Posted by Dawn Barrier on September 30, 2009 at 8:23am
Read the whole article from RISMEDIA @ Op-Ed: 60 Million Mortgages May Have Fatal FlawsInteresting Report....RISMEDIA, September 29, 2009-The latest chapter in the mortgage meltdown is being written in court, as one by one, judges are putting a halt to foreclosures. The latest was a recent Kansas Supreme Court case. In Landmark National Bank v. Kesler, the court held that a nominee company called MERS had no standing to bring a foreclosure action.Nor was Kansas the first. In August 2008, Federal Judge for the U.S. Bankruptcy Court for the District of Nevada ruled MERS had no standing. "Indeed, the evidence is to the contrary, the Note has been sold, and the named nominee no longer has any interest in the Note."Read more: http://rismedia.com/2009-09-28/op-ed-60-million-mortgages-may-have-fatal-flaws/#ixzz0SVrf1JSYIn each case, the reason stems from a fundamental misstep in the handling of Notes and Trust Deeds that runs contrary to established court policies which require that the real parties identify themselves to the court. Each of these cases involved MERS and, in each case, the courts' rationales were almost identical.First, a little background. Over the last 40 years, mortgage lending has evolved from a bank holding the mortgage to the mortgage being bundled and sold as part of an investment pool, usually in the form of a bond.As a registered security, the Note is a negotiable instrument, like money or a cashier's check, and under securities law that Note must be given to the investor. In this case, mortgage backed securities, (MBS) were bundled together in a pool and shipped to...well, we don't really know.One of the impediments to an MBS is the need to file assignments for the beneficiaries in each county each time the mortgage is resold. And apparently, no one holds them for very long because most have been passed around several times.In order to avoid the logistical nightmare of trying to maintain a public chain of title, the biggest lenders joined MERS, Mortgage Electronic Registration Systems, Inc.MERS was created with the sole intent of evading the recording fees due to the county in which the security is located.But, as there often is with a BIG IDEA, there were also unintended consequences. Only now are they coming to light. Until MERS was challenged in a foreclosure proceeding, no one had taken a look at the law.MERS lost track of the Notes. In some cases, according to my research, they deliberately destroyed them.Every thing was fine until the economy contracted. MERS began foreclosing on delinquent home loans and then one day; someone said "show me the Note."In reviewing the judge's rulings in the above matters, several key points have been determined:• MERS is not the beneficiary of the Notes and has no skin in the game. It did not lend any money, collect any payments or do anything more than track the sale of the securities.• Judicial procedure requires that parties identify themselves and prove their standing.• Splitting the Note and Trust Deed leaves no party with standing to foreclose. The true holder of the Note, the security, paid the lender so the lender is covered. The true holder of the Note was insured by AIG so they are covered. AIG and the banks were bailed out by taxpayers. So, unless the American tax payer can produce a "blue-ink" original Note, no one has standing to foreclose.• Allowing a foreclosure to proceed without the original Note places the homeowner in double jeopardy. If the original Note were to surface, the holder of the Note would be entitled to payment, but from whom? The borrower is still on the hook.MERS currently holds 50 to 60 million loans so this is no small matter. And, just because they have lost repeatedly doesn't mean they will give up. They will keep right on foreclosing in hopes that the homeowner won't fight back and, in most cases, they won't be stopped.[Editor's Note: RISMedia has been in touch with MERS for a response, which will be running in our Wednesday edition of the e-news.]Read more: http://rismedia.com/2009-09-28/op-ed-60-million-mortgages-may-have-fatal-flaws/#ixzz0SVswwhLq
You stole my thunder! ;-) I just saw this and was about to post the same article. This could cause a major change to the entire housing industry! I have been reading stories like this for a couple of years, but this is the first case to hit the High Court of any state that I have heard of. All I can say is WOW!
60 Minutes did a story a few years ago about this guy in Florida who purchased a $1.5 Million home, found out the lender sold the loan (as described above) and stopped making payments. When they went to foreclose on the house, the owner asked the lender to prove they still owned the note and had legal right to foreclose. The lender could not produce the court required paperwork. This went on for 4 years (at the time of this story) and as far as I know he still lives in that house and has never made one payment.
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60 Minutes did a story a few years ago about this guy in Florida who purchased a $1.5 Million home, found out the lender sold the loan (as described above) and stopped making payments. When they went to foreclose on the house, the owner asked the lender to prove they still owned the note and had legal right to foreclose. The lender could not produce the court required paperwork. This went on for 4 years (at the time of this story) and as far as I know he still lives in that house and has never made one payment.