MERS "chain-of-custody" issues preventing foreclosures.

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Submitted by afx114 on September 22, 2009 - 9:15am

Anyone know anything about this? It says it only applies to Kansas, but will this set a precedent for the entire country? What happens next for both the troubled homeowners and the banks? What does this mean for the rest of the market?

A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose – on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name.

It seems that a court has ruled that about half of the mortgage market has been run as a criminal enterprise for years, which would invalidate any potential forelosure proceedings for about, oh, 60 million mortgages.

http://www.globalresearch.ca/index.php?context=va&aid=15324 via http://trueslant.com/matttaibbi/2009/09/22/landmark-decision-massive-relief-for-homeowners-and-trouble-for-the-banks/

Submitted by jpinpb on September 22, 2009 - 9:18am.

This is one heck of a cog in the wheel. I see more litigation and appeals here.

Submitted by urbanrealtor on September 22, 2009 - 10:24am.

Since like 99% of foreclosures in our fair state are non-judicial (by design and contract) this would likely be a non-issue.

Now if anyone tried to fight the foreclosure (which is honestly rare) this could come up.

However the real issue is that California repos don't require a judge or atty. It just requires a dude to file a form at the county office and 17 bucks for recording.

In case you're wondering, yes, this does result in errors and abuse.

Submitted by ucodegen on September 22, 2009 - 3:24pm.

The ruling is based upon whether the person who is trying to repossess can prove that they really hold the loan, particularly if they are not the entity that originated it.

MERS has no standing because they don't own it.. unless they are being paid to 'service' the loan, at which point they do. The problem is.. can MERS prove that they control that loan (paperwork trail?).

During the real-estate madness heydays.. I don't think that many people were keeping the paperwork in order.

Submitted by CricketOnTheHearth on September 22, 2009 - 3:50pm.

Every time I think I know how badly mucked up the housing market is, someone shows me new depths like these.

Holeee krap.

Submitted by jpinpb on September 22, 2009 - 5:01pm.

I track NODs and many times I have seen MERS.

Submitted by moneymaker on September 22, 2009 - 9:30pm.

Somebody or entity somewhere owns these houses. Ownership can't change without a paper trail, that's to protect against fraud. The right of redemption however I'm less clear on. What if someone gets foreclosed on and then before a year is up wins the lottery and wants their house back. You know it's going to happen to someone in CA someday.I'm guessing all monies would have to retrace, no harm / no foul. The new buyers would just have to happy to get their money back?

Submitted by urbanrealtor on September 22, 2009 - 9:46pm.

dupe

Submitted by urbanrealtor on September 22, 2009 - 9:46pm.

threadkiller wrote:
Somebody or entity somewhere owns these houses. Ownership can't change without a paper trail, that's to protect against fraud. The right of redemption however I'm less clear on. What if someone gets foreclosed on and then before a year is up wins the lottery and wants their house back. You know it's going to happen to someone in CA someday.I'm guessing all monies would have to retrace, no harm / no foul. The new buyers would just have to happy to get their money back?

That would be true in a mortgage repo or a judicial foreclosure.
However, California went to trust deeds and non-judicial about 30 years ago.
There is no right of redemption for most California repos.

Submitted by patb on September 23, 2009 - 12:07am.

tanta says this would be a real big problem in that
it will make future sales almost impossible.

between clouded titles, and a real hassle in trying to
get papers to closing, this will not be a good thing either.

Submitted by urbanrealtor on September 23, 2009 - 11:41am.

patb wrote:
tanta says this would be a real big problem in that
it will make future sales almost impossible.

between clouded titles, and a real hassle in trying to
get papers to closing, this will not be a good thing either.

Doris Dungey (Tanta) has passed on so she doesn't really weigh in on this anymore. Unfortunate, because she really had some good insights here.

http://www.calculatedriskblog.com/2007/1...

or here

http://www.calculatedriskblog.com/2007/1...

The point is that regardless of the physical or virtual custody of the paper, these problems can be worked out. The courts just force the banks to be less sloppy. Sounds like this is what happened in the MERS case.

Please tell me if it seems like I am wrong on that.

Submitted by patb on September 23, 2009 - 9:00pm.

urbanrealtor wrote:
patb wrote:
tanta says this would be a real big problem in that
it will make future sales almost impossible.

between clouded titles, and a real hassle in trying to
get papers to closing, this will not be a good thing either.

Doris Dungey (Tanta) has passed on so she doesn't really weigh in on this anymore. Unfortunate, because she really had some good insights here.

http://www.calculatedriskblog.com/2007/1...

or here

http://www.calculatedriskblog.com/2007/1...

The point is that regardless of the physical or virtual custody of the paper, these problems can be worked out. The courts just force the banks to be less sloppy. Sounds like this is what happened in the MERS case.

Please tell me if it seems like I am wrong on that.

http://www.calculatedriskblog.com/2008/0...

I was going to suggest this one.

There was a lot of sloppy paperwork and problems that are now hsoiwng up

Submitted by jpinpb on September 25, 2009 - 11:36am.

Here's another interesting read:
Doctor Housing Bubble

Submitted by simon l on November 19, 2009 - 12:14pm.

MERS as mortgagee assignor

Hello all, hoping someone has answers or references for me to look into...:

On a 2005 Promissory Note, it is stated that the Borrower must notify the Note Holder of any act that may effect an obligation to pay under the Note, using the address of the Lender or the address of the Note Holder if different from the Lenders address.

The Lender sold the Note to an unknown entity at execution, and also named MERS a mortgagee at execution (MERS was not a signatory to the mortgage nor to the note)and the same Lender transferred the mortgage for servicing to still another entity a month after execution.

The Lender admits that it was never to be considered as the mortgagee.

Admitted also was that neither of the Lender, Servicer, or mortgagee was ever the owner or holder of the Note (except the Servicer claims it became owner when the mortgagee conveyed the Note after foreclosure complaint).

Neither the Lender nor the Servicer was the mortgagee at default and filing of f/c, and the named mortgagee MERS (who admittedly never owned of held the note) conveyed the Note by assignment to the Servicer after the servicer filed foreclosure complaint in 2008.

The Borrower has affirmative defenses, one is the fact that the Servicer was not the true party in interest (not the owner of the debt) at foreclosure filing, and FDCPA violations before foreclosure was filed.

The Servicer claims that because it obtained servicing before default, it had the right to foreclose, and was not subject to the FDCPA.

It also claims that MERS had given an valid ownership interest in the Note by assignment (the assignment was recorded after complaint was filed, has no specific date of assignment, and is not dated by the notary, no address for the MERS "officer" who also happens to be the attorney of the Servicer).

Neither of the Lender, mortgagee, or Servicer will disclose the identity of the Note Holder or owner of the debt to the borrower nor will they notify the Note Holder of the default and f/c complaint.

The Judge is relying on the recorded assignment as proof of Servicer's ownership of the Note.

This happened in Illinois. As a matter of fact, it happens every day in Illinois.

What is wrong with all of this, and what recourse might an Illinois borrower have?

Also, what is the true legal definition of "mortgagee"?

Submitted by ucodegen on November 19, 2009 - 1:53pm.

Admitted also was that neither of the Lender, Servicer, or mortgagee was ever the owner or holder of the Note (except the Servicer claims it became owner when the mortgagee conveyed the Note after foreclosure complaint).

Somethings missing here. The terms are not really correct. You generally have the Originator, Servicer, Lender and Borrower. You also don't have 'foreclosure complaint'. You'll have Notice of Default and Notice of Trustee sale.

Originator - the company/person who wrote the original loan package. They fronted the initial money for the loan. They then package a bunch of loans together and sell them off (recouping the money they originally fronted plus securitization fees). Depending upon how structured, the originator may contract with a servicer (ie. MERS) as a part of packaging the loans.
Servicer - the company that collects the mortgage payments on behalf of the final Lender and tends to be the one who holds the mortgages in trust(important term.. also why it is called Trustee Sale) for those Lenders. Being the Trustee also means that they have Power of Attorney with respect to servicing the mortgages. It does not need to be 'conveyed after foreclosure complaint' because they have POA.
Lender - This is effectively the most recent person who has bought into the loan package. The servicer makes sure these people get their payments in return for a % of the 'passthrough' aka servicing fee.

The Borrower has affirmative defenses, one is the fact that the Servicer was not the true party in interest (not the owner of the debt) at foreclosure filing, and FDCPA violations before foreclosure was filed.

Wrong.. remember, the Servicer holds the notes in trust.. they are the Trustee and have the Power of Attorney with respect to the notes. All they need to prove is their Power of Attorney with respect to the notes and the terms of the original notes.

The Servicer claims that because it obtained servicing before default, it had the right to foreclose, and was not subject to the FDCPA.

Correct. They have POA. All they need to prove is that they have POA with respect to the note in question and the terms of the original notes.

Neither of the Lender, mortgagee, or Servicer will disclose the identity of the Note Holder or owner of the debt to the borrower nor will they notify the Note Holder of the default and f/c complaint.

You mean the Originator and Servicer will not disclose the Lender.. that is true.. the note is held in Trust.

The Judge is relying on the recorded assignment as proof of Servicer's ownership of the Note.

This happened in Illinois. As a matter of fact, it happens every day in Illinois.

What is wrong with all of this, and what recourse might an Illinois borrower have?

It happens with all mortgages, nothing is wrong with it and if the money is owed.. it is owed. All that the Servicer has to prove is that the money is owed by the Borrower and that the Servicer has POA on the Trust that contains the mortgage (recorded assignment).

What it looks like, is that there is a misunderstanding of a recent court case where a person was able to stop foreclosure on a MERS held mortgage. It was not successful because the Lender could not be disclosed. It was successful because the Servicer could not prove the loan (that the money was owed). They were not able to prove the trace from the origination to the servicer holding the loan. The person asked the servicer to prove that they owed the money.. to the effect of 'where is my signature on the loan papers'??

Submitted by simon l on March 23, 2010 - 1:28am.

Admitted also was that neither of the Lender, Servicer, or mortgagee was ever the owner or holder of the Note (except the Servicer claims it became owner when the mortgagee conveyed the Note after foreclosure complaint).

Somethings missing here. The terms are not really correct. You generally have the Originator, Servicer, Lender and Borrower. You also don't have 'foreclosure complaint'. You'll have Notice of Default and Notice of Trustee sale.

The Lender as named on the mortgage and the note was not the actual lender. This Lender gave notice of transfer of servicing to WF a month after closing, which was AFTER the real lender securitized the note. MERS was named as nominee mortgagee at closing for the Lender, and the real lender was not a signatory to the mortgage and note, neither was MERS, for that matter. WF never purchased the note and never held it, and since MERS never had an interest in the note (remember, MERS is nominee for the named Lender, not the real lender), it could not assign the note to the servicer WF as it did. WF cannot show that it has POA for the real noteholder. WF brought the f/c complaint before MERS "assigned" the note to it. The real party has never appeared to foreclose, and MERS, the Servicer WF, the originating Lender, and the real lender cannot produce the identity of the noteholder. Only the noteholder or it's agent can collect upon the debt. But, the named Lender has no idea to whom the real lender sold the note to. And the Lender assigned the mortgage to WF for servicing, it didn't assign the note, because it couldn't - it was securitized at closing. Notice of default was sent by the servicer, not the lender nor the Lender, so the notice is not valid. There will be no trustee sale, because the trustee has not shown that it has POA for the beneficial noteholder.
MERS stopped being the mortgagee at the time the mortgage was tranferred to WF for servicing. My homeowners declarations prove this. WF claimed to be mortgagee for 2 years on my HO ins. - but it's mortgagee status was never perfected because it was never a true mortgagee, and a fraudulent assignment of mortgage TOGETHER WITH THE NOTE from no-longer-qualified MERS, after filing of f/c complaint by the servicer WF, does not remedy this. 24 months in f/c limbo and counting, along with my 11-mo-old Federal lawsuit against all parties for the 200% overappraisal of my property to fraudulently induce me into a debt that could not be repaid even if I had tried to sell my home 1 month after closing.
BTW, this was a refinance of my home of 20 yrs to pay medical bills in 2006 - I knew nothing of it's market value at application for the refi and I was required to use the Lender's appraiser as a condition. I want to advise the noteholder of the fraud so I can negotiate my promissory note - which would include holding the defendant parties responsible for my home equity theft, unrepayable debt, and the unlawful overvaluation of the noteholder's investment interest. I, the homeowner, am a victim of fraud, and so is the investor. The lender, Lender, MERS, WF, all got paid while I suffer financial hardship, credit woes, clouded title, and the investor loses his investment money. I will either give the property only to the noteholder in repayment, losing my life's asset and all payments I made, and the defendants will be held liable for the destruction of my finances and family unity - OR I will keep the property until that noteholder brings me the negotiable instrument, and if the noteholder does not make claim before SOL for unsecured debt has expired, I will file for quiet title.
Tired of seeing hardworking people file for bankruptcy - it's Wall Street's turn to go bankrupt.

Submitted by IForget on March 23, 2010 - 7:23am.

simon l wrote:

Tired of seeing hardworking people file for bankruptcy - it's Wall Street's turn to go bankrupt.

Great post! I hope more people start fighting the bastards on Wall Street.

Submitted by Aecetia on July 21, 2010 - 3:26pm.

Here is some real estate related news:
"A Reno law firm has filed two lawsuits alleging fraud against a nationwide mortgage registration firm, and if those legal actions prevail, the firm and dozens of mortgage lenders could be liable to Nevada’s counties for billions of dollars in compensation and penalties."

http://www.rgj.com/article/20100625/NEWS...

And another useful link is someone needs to prevent a foreclosure under a MERS property:
http://www.getdshirtz.com/mers.htm

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