This is brilliant – rather than regulate or bailout MERS, these three are pushing to cut them off. If lenders want to sell loans to Fannie/Freddie/FHA, they’ll have to find another way to track them other than MERS, and pay recording fees every time they sell or transfer the loan. FromHW:
Three congressional representatives recently introduced a bill into the House that would gradually phase out the use of Mortgage Electronic Registration Systems,commonly called MERS, within the government-sponsored enterprises as well as Ginnie Mae.
The Transparency and Security in Mortgage Registration Act of 2010, also known as H.R. 6460, would prohibit Fannie Mae and Freddie Mac from purchasing or acquiring any new MERS mortgage deal of six months after its enactment.
MERS allows lenders to track individual mortgages through an electronic tracking and holding system. According to MERS, the firm holds legal title to a mortgage as the loan owner’s agent and is sometimes granted the authority to enforce foreclosure. The firm has been at the epicenter of foreclosure-gate and under scrutiny for wrongful foreclosure.
Under the bill, Fannie and Freddie would also be prohibited from new lending or investing in securities consisting of MERS mortgages for six months.
After the six-month time period expires, “MERS shall not be the named mortgagee or mortgagee of record on any mortgage owned, guaranteed, or securitized” by the GSEs. If at the six-month deadline, Fannie and Freddie still hold loans with a connection to MERS, the agencies will assign those loans to a servicer or holder, the bill states.
Ginnie Mae would be subject to the same timelines and similar terms as Fannie and Freddie under Transparency and Security in Mortgage Registration Act of 2010.
“[T]he association may not newly guarantee the payment of principal of or interest on any trust certificate or other security based or back by a trust or pool that contains, or purchase or acquire, any MERS mortgage,” the bill states.
Richard Bove, analyst at Rochdale Securities, believes the issue will continue for the next four to five years.
“It’s going to be like a tobacco or an asbestos situation,” Bove says, arguing court battles will continue evolving for some time at plaintiffs test courts to find successful strategies and Bank of America and other institutions work to find off the evolving challenges.
The MERS/robo will be a gold mine for attorneys – but will it erode homebuyer confidence? Or end up being a nothing-burger (like ARM recasts, etc.) because the government will spend whatever it takes to avoid a potential meltdown?
Bank of America has a great excuse – “hey, you made us buy Countrywide!”, which could be the clincher that makes the government wave the magic wand (again) and make it all go away.
Or could the MERS legal issues gain enough steam to over-run the system?
Would the specifics about MERS/robo affect your home buying/selling decisions?
Hat tip to daytrip and geotpf for sending this along, fromthe WSJ:
OKEECHOBEE COUNTY, Fla.—Patsy Campbell could tell you a thing or two about fighting foreclosure. She’s been fighting hers for 25 years.
The 71-year-old retired insurance saleswoman has been living in her house, a two-story on a half acre in a tidy middle-class neighborhood here in central Florida, since 1978. The last time she made a mortgage payment was October 1985.
And yet Ms. Campbell has been able to keep her house, protected by a 105-pound pit bull named Dodger and a locked, rusty gate advising visitors to beware of the dog.
“They’re not going to take this house,” says Ms. Campbell. “I intend to stay in this house and maintain it as my residence until I die.”
Ms. Campbell’s foreclosure case has outlasted two marriages, three recessions and four presidents. She has seen seven great-grandchildren born, plum real-estate markets come and go and the ownership of her mortgage change six times. Many Florida real-estate lawyers say it is the longest-lasting foreclosure case they have ever heard of.
You know by now that the banking lobbyists must be working overtime trying to convince Congress to sweep the MERS debacle under the rug. This video doesn’t have the answers, but at least it brings the issues to the forefront. The best is a quote by Thomas Jefferson at the 4:50 mark:
(Hat tip to the Coto Housing Blog where I saw this)
Rolling Stone Magazine reporter Matt Taibbi has a detailed story about the Florida foreclosures being tried in front of retired judges. Clickherefor full story – an excerpt:
After Soud’s outburst, Cooper quietly leaves the court. Once out of sight of the judge, she shows me her file. It’s not hard to find the fraud in the case.
For starters, the assignment of mortgage is autographed by a notorious robo-signer — John Kennerty, who gave a deposition this summer admitting that he signed as many as 150 documents a day for Wells Fargo. In Cooper’s case, the document with Kennerty’s signature on it places the date on which Wells Fargo obtained the mortgage as May 5th, 2010.
The trouble is, the bank bought the loan from Wachovia — a bank that went out of business in 2008. All of which is interesting, because in her file, it states that Wells Fargo sued Cooper for foreclosure on February 22nd, 2010. In other words, the bank foreclosed on Cooper three months before it obtained her mortgage from a nonexistent company.
The MERS debacle will go on for years, and be full of legal wranglings along the way.
The biggest issue? The notes and trust deed have been physically separated by MERS, and according to the U.S. Supreme Court ruling in 1872, a mortgage has no separate existence from the note. It sounds like the money owed would then convert to being unsecured…or will it extinguish?
It’ll be a long road, so let’s just digest in smaller pieces – excerpts from this Bloomberg article sent in by SM that also cites several court cases, mostly favoring MERS:
1. About 60 percent of newly originated loans are on the MERS system, Lejarde said. Since its inception in 1995, it has carried 66 million loans and currently has between 23 million and 25 million active loans, she said.
2. A big selling point for the company is its cost savings. It charges $6.95 for every loan registered, Lejarde said. With an average cost of about $40 for filing a mortgage assignment with local counties, MERS has saved the industry about $2.4 billion, Merscorp Chief Executive Officer R.K. Arnold said in a September 2009 deposition in an Alabama suit.
3. The company is accused in two whistleblower suits filed this year of cheating California and Nevada counties out of millions of dollars in recording fees. In 2006, New York State’s highest court told one county it had to record MERS mortgages against its wishes. The county said MERS cost it $1 million a year.
4. Eventually high courts in states with judicial oversight of foreclosures will have to review MERS’s role, Patrick A. Randolph, a professor at the University of Missouri-Kansas City specializing in real-estate law, said in an interview. “It’s a question of state law,” Randolph said. “The problem is simply confusion about a word the courts are not used to seeing in this context — the word ‘nominee.’”
5. MERS says it has the right to foreclose because the borrower grants the company legal title to the mortgage and it forecloses as agent for the promissory-note holder. “Courts around the country have repeatedly upheld and recognized this right,” MERS said in an Oct. 4 e-mailed statement.
Since March 2009, supreme courts in Arkansas, Kansas and Maine have found that MERS had no standing in foreclosure proceedings under their states’ laws. The company lends no money and suffers no injury, the panels said.
MERS’s relationship to the bank that owned a loan in question was “more akin to that of a straw man than to a party possessing all the rights given a buyer,” the Kansas Supreme Court wrote. “What stake in the outcome of an independent action for foreclosure could MERS have?”
Are the title companies in trouble for insuring robo-signed REO sales, or MERS-related transactions?
Kingside said, “Not if the sellers are using grant deeds”.
Here’s the definition:
grant deed n. the document which transfers title to real property or a real property interest from one party (grantor) to another (grantee). It must describe the property by legal description of boundaries and/or parcel numbers, be signed by all people transferring the property, and be acknowledged before a notary public. The transfer is finalized by recording with the County Recorder or Recorder of Deeds. Importantly, a grant deed warrants that the grantor actually owned the title to transfer, which a quit claim deed would not, since it only transfers what the grantor owned, if anything.
A check of recently sold REO properties revealed that four major servicers – BofA, Wells Fargo, J.P.MorganChase, and IndyMac/FDIC – are all using grant deeds to convey ownership to the buyers. The grant deeds include the warranty, which should relieve the title insurers from responsibility (and put it on the servicers) for robo-signed deocuments fouling up the chain of title.
Click here for an Example of a Grant Deed used recently – remember the bank-owned house in Olivenhain listed for $999,000 that had 17 offers? It closed for $1,170,000, or 17% over list price. You can verify that sales price by taking the documentary transfer tax, $1,287 (at top of grant deed) and dividing by .0011.
While the MERS debacle has many borrowers thinking that they may be getting a free house soon, the biggest threat to the banks/servicers comes from the investors who purchased the securities on Wall Street. Thanks to Kingside, here’s a link to a big class-action suit in the works:
On August 17, 2010, attorney Susan Chana Lask filed a Federal Class Action Complaint on behalf of tens of thousands of New York State homeowners who lost their homes to an alleged foreclosure fraud orchestrated for years by a New York “foreclosure mill” attorney and major mortgage companies.
The case is filed in the US District Court, Eastern District of New York, entitled “Connie Campbell against Steven Baum, MERSCORP, Inc, et al.”, Case #10CV3800. It alleges RICO civil racketeering, RESPA, Fair Debt Collection Practices Act violations and that homeowners paid inflated foreclosure and other fees fictionalized by Mr. Baum who profited from the scheme since 2005.
The action seeks to return tens of thousands of foreclosed homes to their owners or the values thereof and hundreds of millions in punitive damages against Mr. Baum, MERSCORP and HSBC.
Attorney Susan Chana Lask discovered the alleged foreclosure scheme after her client lost her 1.7 Million Dollar Brooklyn Caroll Gardens Brownstone home to a $190,000 mortgage foreclosure filed by attorney Steven Baum for HSBC. The foreclosure court filings were false as filed in HSBC v. Cncepcion Campbell, et al, New York Supreme Court, Kings County, Index #20393/07 .
Steven Baum’s foreclosure complaint he filed was for HSBC against Ms. Campbell . It admits the loan was never assigned to HSBC, yet he sued for HSBC. A later Satisfaction of Mortgage was not filed for HSBC but for a company named MERS, admitting HSBC never owned the loan and the foreclosure complaint should have never been filed in the first place. The actual Mortgage was always in MERSCORP’s name and never assigned as required by law. Just who owns the loans Steven Baum forcloses on is a deliberate mystery and potentially tens of thousands of New York homeowners lost their homes on a mystery.
But there’s more. The documents filed in the Courts are signed by attorneys from Mr. Baum’s office under penalty of perjury that they are filing with knowledge of the transaction; however, they have no knowledge as they admit they do not have the documents they attest to in their office. In fact, in the later case filed of Concepcion Campbell v. Walendowski, et. al., New York Supreme Court, Kings County, Index # 08-3467, when Ms. Lask subpoenaed Mr. Baum’s firm for the original Note, they responded it was not needed and refused to produce it; implying they never had it yet they swear they reviewed it in their court filings “under penalty of perjury.”
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