It’s pretty clear to me at this point that when financial lobbyists want to launder their preferred outcomes, they leak them to Brady Dennis and Ariana Eunjung Cha at the Washington Post. Earlier this week they ran an article claiming there would be a quick settlement to the 50 state AG investigation, based on unnamed sources. The substance of the article was quickly refuted by the New York Times.
Now, Eunjung Cha and Dennis are back with an article about lobbyists seeking to give retroactive immunity to MERS. It’s useful to know what the lobbyists seek, but Eunjung Cha and Dennis clearly have the mindset that whatever the lobbyists want is what’s best for the country.
The financial services industry has launched an aggressive campaign on Capitol Hill to bolster the legality of the way companies have turned mortgages into securities and traded them across the globe in recent years.
The companies have opened wide their wallets for lobbying and are flying top executives to Washington for one-on-one meetings with lawmakers. They are holding briefings for key staffers, including an event last week that drew more than 60 aides. And they are blanketing Congress with white papers, memos and other documents that lay out their arguments [...]
The industry is seeking legislation that would effectively affirm MERS’s legality and block any bill that would call into question what MERS does. MERS has spent more than $1 million in lobbying since fall 2008, when lower courts around the country began to rule against it. But MERS had kept its name under the radar until the recent uproar over foreclosures revealed broad problems in mortgage paperwork.
One million dollars! Oh noes!
Of course financial lobbyists are working to indemnify financial fraud. This is a story with all the richness of “Breaking: Water Wet.” What Eunjung Cha and Dennis fail to tell their readers is whether the Congress has the power to do what the lobbyists want: grant retroactive immunity for MERS.
I don’t see it. Foreclosure actions are governed by state courts; that’s who has the jurisdiction, not Congress. In addition, municipalities who have basically been deprived recorder fees from the MERS system, totaling billions of dollars, would simply not go away if MERS somehow was indemnified as legal through Congressional action. They could still recoup their losses for the recorder fees when MERS’ legality was in doubt.
There’s no question that making MERS legal would solve a lot of problems for the industry. The question is, can they do it? Here’s who Eunjung Cha and Dennis talk to about that:
• The CEO of MERS, R.K. Arnold;
• The deputy executive director of the American Securitization Forum, an industry group who just put out a white paper that claimed MERS was valid and legal (one which Adam Levitin said in Congressional testimony focused on the wrong issues entirely);
• Ira Rheingold of the National Association of the Consumer Advocates, but only to get a quote on why it would be a bad thing if this happened.
You can argue about whether creating a federal land title system would be viable, as Rep. Marcy Kaptur and John Taylor of the National Community Reinvestment Coalition wrestle with in the article. You need to argue over whether it’s legal to take away the land title system that has existed in this country for over two centuries. Eunjung Cha and Dennis don’t bother to do that, because, well, I guess some lobbyist said it was legal.
I do find it interesting who’s doing the lobbying for MERS:
Lobbyists working for MERS include people who were prominent legislators or federal officials: former U.S. representative Bob Livingston and his former chief of staff, Allen Martin; John M. Duncan, assistant secretary of the Treasury for legislative affairs in the George W. Bush administration; and Arnold Havens, a former general counsel at Treasury.
Awesome.
I eagerly await the next article from Eunjung Cha and Dennis, when they mention that there’s dubious Constitutional claim for the federal government to take control of the state land title system, that the pooling and servicing agreements have standards above that of state or federal law and would not be affected by this ruling, that securitization is governed by New York state trust law and that foreclosures by a patchwork of state laws, and that the entire scheme by the lobbyist class is completely unworkable.
I’ll be waiting a long time.





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Good post David. “But is it Legal?” Let me answer your question with a question. Does it matter? The government only sees the law as an incovenience. Figure out how to make the most money possible for the rich and change the laws accordingly. Pretty simple really.
I fail to see how legalizing MERS can undo the wee problem of failing to endorse mortgages into MBS trusts within the time window. Notes endorsed-in-blank violate the PSAs. The horse has already left the barn on this issue.
Legalizing MERS can’t undo the fraud that has already been perpetrated upon the courts with the robosigned affidavits already entered into evidence.
And what, exactly, about MERS will become legal? It’s status as nominee, or as mortgagee? On its face MERS is nothing but a shell company intended as a shield against prosecution for fraud. Legalizing MERS is to legalize fraud in the intent to deceive.
“The government only sees the law as an incovenience.”
Right, but state courts may not. And investors who see the ability to get out of crappy MBS certainly do not, and everything covered here regarding MERS has no application to their pooling and servicing agreements.
Sounds like somebody is getting desperate.
Must be all those investors camped out on their doorsteps screaming to get their money back, because I know they’re not bothered by the screams of the homeowners they’re putting through
foreclosureenhanced interoggation down in the basement.I have a feeling these guys are going to find out that it’s harder to time the arrival of subpoenas than it is to time the market.
“Notes endorsed-in-blank violate the PSAs.”
Got link for this?
“Problems in Mortgage Servicing from Modification to Foreclosure”
Written Testimony of Adam J. Levitin, Associate Professor of Law, Georgetown University Law Center
Senate Committee on Banking, Housing, & Urban Affairs, November 16, 2010
p.22
The worst case scenario, therefore the most likeliest with this bunch, is for Congress to immunize MERS from any legal action by investors or homeowners. So MERS gets a bailout. But then investors sue the US Government on an inverse condemnation claim (that the law is a regulatory taking unjustly deprived them of the value of their investments) and they get their own court-ordered bailout.
http://en.wikipedia.org/wiki/Inverse_condemnation
In other words, Congress could put taxpayers on the hook for a 200% bailout without helping a single family keep their home. Good times.
Thanks David.
I think there’s gonna be hell to pay if MERS and the Big Banks are allowed to get off the hook on this issue.
Brady Dennis and Ariana Eunjung Cha: The MERS Megaphone Mouthpieces via the WaPo0
Wonder where all the “states rights” (aka right wing blowhards) are on the “nationalization” of property deed recordings?
Come out, come out, wherever you are!
There is so much illegality in this situation that it is going to be difficult to sweep it under the rug. Clearly that is not going to stop them from trying.
I believe it’s necessary to legitimize the MERS mess. And I also believe it will happen. There is too much money at stake for this not to happen.
As much as 60 million mortgage holders would like to be off the hook (which they would not be), the homeowners would get sued out of their home because the notes are still valid, only the security instruments that enable foreclosure are not valid).
I also have no sentimental attachment to the current recording system.
My point is what should we demand as the price from legitimizing MERS?
Here are some options:
1. Cramdown for residential mortgages?
2. HAMP to become effective and use the money appropriated?
3. Other options?
This is the time we can gain some leverage. We either size the advantage to make 60 million loans properly secured, or we loose the opportunity.
Please do not quote the solutions from Wray or Denniger at me. These involve closing major banks, and as we have noticed, this is not going to happen.
So you’re comfortable with the Banksters via MERS ripping off the state and local governments for recording fees to the tune of a few billion dollars? At a time when both are cutting services and jobs? Because that’s what you are seemingly saying here.
The banks created the mess using MERS and lost control of the chain of title (audit trail) All legalizing MERS does and absolving them is brush it under the rug. The chain of title is still lost. Along with the recording fees which they wanted to avoid having to pay.
And yes, if it means a few TBTF banks actually have to fail, that is a good thing in the long run.
And I miss ed(it).
Let’s focus on the homeowners. The fees are gone, and are not the Germaine issue.
Homeowners are the Germaine issue.
Possibly the successor to MERS could be some form of online recording system. If so, add it to the solutions.
Copy that.
I do believe that Congressional “key staffers” are paid by us taxpayers. How about briefings for the lesser people and how about letting everyone else know what these 60 “aides” are doing for or against MERS. Is it Top Secret?
Ah but the fees are a very large part and parcel of the issue and are part of the root problem.
The fees are not all gone. They need to be part of the solution (along with the cramdown)
And I really doubt if all the cities, towns, county, and state governments that have come to rely on the recording fees as part of their funding will so blithely give them all up to save the banks a few billion dollars to escape their fraud. Because many of those governments have those fees enshrined in law.
What’s their end in this? Are they being greased in some way, are they trying to position themselves in the “right circles,” or are they just plain stupid?
Also, is it anticipated that any of the state actions will go after individuals, too? I’d enjoy that. Just clean their f-n clocks.
Also there are two instruments for a loan on a home, a note, and security instrument (mortgage or trust deed).
In CA, where I live, trust deeds, the security for the note, are recorded. Notes are never recorded. If a note named the holder, it could be assigned many time and never be recorded.
The trust deed refers to the amount of the note, it’s original loan number and names the trustee for the trust deed. Only change of trustee requires re-recording the security instrument, not the note.
This loss of fees to which you refer is, I believe, not as valid as you believe.
Nor is it of any consequence to the homeowners and our neighborhoods, who are the one needing the help.
Ok, add the lost fees to our demands of the Banksters.
The list I had was open-ended. It is now:
1. Cramdown for residential mortgages?
2. HAMP to become effective and use the money appropriated?
3. Reimbursement to the counties for lost fees
4. Preservation of fee revenue in the future
5. Preserving the role of country recorders in the recording process (there are many instrument that get recorded, including many forms of liens)
6. Other options?
No, it’s not legal. But IOKIYAR. We know that rule very well.
Are you absolutely sure that each and every transaction of the trust deed has been properly recorded?
That is part of the problem as I understand it, many of the notes have been re-assigning trustees (for California)
And since this is a nationwide problem, the way California does things is not the same way it is done in the other 49 states, so even if there is not a problem in CA (which I seriously doubt is as benign as you suggest), it still doesn’t mean it is not a problem elsewhere. Many states and municipalities require the full recording of each movement of the title and the accompanying note.
Substitution of trustees must be recorded or there is a cloud on title.
Is it done perfectly? No.
I cannot speak to other states. I only know how it is done is CA.
And that is part of the problem. Even though substitution of the trustees “must be recorded” it seems that they (the banks and MERS) have not been doing so which is why there are clouds on titles of property all over the country, why banks (or other parties) have had multiple organizations attempting to foreclose on the same property, or foreclose on the wrong property.
It is why SEIU started the “Where’s the note” campaign to force the banks to fully identify things
I believe is should be IOKIYHLO$ (LO$=Lots of Money)
Being republican or democrat is just window dressing.
If corporations say it’s legal and constitutional it is legal and constitutional. Just ask Chief Justice Roberts.
Next question.
A few things I think of when it comes to federal govt fixes of this monster mess. What DDay said:
That first part, “there’s dubious Constitutional claim for the federal government to take control of the state land title system,” — I love to quote Mary:
Is it legal? This question reminds me of the gag on the Letterman Show called “will it float?”
If you own the President, the Senate and the Supreme Court, it’s a silly question.
IS IT LEGAL – A great late night with David game!
meanwhile, in around 1998 the check clearing system in the US used a new Federal Law to get around the idea that a bank had to have physical possession of the check proved to you before it could deduct the money from your account Fed say so with a photocopy became sent via email became all one needed. Indeed today “checks” are honored without signature based a bank statement saying it was verbally authorized by their client II am not sure this is actually legal – could be a question in the game).
As someone note – our USSC has 5 folks that never vote against corporation wishes , so I suspect a Federal law on MERS with retroactive immunity will be upheld under the commerce clause.
Well we have the edit function back – but it expires in less than 5 seconds! – Sorry about all the typos in my prior post.
Book Salon up with Lt. Col. Anthony Shaffer’s Operation Dark Heart: Spycraft and Special Ops on the Frontlines of Afghanistan — And the Path to Victory hosted by Spencer Ackerman
So the lobbyists are working hard to legitimize MERS, ergo its actions were illegal. Where is Attorney General Eric “See No Evil” Holder when we need him? The multiple owners of MERS should make it a RICO case
Yes. And even before that, is it wise to replace a system which has worked for two centuries with a broken mess which hasn’t worked, isn’t working and will likely continue to malfunction?
MERS needs to be put down.
You can look at this post which links to a PSA and see for yourself.
But what if it could be spun that way? See this youtube (embedded in ForeclosureHamlet here) — it’s part 1 of 5. I’ve watched two parts so far. In part 1, the poster, DinSFLA, pans between foreclosure documents — the court papers, the assignment of mortgage, and a list of OneBank’s Attorneys-in-Fact [filed with the FDIC?] when they took over IndyMac, effective March 2009. The flow of the property assignment is impossible chronologically (“you can’t have an omelette if the chicken hasn’t laid the egg yet”) and the same people sign both as the assigning MERS vice presidents and as the assignee bank attorneys. But note this from Part 1 (video posted February 2010:
That last, the notarization in Texas — hello HR 3808?
Remember that foreclosure mill attorney David J. Stern in FL was foreclosing on behalf of his clients Fannie and Freddie — fed GSEs who btw were part originators and are part owners of MERS. I say that as an easily hypnoized chicken.
Hypnotized. Hypnotized chicken.
As in, see this chart on Huffington Post: Man Makes Ridiculously Complicated Chart To Find Out Who Owns His Mortgage (CHART):
It took the homeowner a year to make that flow chart. You can get lost following the colored arrows through the boxes and names on it. Note the black circle on the right side: “Black hole”
See another chart [Mortgage Meltdown chart], that I linked to in this comment I left in an earlier blogpost; specifically step 6: Investors worldwide gobbled up the securities
In Part 3 of the video series, DinSFLA tracks his mortgage through a Deutsche Bank mortgage-backed trust prospectus — which I am glomming here because Deutsch looks international to me, but it also refers to PSA language, so perhaps this is of interest @6:
Robert Scheer wrote a column on Goldman Sachs and its part in the Greek crisis last February. Like, I don’t know if the black hole in the mortgage chart @39 is the same black hole that Goldman Sachs hides stuff in, but just note that there’s a worldwide financial black hole incentivized to get bigger and bigger and bigger, and that mortgage-backed securities are not the only derivative involved…
…bigger and bigger and bigger…
Re Synoia @12, Check out the ballpark:
That was February. I wonder what the numbers are now?
In June:
Financial black holes and national security … is this how states lose property rights law?
Synoia makes the point that
I DO make Randy Wray and Bill Black’s case, and I say it because there’s no way anyone in the world can afford the alternative that you see as inevitable. It’s not just existing money that’s at stake, it’s still-mushrooming cloud fantasy-casino debt that there is not enough money in the world to cover and it’s time to get real, real fast:
Note the diff between 1.6 trillion in the above-referenced quote, and 605 trillion @43 worldwide inclusive of all black hole derivatives, noted in February 2010, God knows what it is now. If it took one Rosa Parks to say No I Will Not Move to the Back of the Bus to stop the national illegal insanity of discrimination, I am all for lone property owners saying No You Don’t Have the Right To Foreclose to put a stop to the global illegal insanity of fantasy-based securitized derivatives.
That’s me being hopeful. A stitch in time saves… what’s Goldman leveraged at? 858%?
It would be interesting (fabulous!) if Congress took note that black holes are the problem with national security (@44), and not the solution.
David Dayen is upstairs!
Government Shutdown in December?
If you whitewash MERS, you can kiss property law goodbye, you can kiss due process goodbye. You can kiss a large part of what makes America unique goodbye.
Where’s the damn Tea Party protests now? What a bunch of suckers.
What a sick joke this all is.
But the point is that many of the issuers never registered the trust deeds either, once they had registered the mortgage with MERS. Once they did that they shredded the original mortgage. If I remember correctly, when Tanta at the Calculated Risk blog wrote about this documentation problem back in 2008, she said some of her sources told her they had shredded the notes, too, once they had been securitized. They were going all out to cut corners and reduce staff to maximize their profits. I’ll have to go back and read her articles. This stuff was already coming up back then, it’s just gotten more publicity recently.
Over one million foreclosures this year alone, in spite of the moratorium.
He, along with the other regulatory agencies, is committed to the Prime Directive: Save the Banks.
Silly consumers…..all this discussion is just a bunch of wanking, as you most certainly should realize if you’ve been awake and semiaware for oh, the last ten years or so. I’d say longer, but (as the Republicans realize), people have short memories. MERS will be whitewashed, as will all potential fraud charges against banks, because bank managements and their creatures MUST be indemnified against the consequences of their own actions/greed. The Senate is owned by bankers, per Richard Gephardt, and the House isn’t far behind. Obama, Bush….makes no difference. Bankers will get richer and go free, because the “free market” requires it and so do our legislators – gotta keep those bribes, er, campaign contributions flowing. Two hundred years of common law and state statutes will be overturned, if necessary by one or more Supreme Court decisions, all, of course, with the obligatory disclaimer about how the decisions are “limited to the present circumstances”.
Not a single meaningful thing has or will happen to the creatures who screwed the mortgage market and the larger economy and got rich doing so. Chuck Prince got fired from Citi…but got paid $53 mil in salary for four years work before he got canned for running his company into the ditch. Angelo Mozilo settles with the SEC for $67.5 mil….leaving him with a net worth of over $500 mil. Oh, the humanity…the humiliation! Responsibility for one’s actions? That’s for the little people, like you, and me, and 99% of the populace. Your role is to pay your taxes, your mortgage, your credit card bills, and shut the fuck up.
I believe in CA all original trust deeds are recorded. If they are not recorded then the loan is a unsecured loan.