The House Judiciary Committee held a hearing today, the fourth in a few weeks on Capitol Hill, on foreclosure fraud. And because this was a Judiciary Committee hearing, the focus was a little different. We heard more about standing to foreclose and the whole legal mess in this hearing.

Mortgage lenders and their servicers, by flooding courts with falsified foreclosure documents, have created chaos in the judicial system, housing lawyers told lawmakers.

“As we allow the mortgage loan industry to circumvent the rule of law, we show that corporate interests can get away with such massive dishonesty,” said Thomas A. Cox, a foreclosure- defense lawyer. “We thereby encourage more of it.”

James A. Kowalski, a Jacksonville, Florida, foreclosure defense lawyer, described a homeowner who is facing simultaneous foreclosure lawsuits filed by two different trustees both claiming to own the same loan [...]

“It’s a bedrock securitization problem,” Kowalski said in an interview before today’s hearing. “Once we allowed the securitization model and the concept of the securitized trust servicer to run the show, we ended up going down this road.”

Cox and Kowalski are the right two people to listen to about this. They’re on the front lines in the courtrooms and they know the law. Judge F. Dana Winslow of the New York State Supreme Court also testified, and he said that judges, who helped create this atmosphere of chaos by accepting faulty documents, are starting to “recognize the need to scrutinize the evidentiary submission of lenders and their agents.” That’s bad news for lenders and their agents.

Julie Williams, the chief counsel of the Office of the Comptroller of the Currency (OCC), said in the hearing that banks could face “civil money penalties, removals from banking and criminal referrals, if warranted” from the documentation problems. I’d doubt the last two, and the first would amount to the cost of doing business. The far bigger problem the banks have, beyond the regulators, is with the courts. More from Ariana Cha.

New York State Supreme Court Justice Dana Winslow said Thursday in written remarks that “standing has become such a pervasive issue” in the cases he sees “that I frequently use the term ‘presumptive mortgagee’” to describe the entity trying to foreclose.

Winslow described a litany of problems with documentation about mortgages that go far beyond the “robo-signing” that led to the current uproar over foreclosures. He said it’s unclear whether MERS, the electronic system used by the majority of lenders to record mortgage assignments, gives it the right to foreclose, as well as whether trusts — where many mortgages wound up after they were pooled and traded — also have that right [...]

University of Utah law professor Christopher L. Peterson raised further questions about MERS in his written remarks, saying the system has a “problematic legal foundation” because it undermines state recording laws.

Calling MERS a “deceptive” and “anti-democratic” institution because it allows 20,000 people who are not its employees but rather employees of mortgage lenders, servicers and law firms to sign mortgage paperwork in its name, Peterson argued that the practice clouds the ownership of the loan.

Peterson said Congress should stop Fannie and Freddie from buying any loan recorded by MERS because of the title problems – there’s actually legislation to that end from Marcy Kaptur.

Testimony from all the major players at the hearing is available at the bottom of the link.

Between this and Tom Deustch’s FAIL yesterday at the Senate Banking Committee hearings, everyone on these committees has had the opportunity to know the extent of the very real problem involved in foreclosure fraud. Add to this the revelations in Countrywide v. Kemp, and it’s clear that the entire land title system of the United States is at risk.