient. The whole business of failing to properly register the title is a breach of contract.
2. I got a notice from Bank of America that from now on they’d be charging for “mortgage verification”. I guess they’re getting a whole lot of requests to show that they have the note.
You’re making my head spin. Somebody say it ain’t so.
Allen Stanford Loses Bid for $100 Million of Lloyd’s Directors … – 4 days ago
Indicted financier R. Allen Stanford arrives at the Bob Casey Federal Courthouse in Houston, Texas. Photographer: F. Carter Smith/Bloomberg Oct. 14 …
Bloomberg – 151 related articles
But just because they took the money, what obligates them to remain hushed? Their moral principles?
[Edit] Never mind. Once they take the diry money, they are contaminated as so will also be dragged down in any investigation, even in one which they might precipitate. Unless of course they get in first and get immunized.
Scribe, what about the insurance on these homes? How did that figure in the scams?
If the homeowners collected on insurance policies, wouldn’t that substantiate their ownership?
Was MERS insuring and writing off policies ,unbeknownst to home owners?
Helpful in class warfare for asset stripping….
Perhaps the mortgage note / title issue is why Home Builder confidence is reportedly rising … they might be able to build homes if no one wants to touch pending or past foreclosed properties.
If my mortgage is in MERS, and all indications show that paperwork is mishandled in MERS, if not outright fraudulent, then how do I know that when I make a payment, that the money is accurately tracked to pay on my mortgage?
You think it wouldn’t happen in America – that we’re all about fairness. But it’s become a shark feeding frenzy where any asset has to be grabbed before someone else grabs it.
You ask for a statement. I saw many situations where payments were misallocated. You probably should stay on top of it. I would.
Not just the politicians, but the billionaires who own them. Time to foreclose on the Koch brothers.
If payments have been misallocated, but a person believes that their mortgage is paid-in-full, how is the mortgage lender/MERS able to accurately produce the ‘Satisfaction of Mortgage’?
Whether MERS has the right to foreclose or not, SOMEONE does. And, if you aren’t making the payments, you will be foreclosed on.
Yes, you could make them find WHO has the right officially. But, that will not keep the inevitable from happening.
Yes, there are lots of people who might like to get some more months of free housing. And, yes, they have lots of justifications generated in their mind as to why they “deserve it.” But, it will happen.
Fine to insist that things be done with all paper work neatly arranged–that is good. But, it isn’t going to prevent the end result.
It’s like trying to stop a war by demanding to see the exact original order signed by the general or President rather than getting to the core.
Yes, we all know that there is no real concern about title holders and new buyers strength of title. It is just a way to get a few more months of free rent, and that is the only real concern.
If the MERS controversy did not result in a few more months of free rent, not one person here would give a hoot about it. Or, maybe, they’ve all become concerned crusaders for the arcane matters of deed recording and title search.
Correct.
The issues with MERS became known with all these foreclosures because MERS doesn’t have the original mortgage note. But, any mortgage in MERS could have issues with the tracking of mortgage payments and ultimately receiving a clean ‘Satisfaction of Mortgage’ when the mortgage is paid-in-full.
10/14/10 WheresTheNote.com – CBS News’ Rebecca Jarvis discusses the brewing mortgage fraud scandal and how important it is for homeowners to visit http://www.wheresthenote.com and demand to see their original mortgage note.
video appx 2.5 minutes
http://www.youtube.com/watch?v=9Gi7BwrvgXI
What’s a mortgage note?
A mortgage note is the document you signed when you purchased your home loan. Mortgages contain lots of paperwork – but only the original mortgage note with your signature is proof that you owe the debt. That’s why banks need the note to prove that they own the loan and can collect payments from you. The problem is, banks now buy and sell mortgages up and down Wall Street – slicing them up and repackaging them to sell to other banks. The bank you bought your mortgage from two years ago may not be the bank that owns it today. But, in all the shuffle, the mortgage notes often don’t get transferred along with your debt.
http://www.wheresthenote.com
We now know where all the missing mortgage documents ended up–
http://theeconomiccollapseblog.com/
A concern I have as a solvent mortgagor is to make sure that the entity I am paying is the entity that holds the note.
And if some non-holder of the note forecloses on the property, what is to prevent the note holder of record from subsequently demanding payment in full on the amount of the note they own?
Edit–and I would also be concerned about a clear title to any property that has gone through the foreclosure process.
These are concerns that transcend a few months of free rent as you call it. These are issues that can wreck the housing market and the economy for a decade.
MERS is a Beltway bandit’s dream come true and in itself is a crime scene. We have the legal processes to deal with this situation. Use them.
And there are lots of insurance companies who want to continue receiving premiums-however, when a claim is filed by the homeowner, theoretically, couldn’t the insurance company say-show me where you are the rightful owner to be entitled to collect money from me?
I would proffer, just what due diligence is done by the insurers to verify the ownership title BEFORE they even write a homeowners policy?
Imagine how many policy claims have been paid out to people who are NOW being forclosed upon. Do not the insurers have the standing to claim THEY were defrauded by paying claims to people who allegedly don’t even OWN the homes?
Exactly my concern. If my payments are not going to the lender who holds my note, where are the payments going?
Certainly if you are talking about property insurance.
If your property burns down, who is the lienholder?
That’s exactly what I’m talking about.
remember I’m talking about dispursement of TARP funds, maybe even earlier bonuses, meant to insure silence during the very dynamic early days of the melt-down.
The MOTU were probably making a lot of promises at the time, so who knows how long they could expect silence but considering how short-sighted these guys have proved to be I wouldn’t be surprised to find out they were sort of week-to-week agreements.
How much do you think Jamie Dimon would pay for a good nights sleep back in Sept. 2008?
Well, I put in my request this morning at the showmethenote website.
I always wondered if some these “mortgages” were being run through AIG before it’s “takeover” .Just wondering,not an accusation,mind you.
BTW,one of the loan “servicers” was Litton Loan Servicing, a subsidary of Goldman Sachs,for the record.
You only think you can think.
You couldn’t be more wrong if you tried.
So my guess is you’re trying.
The issues affecting foreclosures at the level of the individual mortgage are not the principal crime, although that’s important enough.
The foreclosure fraud issue is a direct window into a much bigger/more important fraud committed when the mortgages were bundled into MBSs, and that fraud impacts the whole economy through the investors who’ve been, and continue to be defrauded.
“It’s hard to get a man to understand something when his paycheck depends upon not understanding it.”
That old quote is appropriate for a myriad number of responses and situations,don’t you think,Bob?
Makes me wonder why the insurance companies aren’t squawkin’ the LOUDEST!
Every day, multiple times.
Thanks.
The banks own MERS. It’s nothing but a shell corporation set up by the banks to facilitate a more efficient securitization process. Banks made billions of dollars doing securitizations. Mortgages were to the securitization craze what oil is to the real economy. In otherwords, the banks needed a consistent and constant supply of new Mortgages to create things like CDO’s and Synthetics. These are sophisticated finance professionals, not a bunch of rubes. They set up a system that wasn’t exactly legal and now rather than suffer the consequences for poorly managing their businesses and their risk, they, just like in ’08, want a do-over. They have help in the form of Tim Geithner who has done more to wreck the real economy while enriching his friends on Wall Street than any man who ever lived. He’s shall we say sympathetic to the concerns of his banker friends. The foreclosed and unemployed? You’re on your own. I lost all faith in Obama a while ago because he simply seems to sign off on whatever Geithner thinks is best. Unfortunately for Obama and the rest of us, the interests of Geithner and his friends on the steet diverged from ours a long time ago.
You are wrong because in almost all of the MERS cases, the original paperwork including the note, mortgage, and assignments, if any, were never recorded at the county courthouses in order to avoid paying the filing fees. Then the mortgages were sliced, diced, bundled together with pieces of mortgages called tranches, and sold to banks and investors all over the world. In many cases the original paperwork was thrown away and there it’s impossible to reconstruct the terms of the original loan and identify the party or parties entitled to receive the monthly mortgage payment, much less the proportion each party is entitled to receive. The companies that have been collecting the mortgage payments from the borrowers have no identifiable and compensable interest in any of the properties and none of the necessary and legally required paperwork to prove who owns how much of what. The same is true of the parties that claim an interest in the properties. The impossibility of conclusively determining the identities of the parties entitled to payment and the respective percentages to which they are entitled is the reason why there is no apparent solution to sorting out this mess.
Why did this happen? The banks and investors never were interested in capturing the revenue streams from the monthly payments, which they regarded as chump change. They wanted to make billions buying and selling them in the world casino.
First, notes are not recorded in the courthouse.
Second, the original mortgages were recorded.
Third, the assignments were not recorded. This is problematic, but not a fatal problem.
I have a question: If no one really knows who actually holds the title to the property, what are the implications if the borrower is trying to sell the property? What are the implications for the individual(s) wanting to buy the property?
This is a national disaster. And it will impact all of us when it implodes.
in almost all of the MERS cases, the original paperwork including the note, mortgage, and assignments, if any, were never recorded at the county courthouses in order to avoid paying the filing fees…Mason
Mason, wouldn’t these fees have been written off as an expense,anyway?
It is a serious, but manageable problem.
Actually, establishing MERS was an overt act committed by the banks in furtherance of their RICO conspiracy to make billions of dollars by engaging in a scheme to defraud other banks and investors by selling them MBSs and CDOs that they knew to be worthless. avoid paying filing fees.
The banks meet the definition of a racketeer influenced enterprise that committed multiple racketeering acts of wire fraud and mail fraud to carryout their fraudulent scheme. Creating MERS was an indispensable part of the conspiracy to commit RICO because it eliminated the possibility of prospective buyers discovering that the sellers were selling worthless securities.
An equally important overt act was capturing Moody’s and other ratings agencies and improperly persuading them to award their highest rating to the worthless securities.
I respectfully disagree. The banks didn’t want to pay the filing fees.
This is why the title companies won’t insure title anymore.
I agree.
Deliberately failing to file the original mortgage would never be the policy of a bank. Not even the crazy bastards involved in this mess would adopt that policy.
But, what would I possibly know about such things?
Jeff Nielsen over at Seeking Alpha did a spectacular two piece series on the mortgage scam,over a YEAR ago-and predicted exactly what would come down-and,now it is.
In the Part II,here are a couple of “nuggets” I found particularly “golden.”
“On a related subject, it was recently reported that the huge stash of money which Wall Street has in a “savings account” with the Federal Reserve now exceeds $1 trillion. Doesn’t it seem odd that with Wall Street banks regularly bragging about how much money there are making with their own, in-house trading that they would leave a trillion dollars sitting in a savings account during this fantasy-rally in U.S. markets (which they helped to engineer)?
Obviously the banksters dare not admit to their shareholders or the media that they have stockpiled a trillion dollars as a down-payment for all the pay-outs they will be forced to make in future litigation. Instead, they just hide this money with the Federal Reserve and pretend it doesn’t exist. Meanwhile, as I also pointed out in a recent commentary, U.S. banks are holding at least 5 million already-foreclosed homes off of the market. No point in trying to “sell” these properties if they don’t actually own them.”
NOTE:And might I add, why pay homeowner’s insurance if you don’t own it?And what about those who BOUGHT foreclosed properties-that’s another kettle of fish.
OWNS Foreclosed U.S. Properties?, Part II: the role of MERS
Oct 26, 2009 … Who OWNS Foreclosed U.S. Properties?, Part II: the role of MERS …. This not only is a crippling blow to the U.S. financial crime syndicate …
http://www.bullionbullscanada.com/index.php?…owns-foreclosed-us-properties-part-ii…us... – Cached► Properties?, Part II: the role of MERS …
Oct 26, 2009 … In other words, many (if not most) of the people who have bought “foreclosed” properties in the U.S. over the last few years may own nothing …
seekingalpha.com/…/33036-who-owns-foreclosed-u-s-properties-part-ii-the-role-of-mers – Cached – Similar
I can tell you that in this state, MERS paid plenty of filing fees and recorded the Deeds of Trust as required. What I do not see in public record is the requisite assignments of interest. I suggest that it wasn’t the filing fees they were trying to hide; it was their client lists so that other companies could not poach clients.
Sure it is, if you ignore the law. I know it seems like a technicality but remember these were the same guys who lectured us about the sanctity of contract law over retention bonuses when AIG was imploding and costing the US Taxpayers billions of dollars. There’s a real problem here. Foreclosure laws vary from state to state but I’m willing to bet somewhere along the legal trail, a judge will rule that MERS surrogates have no legal standing to foreclose. Then what? Banks can’t use the courts to enforce only the laws they like and ignore the ones they don’t like. Is that what you’re advocating?
How does this happen?
“So this is how you end up with…foreclosures on homes bought with cash.”
How is it possible to “foreclose” on a home that had no mortgage attached?
Fraud requires intent. That’s a very high bar. I actually understand the reasons for MERS.
Wray’s process will not work. As much as I might dislike MERS it’s like being pregnant. There’s no going back.
You wish to halt banking for an unspecified time, and liquidate the RMBS marketplace, with regards to the rights of the bondholders and obligation of of the borrowers.
As I wrote before, go to the next step with the process you prefer, and estimate the number of people requires at each step, and the costs, and indicate how you’d find the money for each step. Without halting the banking system for more than a long weekend.
Or else, letsgetitdone, it will be itwontbedone, with eggonyourface.
Having a lawyer read your mortgage wouldn’t tell you if the bank was being truthful, if the appraiser didn’t lie, if all the forms were filled out and filed properly afterward, if your mortgage would then be sliced and diced and bundled not as a mortgage but as a security to be sold on the stock market, if the trail of ownership would be broken and lost, and if the bank would lie about it despite being caught.
This all began with fraud and, since the federal gov’t didn’t do anything except bail out the banksters, why wouldn’t the fraud continue?
Since this system or similar one has been used for many years with no real ACTUAL problem, I would guess none is in the offing.
Might be different in your state, but in ours, what is recorded is just about he only thing that matters. If your mortgage is paid off and then reconveyed by the lender or servicer, it would be a massive task for someone else to come and claim different.
Most important is that the servicer or bank records the reconveyance. That you can easily make certain of.
Other states might be different.
By the way, the real remedy would be the so called “real” note holder to sue the servicer for fraud–because they obviously got the money and did something with it. Do you think they just sat around saying, “Well, we got this money from pineywoods, but we really don’t know where to send it.”
Most important, did the note and servicing agreement give the servicer the authority to reconvey? Very, very likely, it did. So, having the authority to do so, their reconveyance is official. The “real” note holder will have to go after the servicer if they don’t get their money.
But, really, you can sure they got their money–in 99.9% of cases.
I don’t think anyone has made the charge that a bank, as servicer, took mortgage payoff money (which in a sale or refinance occurs in one big lump sum) and then kept it and did not pay the note holder. Or, that people who are not note holders got paid money they were not owed.
It is exceedingly rare, but it does happen.
When it does occur, it is usually the consequence of a scrivener’s error concerning the legal description of the property. I have never heard of anyone actually losing their property as a result of a wild foreclosure. But, if if such a thing did occur, the innocent injured individual, would have many avenues of legal recourse available to them.
I’m not following your argument.
If someone can find more than one or two cases of someone whose home burned down and then an insurance company told them that they don’t have the correct lienholder so they aren’t paying, I’d like to hear it. The owner has the insurance. The side beneficiary is the lien holder. Nearly all such insurance payments go to the home owner, who can easily prove he is the owner. And, I don’t even think the insurance companies get into it THAT closely. If you show in county records as the title holder, and you paid for the policy, then that is who they pay.
UNLESS by some odd coincidence, some far off note holder claims you aren’t the holder of title. But, such a thing has not happened and likely won’t.
Most people here are speculating about something that is complicated and that they have no knowledge of.
Mortgages have been bought, originated and sold for many, many years. It is not a new or 2005 to 2008 thing.
The issue is like a smoke screen to get a few more months of free rent and delay the inevitable. Which also delays the recovery. Which we hope is inevitable.
You are right!
That is the issue. Halting foreclosures on people who are far, far behind in payments is NOT going to address that issue.
So, why the attention on moritoriums on foreclosures? Since it will not address the issue you refer to, there really is only one reason–to gain a few more month of free rent.
Attack the real issue.
I think, when it comes down to it, you will find just about everything you are saying here is not correct.
The urban legend might be that the banks didn’t keep track of this or lost it, etc.
I am sure a few might have. In any large number of transactions a few are bound to go wrong. But, more likely, 99% and higher were well kept track of and through a chain of records the original note holder is known.
Otherwise, over the last few years, since the meltdown, thousands and thousands of mortgages have been paid off through refinance or sale–maybe even millions of mortgages.
If all was as you say, there would be tons of money floating around with no home. Mortgages paid off that never got paid to the note holders.
Can you imagine the racket that would have caused if what you were saying was true? Believe me, the note holders would have complained and raised FAR more hell that a few people being foreclosed on.
The reason you have NOT seen such a ruckus is that the note holders were kept track of, they were paid when the underlying mortgages were paid off, etc, etc.
Good urban legend, making people feel they might, somehow, get a free house, but not true.
To those of the ‘nothing to see here, folks’ train of thought, please go to http://www.cleveland.com and search “Mortgage foreclosure uproar” (or google it – sorry, the link was too long for me to post) The stories there might make you change your mind about the accuracy of the MERS system of doing business. Did for me.
Houses should not be poker chips in a Wall Street casino. All mortgage business should be local. Read here why mortgage backed securities should be prohibited.
Litigation and major legal decisions
FDN attorneys Jeff Barnes, Esq. and Elizabeth Lemoine, Esq. have achieved a significant victory in Federal Court in Oregon against MERS. On Tuesday, September 28, 2010, Mr. Barnes and Ms. Lemoine defended and argued Motions to Dismiss the borrowers’ lawsuit challenging a nonjudicial foreclosure.
The Motions were filed by the Defendants OneWest Bank and MERS. During the course of the hearing, the Court repeatedly raised the “MERS as nominee” issues to counsel for the Defendants, with said counsel finally admitting, upon repeated inquiry by the Court, that MERS cannot transfer promissory notes. The Court denied the Motions to Dismiss and has, by Order, commanded the injunction against the sale to remain in place through the duration of the borrowers’ lawsuit.
The questions posed to the Defendants’ counsel by the Court on the record demonstrate, again (as with the concerns of the Michigan court highlighted in our other post today), that courts are really starting to examine the inconsistent claims made by MERS (e.g. that it is “solely a nominee” yet purports to have authority to further foreclosures by, among other things, transferring promissory notes and appointing successor trustees). What the case law is consistently holding is that MERS cannot do what it has purported to do (and has done in what appears to be over sixty (60) million mortgage transactions nationally). [1]
Wikipedia
It’s important to understand why the banks don’t want anyone digging around those securitization documents. Banks made certain representation to bondholders about what was in those bonds. For instance, let’s say a bond is sold to investors which is made up of 75% prime mortgages, 15% mezzanine (between prime and subprime) and 10% subprime mortgages. Sometimes the banks didn’t enter the tranches until after the bond was sold, this is called TBA’s (to be announced). Generally, the system worked well when prime loans were more plentiful but like everything else, there’s a finite number of quality loans to securitize. Near the end, many of the bonds that were sold to investors under this scenario or close to it probably don’t meet the requirement of containing 75% prime mortgages. Bondholders aren’t without resources and once they start to realize they’re the victims of fraud, the banks are in real danger. Up to now, nobody wants to open the lid on this pandora’s box. Big insurance companies and pension firms don’t want to see the value of their holdings destroyed overnight by questioning what’s in those MBS’s. The banks won’t open it because they know their liabilities will far exceed their assets and the government won’t open it because freddie and fannie have gobbled up what Atrios politely calls the big shitpile. It’s a time for magical thinking. They all know what’s in that box. They will do whatever they can to be sure it stays closed. But like pandora’s box, the temptation will eventually prove to great and someone someday will open it and we’ll all never be the same afterward.
Kinda like what the butcher does with all the “naughty bits” after all the prime has been carved away.
That’s what they make bologna with,right?
Seems like a LOT of phony bologna being marketed at prime rib prices.
Please see #79.
Thank you for that Pandora’s Box ananlogy.
Wall Street went from lock box to Pandora’s Box.
” But, more likely, 99% and higher were well kept track of and through a chain of records the original note holder is known”
That’s true but it’s beside the point. Mortgage servicers are in the business of collecting and allocating those mortgage payments to the bondholders, they are not the Mortgagee. Once a property enters foreclosure proceedings, they are notified and they in turn notify the bondholder. That mortgage tranche is removed from the bond making it less valuable. Bondholders don’t own individual tranches, they hold an interest in the particular bond as a whole. Finding out who’s got the right to foreclose according to the letter of the law isn’t going to be so easy. The banks can’t complain because they set up this system and have personally benefitted from it for over a decade. The law in most states says you must prove you own that individual mortgage in order to foreclose. Good luck with that one. I know your response is to just ignore that little detail but it won’t be ignored.
Re: OneWest Bank…perhaps many will remember them by their earlier incarnation,IndyMac.
Ring a bell?
IndyMac Bank’s new name: OneWest Bank – Los Angeles Times
Mar 20, 2009 … The sale of IndyMac Federal Bank was concluded Thursday, and the new owners wasted no time in ditching its tainted name.
articles.latimes.com/2009/mar/20/business/fi-indymac20 – Cached – Similar
Bankers are to blame for many things but the blame for allowing the rating agency monopoly belongs to the federal government. The rating agencies have a huge conflict of interest. They are supposed to be independant but in fact they depend on the broker/dealers for nearly all of their revenue.
Government requires most institutional money managers (pension funds, insurance companies, ect.) to limit their risk. These large customers would be unable to buy bonds without that AAA rating. That simple step, eliminating the rating agency monopoly, should have been taken when we did FinReg but of course it wasn’t. The banks have a friend at the fed but they have a sugardaddy at Treasury.
Does this mean I can make myself a Vice President of MERS and foreclose on my own house?
If just about anyone can foreclose on me, I might as well do it myself.
off topic but I know the guy who bought the firm. He’s an ex-Goldman Sachs banker. Very smart guy too. In fact, he didn’t use much of his own money to do it. Indymac was taken over by the FDIC. They look to quickly do a sale so whatever value the firm still has can be retained and the fund can at least limit their exposure. He bought the firm at the height of the panic and the FDIC assumed a large part of the liabilities on their books. It was a great trade. He quickly raised some money, put together a plan and now he’s the owner of a new bank without a ton of liabilities. If there’s another banking crisis, and my guess is there will be, it’s banks like this that will be the only ones left standing. Ironic isn’t it?
Mass media tries to pretend that this is a paperwork problem, but it is an ownership problem. The article is alarming but not alarming enough. As far as I can tell most mortgages issued recently do not have owners. MERS was explicitly set up as a “black box” that magically transformed mortgages to bonds.
Foreclosures just illustrate the problem; even people who are current on their mortgages are affected. You have to rely on the bank to make the payements to the lienholder and it is not at all clear that they are doing so. When the funds start fighting over who owns the underlying assets (your house) it may become impossible to sell. This is happening now. Bank of America is being sued by DeutscheBank for over a billion dollars for improper loan servicing. Wells Fargo is also suing itself, in an amusing illustration of just how messed up the whole system is.
The problem is that the CDO model does not take asset ownership into account. The instrument is sliced up and sold to different owners but which owner even potentially owns an individual asset changes based upon how many assets are in default. It is mind-bogglingly complex and pretty much a fraud.
However, once you have wrapped your head around MERS and the problem of a CDO where the bond that is backed by houses doesn’t give the bondholder rights to any individual house you are ready for the next step. When mortgage backed CDOs stopped selling on the open market the banks started selling them… to other CDOs! This is called a “CDO-squared.” It is a CDO based upon tranches of other CDOs. Then there are CDO-cubed and more. God himself couldn’t assign ownership of the underlying assets of a CDO-squared. (I strongly suspect that this was a deliberate mechanism to obscure the fact that there were more bonds created than mortgages to support them, in other words fraud.)
In my opinion this is the “ground zero” of the financial collapse. All of the money available for real estate investment was getting hoovered into dodgy funds, fees and bonuses. House prices were inflated beyond what anybody could afford, and well beyond any intrinsic value of the asset. Yet in the quest for more fees the industry kept cranking out financial products, being careful to make sure that somebody else was holding the bag.
I have no idea what the solution is, but it should involve large numbers of “smart” people going to jail.
Perhaps it’s because I’m a Louisiana attorney that I am having a difficult time understanding what you mean by “title”.
Louisiana, unlike the 49 other states, has civil law not common law. In civil law there is no splitting of title, no equitable title and legal title, and no trusts involved in holding some portion of “title”. In Louisiana if you buy property, you have title, period. And that title is in full, the same as if you paid cash for the property. Your absolute title is not diminished by having a mortgage on the property. The mortgage, if properly recorded, is a lien on your fully titled property.
Roger that.
I think that’s true, but imagine the scale it took to achieve that distinction: Little Timmy TurboTax has to leapfrog past Greenspan and Bernanke. That takes some doin’!
Every single court challenge to the standing of MERS in the foreclosure process has been upheld, either in the initial court proceeding or upon appeal, when proper evidence is presented before the court. Prof. Peterson’s assertion that “virtually any company can show up, claim to own the note, and proceed to foreclose,” is false. Foreclosure is a terrible thing for homeowners but none of the confusion surrounding erroneous foreclosures can be ascribed to MERS.
MERS does not create a defect in the mortgage or deed of trust. Claims that MERS disrupts or creates a defect in the mortgage or deed of trust are not supported by fact or legal precedents. This argument is often used as a tactic by lawyers to delay or prevent the foreclosure. The mortgage lien is granted to MERS by the borrower and the seller at closing and that is what makes MERS the mortgagee. The role of mortgagee is legal and binding and confers to MERS certain legal rights and responsibilities.
MERS does not initiate foreclosure proceedings; it is the lender that initiates the proceeding. Similarly, certifying officers are designated by lending institutions and are allowed to execute only certain documents on behalf of MERS. Certifying officers selected by their employer are expected to fully comply with the policies of the lending institution for which they work, as well as MERS guidelines and all applicable laws and regulations.
Regarding the recording issue that was raised several times in the report, MERS fully complies with all recording statutes. The purpose of recording laws is to show that a lien exists, which protects the mortgagee and any bona fide purchasers. When MERS is the mortgagee, the mortgage or deed of trust is recorded, and all recording fees are paid. As for the fees themselves, these are local fees for service; if no service is needed or requested, no fee is appropriate. Additionally, any costs savings on fees are passed on to consumers.
MERS does not remove, omit, or otherwise fail to report land ownership information from public records and the trail of ownership does not change because of MERS. Parties are put on notice that MERS is the mortgagee and notifications by third parties can be sent to MERS. Mortgages and deeds of trust still get recorded in the land records.
The MERS System tracks the changes in servicing rights and beneficial ownership. No legal interests are transferred on the MERS System, including servicing and ownership. In fact, MERS is the only publicly available comprehensive source for note ownership.
While this information is tracked through the MERS System, the paperwork still exists to prove that actual legal transfers occurred. No mortgage ownership documents have disappeared because loans were registered on the MERS System. These documents exist now as they have before MERS was created.
We hope this helps clear up some of the confusion on these issues.
When “proper” evidence is presented before the court.
Aye, there’s the rub.
nice try.
“Every single court challenge to the standing of MERS in the foreclosure process has been upheld, either in the initial court proceeding or upon appeal, when proper evidence is presented before the court.”
That was when nobody ever heard of MERS. I suspect the courts might take another look now. It’s important to know that MERS isn’t real. It’s an illusion. The banks created MERS and manage it. As was the case in Florida, the legal streamlining of foreclosure procedures allowed for quick resolutions which effectively tilted the playing field in favor of the banks. Let’s see what judges do now that the world is watching and the opposition isn’t completely outgunned.
Please see bold face type @ #92.
The claims of Merscorp are as fictitious as the instruments that they recorded. “None of the confusion regarding foreclosures can be attributed to MERS” “MERS does not create a defect.” This is what we call “argument by assertion.” “Mers has not lost a case.” Simply repeat something enough times and hope that it is true. All statements are demonstrably false.
If the papers were recorded properly rather than in sham names, and if the subsequent assignments had been recorded in public rather than in a secret “members only” database then there would be absolutely no legal difficulty with foreclosures. The problems we are having are directly attributed to the MERS model, as was well explained in the article.
The position of MERS is that registering a mortgage in their name “puts the world on notice” that there is a (non-public) assignment in the record” and is sufficient notice of a lien. Whether this logic holds up is currently being investigated by 49 Attorney Generals. There is no precedent in the last millenia of property ownership for what they have done.
“The purpose of recording laws is to show that liens exist.” I’d like to see a cite for that one; I always thought that the purpose of recording laws was to show WHO OWNS the lien. “Joe owes somebody $1000″ is not a very useful legal statement when there are multiple somebodies. Simply redefining the purpose of laws to suit your own ends is a legal strategy known as “baloney.”
“No ownership documents have disappeared…” is not something that any officer of MERS would have knowledge of, and it contradicts sworn testimony that the banks shredded original notes. Again, just making assertions enough time in the hope that they stick.
As far as MERS not losing any cases, what do you consider “MERS v. Southwest Homes” where the Arkansas Supreme Court denied them standing precisely because of their business model.
The impact can be small or great depending on what the Government does. See this.
Synoia, you still haven’t answered my arguments, and now you’ve got some from Randy Wray to contend with also. And while it may be true that I will have egg on my face in the future, it’s on your face now. See here.
It might clear up things if you could address the immediate counter-examples, such as the ones discussed by Cynthia Khouril in her many posts on this site, and also the case cited just above.
Really, if you’re going to make such a blanket statement here at FireDogLake, you need to be able to contradict the very great number of posts at FireDogLake stating otherwise and presenting evidence to the contrary. Otherwise you’re just wasting your time and ours.
It actually is pretty much the same in California. You have the title, the bank has a lien against the property.
You can do as you like, but usually, the loan dictates that you pay the loan off if you sell the property. Maybe other clauses too, I am not a lawyer.
Again, eventually, if you don’t make the payments, the bank or someone is going to take over the property and you are out. Whatever the documents.
The banks ought to be fined for bad docs, etc. But, no one is going to stay in a house over the long haul if they aren’t making the payments.
I think we tend to look at the problem through the wrong end of the telescope. Of course it matters a lot to people who are going to be foreclosed upon, but it is hard to imagine any universe where the solution is going to be that people who are not paying mortgages get to stay in a house encumbered by them. This is a sideshow in my opinion.
The more dangerous problem is what this system has done to our confidence in property ownership. The MERS system was designed by Electronic Data Systems (EDS) which should send chills down the spine of anybody technically knowledgable. (http://www.devtopics.com/20-famous-software-disasters-part-4/) The system was designed to be opaque, and it is managed by a company with a reputation for software disasters.
I’m not sure that I have the confidence to buy a house that has MERS anywhere in its chain of title right now.