Posted on 09/27/2009 4:32:21 PM PDT by dennisw
Back in April, we mentioned the The Mortgage Netherworld of MERS — the Mortgage Electronic Registration Systems.
MERS is the firm that (technically) holds 60 million US (securitized) mortgages on behalf of the actual buyers. They were created by a consortium of lenders in part to save money (on paperwork and recording fees) every time a loan changes owners. In the era of securitization, these savings amounted to billions of dollars.
But MERS also acts as a shield, making it all but impossible for many borrowers to deal directly with whoever happens to be holding their mortgage at the moment. As the NYT noted, it has “made life maddeningly difficult for some troubled homeowners.”
Now, the Kansas Court of Appeals has called foul. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. (Other than GlobalResearch.ca, I have yet to see any MSM coverage of the issue). The Court stated that MERS’ relationship is not that of a true party possessing all the rights given a buyer. Hence, the court ruled:
“By statute, assignment of the mortgage carries with it the assignment of the debt. . . . Indeed, in the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable. The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust.” (emphasis added).
What does this mean for the 60 million people — over half of all US mortgages — whose loans have been securitized, sliced and diced, and are now held by MERS?
To start, it potentially gives a powerful weapon to homeowners who are being foreclosed upon. If their mortgage is held by MERS, they certainly have a strong basis for challenging the action on the grounds of standing. (Note that this was a Kansas COURT OF APPEALS decision, and while it is not binding on other states the way a US Supreme court ruling would be, it is likely to be influential). I also think the Kansas Court of Appeals could also review this case
I don’t quite agree with Ellen Brown, who in an extensive legal analysis of the decision, writes: “The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose.” It may be possible for trustees for the securitized loans to somehow perfect standing, i.e., develop the ability to claim loan ownership (perhaps via a purchase) and then move to foreclose. (Brown also calls it a Kansas Supreme Court decision, but it appears to be the intermediate 3 judge panel of the Court of Appeals that heard the case, not the full Kansas Supreme Court).
But Brown is correct when she states this is a very significant legal development, one that might dramatically impact foreclosure litigation.
This ruling could send the lenders who work with MERS scurrying to resolve this in their favor. Look for a lobbying effort to get some favored congresscritter to pass legislation granting them standing to sue on behalf of loan holders (Congress may be able legislate that legal right, although there are state laws to be contended with).
As foreclosures continue to ramp up, I expect a lot of rhetoric about why we need to stop them (I disagree) and modify mortgages (which have been mostly unsuccessful).
Last, you never know what someother state supreme court might rule. (Any lawyers out there know what is on upcoming dockets involving MERS ?)
Bottom line: It just got a lot harder to foreclose on homes with securitized mortgages in Kansas, and quite probably, the rest of the nation.
“All well and good when the mortgage is sold and resold whole. Lots of mortgages were chopped up with one MBS holding the piece that gets the principle payments and another MBS holding the piece getting the interest payments
“***MBS = mortgage backed security
“I’ll bet some mortgages were cut into more than two pieces”
But even if the economic interests are severed and sold to different parties, there has to be a written assignment to the buyer of the principal revenue, interest revenue, etc. It’s just that the banks don’t want to have to be bothered with recording those assignments.
Payments on a 2008 mortgage would quickly end up seeming very small as hyperinflation took effect. Both wages and prices would swiftly rise, but the increase in wages would not keep up with prices. Although price increases would cause some hardships, monthly mortgage payments as a percent of income would quickly shrink - freeing up more income for other costs.
During the big party no one cared about sloppy record keeping because real estate was always going to go up up up. and you could always pay
It's only when real estate is collapsing, when what you bought is underwater, when you are having trouble making payments, are you concerned about the particulars and the legal fine points
Some of the derivatives were put together with no allowance for real estate going down.
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Couldn’t they just assign the deed of trust back to the holder of the promissory note and give that lender standing once again. Maybe MERCs does not have standing without both note and deed but if it can be assigned one way, can’t it be assigned back?
“It’s only when real estate is collapsing, when what you bought is underwater, when you are having trouble making payments, are you concerned about the particulars and the legal fine points”
Very true.
MERS has largely been a cluster-f*ck from the beginning. They behave kinda like a hybrid between a trustee and a beneficiary and want to have all of the power but very little of the responsibility.
The MERS foreclosures I’ve worked on in the past have all been trustee-driven, so thankfully I haven’t had to deal directly with the MERS nightmare directly very often. Usually it’s just been to check the MIN (MERS Identification Number) to see if a deed of trust is still open.
But I’ve heard horror stories from lots of people who have had to deal with MERS and for every three people they talk to they get four different stories.
It can be assigned back, but since money changed hands to transfer it one way, there’d have to be an agreement as to how much money needs to change hands to transfer it back the other way. A defaulted note is not worth nearly as much as a current one. How much they pay (if they even want to buy it back) is a big consideration when we consider that we’re actually talking about the huge numbers of deeds of trust. And should the note holder sell to the DOT holder or should the DOT holder sell to the note holder? Is it done on a case-by-case basis? Are they allowed to be bundled? Will MERS be allowed to continue operating? Will they profit from this in some way or will they end up taking a financial bath because they tried to cut corners before?
Lots of questions remain unanswered.
“MERS is the firm that (technically) holds 60 million US (securitized) mortgages on behalf of the actual buyers. They were created by a consortium of lenders in part to save money (on paperwork and recording fees) every time a loan changes owners. In the era of securitization, these savings amounted to billions of dollars.”
“But MERS also acts as a shield, making it all but impossible for many borrowers to deal directly with whoever happens to be holding their mortgage at the moment. As the NYT noted, it has “made life maddeningly difficult for some troubled homeowners.”
Two paragraphs, two errors...First, the loan doesn’t change owners, the home or property itself is changed between owners via a deed...The loan only shows proof of indebtedness, not ownership of the property; the deed shows the buyers and sellers of the property, or ownership...Secondly banks bundle their mortgages and sometimes the mortgages may be sold from one bank to another to another, or finally to Freddie Mac...So you have two potential wording problems right there..
MERS is merely an electronic holding system to keep track of the flow of the Mortgage documents from one lender to the next, especially in this day of rapid sale and transfer of properties by the millions...In the old days a copy of the mortgage instrument as well as a copy of the deed was filed by hand usually with the Clerk of the Court in each States’ counties...With the millions of transactions that ensued as home ownership grew, the Court Clerks offices were overwhelmed to the bursting point, so much so that in New York City,for example, the Clerks were nearly a year behind in filing the paperwork which created havoc with the Real Estate market...ditto Chicago-Cook County...so MERS was set up...The Court ruling does raise some valid points but it would appear that some form of electronic filing is absolutely vital otherwise the whole mortgage filing system would breakdown...
As for MERS ordering foreclosures- that would also appear to be innacurate...Only the Bank or Company holding the actual Mortgage Loan Documents would be the only entities to order a foreclosure, not MERS since that is only a holding company of an electronically filed set of mortgage paperwork for each property...
An analogy would be if a State’s Dept of Motor Vehicles were to order a car to be repossessed..That would not happen, since the DMVs only issue Titles and registrations to a vehicle and it may notate a lien on a title, but that would be the limit of what it does with regard to the actual car loan...The company holding the auto loan would have to be the legal source of a repossession order.
I would guess that the MERS electronic filing system would be upheld by the courts but if it did indeed order a foreclosure that would be very unusual since it is not the owner of the indebtedness, merely the holder of the document showing the indebtedness,and a Court would likely block the foreclosure...
“It’s just that the banks don’t want to have to be bothered with recording those assignments.”
Not the full quote but a salient point..I have discovered this too—that some banks just did not bother filing their assignments..VERY aggravating...However if they were caught charging the customer for the assignments and were not actually filing the assignments, they could be in big trouble- as well as causing more confusion for someone trying to track the mortgage holder(s)...
ok...let’s say a bank holds $2 million in less than prime quality loans...So it sells the mortgages to another bank or insurance company for $1.4 million but it still continues to retain the interest income from the monthly payments the homeowners make, the principal is sent on to the other bank or insurance company, which goes towards the $1.4 million they paid out..Meantime if a homeowner defaults, the other bank can foreclose and get the bulk of the money back from that particular mortgage, figure a $25,000 loss per foreclosure...If the other bank eventually brings in $1.6 million then it has made out ok...Also- they can bundle those mortgages up and re-sell them to Freddie Mac and get their $1.4 million or so back at any time...It’s only Monopoly Money to those fellas...
It’s all in the money flow...
Hey Wally, there is no money. Obviously you and many other unlearned Americans just don’t get it. The reason the so-called monetary system is collapsing, and rightfully as it should be imploding, is because there IS NO MONEY!! It’s all digital checkbook entries. The financial sector should be collapsing because unlearned Americans like you have not spoken out about a State’s use of something other than gold and silver coin as Article I, Section X of our U.S. Constitution mandates. DUH!!! Where have all of you braniacks been since 1963? I am sure you don’t even know thge relevance of that year.
I can’t wait for the total collapse of the financial section, because if it does not collapse sometime soon, and they keep printing money on the presses to sure up broken and corrupt financial instutions, this checkbook digital monetary system will be here on this planet for thousands of years. SO, why can’t we just type in digits on a computer to pay out bills and then stiff the American people with the debt created by those digits? This would no different than what is taking place today.
I have attended courses and read many many publications by the American Bankers Association in conjunction with the American Bar Association and each course and study text explicitly explains just how the fraud is being perpetrated. THERE IS NO MONEY!! It is being created as debt money by the financial sectors and there debt is charged to YOU AND ME!! I can’t wait for all of you dumb Americans to loose everything you THINK you have stashed in some financial institution for yuor retirement, then maybe, just maybe, you all will wake and say DUH, WHAT HAPPENED?
Study money, study money creation through the (alleged) lending process. No bank EVER lends money. Yes, not one. They create debt money through the lending process and bury the fraudulent scheme in thier books. IF Enron had the work “Bank” after it, it would still be here, because the banks are doing the EXACT SAME THING ENRON WAS DOING only the corrupt banking industry gets free taxpayer printed federal reserve notes to prop them up. If you don’t think that will not cause hyper-inflation, think again. I can’t wait. You might want to turn whatever you have stashed into gold and silver coins if you want to survive whey that dreadful day does arrove, and it WILL arrive. The sooner the better for me, so I can tell all of those over the last 20 years of my preaching, I TOLD YOU SO, BUT YOU WERE TO DARNED DUMB TO GET IT.
moneywhatmoney
Unless they find out you're a Republican.
What does this mean for the 60 million people — over half of all US mortgages — whose loans have been securitized, sliced and diced, and are now held by MERS?
Should be Does not work so well when foreclosure is called for.
Unless they find out you're a Republican.
Also you'll get the crappy doctors and affirmative action doctors when the Obama-care bureaucrats find out you are Republican.
You will also be waiting months while friends and family of the bureaucrats get to the head of the line
All the people in government are buddies and do favors for each other
So if you are a teacher who needs immediate attention you will have a friend of a friend who is in the 0bama-care bureaucracy.... And you will funnel her a $200 payment and she'll get you a very good doctor right away
Ok, then what happened in September of last year. More and more judges are wanting docs in their courtrooms entered into evidence.
MERS = would you cash this photocopy of a check that is made out to somebody else but give me the money.
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