Homeowners' Rebellion: Recent Rulings Could Shield 62 Million Homes From Foreclosure
Submitted by ChesapeakeCitizen on Thu, 2010-08-26 13:21
Thursday 19 August 2010
by Ellen Brown, t r u t h o u t
the best laid plans even of Wall Street can sometimes go awry. In an ironic twist, the industry may wind up tripping over its own Achilles heel, the Mortgage Electronic Registration Systems or MERS. An online computer software program for tracking mortgage ownership and rights, MERS is, according to its web site, "an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans." Or as Karl Denninger puts it, "MERS own website claims that it exists for the purpose of circumventing assignments and documenting ownership!"
MERS was developed in the early 1990s by a number of financial entities, including Bank of America, Countrywide, Fannie Mae, and Freddie Mac, allegedly to allow consumers to pay less for mortgage loans. That did not actually happen, but what MERS did allow was the securitization and shuffling around of mortgages behind a veil of anonymity. The result was not only to cheat local governments out of their recording fees, but to defeat the purpose of the recording laws, which was to guarantee purchasers clean title. Worse, MERS facilitated an explosion of predatory lending in which lenders could not be held to account because they could not be identified, either by the preyed-upon borrowers or by the investors seduced into buying bundles of worthless mortgages. As alleged in a Nevada class action called Lopez v. Executive Trustee Services, et al.:
"Before MERS, it would not have been possible for mortgages with no market value ... to be sold at a profit or collateralized and sold as mortgage-backed securities. Before MERS, it would not have been possible for the Defendant banks and AIG to conceal from government regulators the extent of risk of financial losses those entities faced from the predatory origination of residential loans and the fraudulent re-sale and securitization of those otherwise non-marketable loans. Before MERS, the actual beneficiary of every Deed of Trust on every parcel in the United States and the State of Nevada could be readily ascertained by merely reviewing the public records at the local recorder's office where documents reflecting any ownership interest in real property are kept.…MERS now holds over 62 million mortgages in its name, including over half of all new US residential mortgage loans. But courts are increasingly ruling that MERS is merely a nominee, without standing to foreclose on the collateral that makes up a major portion of the portfolios of some very large banks. It seems the banks claiming to be the real parties in interest may have short circuited themselves out of the chain of title entitling them to the collateral.
"After MERS, ... the servicing rights were transferred after the origination of the loan to an entity so large that communication with the servicer became difficult if not impossible... . The servicer was interested in only one thing - making a profit from the foreclosure of the borrower's residence - so that the entire predatory cycle of fraudulent origination, resale and securitization of yet another predatory loan could occur again. This is the legacy of MERS and the entire scheme was predicated upon the fraudulent designation of MERS as the 'beneficiary' under millions of deeds of trust in Nevada and other states."
Over 62 million mortgages are now held in the name of MERS, an electronic recording system devised by and for the convenience of the mortgage industry. A California bankruptcy court, following landmark cases in other jurisdictions, recently held that this electronic shortcut breaks the chain of title, voiding foreclosure. The logical result could be 62 million homes that are foreclosure proof.