WAKING UP TO DISCOVER THE MORTGAGE MARKET WAS A GIANT CRIMINAL ENTERPRISE!

Matt Taibbi; Global Research.ca ^ | 9-22-09 | Mike Taibbi

[thouworm]

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. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.

via Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks. [link below]

This is a potentially gigantic story. 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. The court ruled that the electronic transfer system used by the private company MERS — a clearing system for mortgages, similar to a depository, that is used for about half the mortgage market — is fundamentally unreliable, and any mortgage sold and/or transferred through MERS can’t be foreclosed upon, at least not in Kansas.

Coincidentally I’d been working on something related to this all day yesterday. All over the country, lawyers are contesting foreclosures because of similar chain-of-custody issues. I have some material about this coming out in my next Rolling Stone story, so I can’t get into this too much, but suffice to say the lenders and the banks were extremely sloppy about their paperwork (at best — there is a fraud angle as well) and jammed up the system with missing and/or mismarked mortgage notes. Since a sale isn’t legal unless there’s full transfer of the physical note, a lot of the sales of mortgage-backed securities were not entirely legal, since the actual notes were often not transferred.

Nothing like waking up in the morning and finding out a whole sector of the economy is completely screwed. Are these good times or what?

Although this particular case pertains to MERS, non-MERS mortgages were often even worse. Anyway I have more on this coming next week. Thanks again to Eric at MonkeyBusiness for the heads-up.

Must Read: http://www.globalresearch.ca/index.php?context=va&aid=15324

[jaydee770]

rswan6574 wrote: "...I was not a party to any transaction after I signed my original note, which is now marked in bank ‘A’ as “PAID IN FULL”, and since bank ‘B’ doesn’t own any other promissory note signed by me, what legal duty do I have to pay bank ‘B’?..."

That might be a bit of an over-simplification...

In the 2-hour "signing exercise" you had to go through when you closed on your house, how sure are you that you didn't sign/initial a clause that authorizes your first lender to sell or otherwise transfer your mortgage to another holder? That has been a standard clause in each of the three mortgages I have had in my lifetime (so far) over the past 25 years. That's with three different lenders.

I'm not sure how those clauses would affect the use-cases offered as examples so far, but I would think it would show you had *some* liability to repay the loan in the event it was transferred/sold.

However, if it is the case where the original documents are well and truly destroyed, eliminating any and all instances bearing your signature/initials, then I can see where you would have an argument of "prove I signed it." But, if you are the home-owner of record (property tax rolls), I would hope for a very tolerant judge before I tried that argument.

Of course, I will readily admit I'm not a SME. I'm just trying to apply a bit of common sense to the issue.

[gusopol3]

Looking it over myself, I’d have to conclude they were relatively local ( I was thinking of western land specuation in colonial days in particular)http://www.google.com/search?q=real+estate+bubbles+history&hl=en&rls=com.microsoft:en-us&tbs=tl:1&tbo=u&ei=qau_StXfLsTR8Aay9PWdAQ&sa=X&oi=timeline_result&ct=title&resnum=11

[E. Pluribus Unum]

You said it yourself.

Land speculation caused the inflation in real estate prices you refer to.

The current real estate bubble was caused by lending money to people who were not qualified for loans. The more buyers you have, the higher the price of the commodity is driven - simple supply and demand.

But part of the demand was not real - it was demand from people who could not afford to make the payments and who ultimately defaulted.

When they defaulted, prices plummeted to more realistic levels that were supportable by real demand, not fraudulent demand stimulated by fraudulent government policies.

[gusopol3]

Thanks for helping me out.

[mcenedo]

rswan6574 wrote: "...I was not a party to any transaction after I signed my original note, which is now marked in bank ‘A’ as “PAID IN FULL”, and since bank ‘B’ doesn’t own any other promissory note signed by me, what legal duty do I have to pay bank ‘B’?..."

Bank 'A' would not mark your note as paid in full, they would assign the mortgage, and endorse the Note over to the new Investor/servicer.

Please excuse my impatience with this thread as I have 25 years in the mortgage banking business and thost that think borrowers have no obligation to repay because thier loas were sold are sadly misinformed.

[jaydee770]

mcenedo wrote: "...Bank 'A' would not mark your note as paid in full, they would assign the mortgage, and endorse the Note over to the new Investor/servicer..."

That sounds more like my experiences and it sounds like the prudent way to transfer a mortgage to a new lender/investor. I'm thinking there's more to the story behind the KS court ruling...

[GOPJ]

"For decades now, . . . I have been receiving letters [warning] me about the dangers of a secret government running the world . . . . [T]he closest I have recently seen to such a world-running body would have to be a certain large investment bank, whose alums are routinely Treasury secretaries, high advisers to presidents, and occasionally a governor or United States senator.”

Goldman Sachs?

[jaydee770]

Here's the article that (I think) started this mess: (http://livinglies.wordpress.com/2009/09/26/mers-getting-the-grilling-it-deserves).

It seems that...
MERS was set up by the mortgage industry in an effort to streamline transferring mortgages. The case in Kansas involved a home with two mortgages on it. The property buyer went bankrupt and the first lien-holder foreclosed. The home was sold and the proceeds paid off the first lien-holder and any remainder went to the buyer.

The second lien-holder used MERS as the nominee to record their interest (instead of recording the lien with the county clerk) and was subsequently not notified about the foreclosure. They found out about the forclosure & sale after the fact and wanted to get a cut of the foreclosure proceeds. For reasons I'm not clear on, the second lien-holder had MERS go to the court and try to assert it's rights to the proceeds.

Since MERS didn't have a note or deed *and* since there was no record with the county-clerk, the court told them to get lost.

So if I'm reading it right, it appears that had the second lien-holder simply recorded their lien/deed/note/whatever with the county clerk, then the court would have allowed their claim. But, with no proof of ownership or claim properly recorded with the county clerk, it was disallowed.

So MERS was set-up to facilitate electronic transfers of mortgages and one of the ways it facilitates those transfers appears to be avoiding having to record the liens/deeds with the county clerks. It would seem that the court has ruled that their business process has a gaping hole in it. So the remedy is to... hire an army of folks to run around the country and properly record all the liens/deeds that MERS holds?

Sounds like a bunch of lawyers somewhere are about to make a killing and everyone else will take it in the shorts.

[Neidermeyer]

Here’s how I now see this story ,, maybe I’m wrong..

1.) Joe Blow gets a mortgage from bank “A” on a house.
2.) Bank “A” sells Joes mortgage along with 499 others to Goldman for 95% face value. Mortgage notes are cancelled/paid in full.
3.) Goldman/Lehman whoever ,, repackages the mortgages into a NON-MORTGAGE (but mortgage related) product where people buy “income streams” from the now now-existant mortgage.
4.) Housing bubble pops ,, things start going bad.
5.) The original lender , “bank A” , was retained to collect and distribute payments BUT they no longer have an actual interest in the mortgage as they have been paid in full by GS for the note and they have no rights to foreclose if payment is not made.
6.) Similarly the buyers of the CDO/CMO “security” do not and never did own a piece of a mortgage, just a promise from Goldman, they cannot foreclose. Besides that one mortgage of Joe Blows was divided into 10 “tranches” that went into 4 different CDO’s each having 250 end buyers ,,, even if the CDO purchaser had the right to foreclose you would need to assemble 1000 fractional owners and get parallel paperwork from them..

Am I seeing this the right way now?

[Neidermeyer]

OOps! There needs to be a “2A”

2A) Goldman has the mortgages they bought in bulk registered/recorded at MERS , MERS does not follow various state guidelines! The electronic only copies on file have no signatures.

[RegulatorCountry]

Not being able to prove standing to foreclose is a problem. I’m not so sure you’ve thought this through completely. Yes, there are anticapitalist deadbeats promoting this. But, do you seriously want to allow parties not holding title, the legal power of foreclosure? Think of the potential for abuse, against those who are not in arrears. Mortgages have gone international. All manner of further, criminal michief would be made possible.

[Neidermeyer]

they would assign the mortgage, and endorse the Note over to the new Investor/servicer.
************************************************
There is a MAJOR problem ...

The company that “owns” the mortgage “stripped” out the payments to make a CDO/CMO instrument ... that new instrument is not a mortgage and is not covered by assignment, it is a totally seperate entity... this makes the mortgage owner , who now has absolutely NO INTEREST IN THE PRINCIPLE OR INTEREST PAYMENTS, no leg to stand on to foreclose ,, THEY BY DEFINITION CANNOT BE HARMED as the proceeds of the payments do not belong to them. if they cannot collect from the mortgagee it’s their problem to make the buyer of the CDO/CMO whole if that is part of their contract with the buyers.

[mcenedo]

In order to foreclose you need to go before a judge. Judges are notoriously inclined to listen to the deadbeat borrowers and accept any excuse to delay foreclosure. Nowadays, the mortgage servicer not only has to prove nonpayment, but also must produce evidence that they have mailed the deadbeat all the foreclosure counseling notices and phone numbers where to get help.

Not to mention the bankruptcy courts that will happily delay any foreclosure.

Foreclosure agianst those not in arrears? Possible, but only in the rarest instance and aways by mistake. Foreclosing is the last option for any investor as the reason they madee the loan was to collect the interest income. It is expensive to foreclose and seeing as how 99% of foreclosures are on properties with no equity, it is the last, worst option for all involved.

[kennyboy509]

Ever if you could make the payments, the entire mortgage industry has commit fraud by creating an artificial entity to record documents that by ANY state law should have been done. They have circumvented the county and state laws and have not paid fees and taxes every time the property change hands which apparantly was a lot.

Search MERS. 60 million people may soon own homes because of big time barney frank and cris dodd enabled fraud.

[dixiechick2000]

BTTT!

Excellent post!