There may be no legal way to foreclose on some delinquent mortgages

This is going to get interesting. The mortgage holders may, in some cases, not be able to prove that they actually hold the note.

Mortgages bundled into securities were a favorite investment of speculators at the height of the financial bubble leading up to the crash of 2008. The securities changed hands frequently, and the companies profiting from mortgage payments were often not the same parties that negotiated the loans. At the heart of this disconnect was the Mortgage Electronic Registration System, or MERS, a company that serves as the mortgagee of record for lenders, allowing properties to change hands without the necessity of recording each transfer.

MERS was convenient for the mortgage industry, but courts are now questioning the impact of all of this financial juggling when it comes to mortgage ownership. To foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. But MERS has acknowledged, and recent cases have held, that MERS is a mere "nominee"-an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. Recent court opinions stress that this defect is not just a procedural but is a substantive failure, one that is fatal to the plaintiff's legal ability to foreclose.

That means hordes of victims of predatory lending could end up owning their homes free and clear-while the financial industry could end up skewered on its own sword...

From http://www.commondreams.org/headline/2010/08/18-8

cc

 

I worked at a foreclosure firm and this happened sometimes. However, usually a pooling agreement will suffice in lieu of a note. I've seen judges accept pooling agreements.

 

Finally some movement in goin' after Wall Street banks...

US 'to sue a dozen banks over housing bubble mortgages'
2 September 2011 - Goldman Sachs is expected to be one of the banks facing legal action

 

Help for underwater mortgages...

Plan would allow refinancing of some underwater mortgages
October 19, 2011 Washington — Proposal is part of settlement talks between the federal government and major banks

 

Banks are normally HUGE fans of the "law".

If the law requires a note, I think it would be horrible of society to NOT prevent banks from compromising their OWN values by letting them legally accept any other paperwork.

If they don't have the required paperwork, they should be out of luck.

Just like drug and morals laws for people, sometimes you have to help legal entities live up to their OWN values!

 

It's time to end the bail-outs and let the chips fall where they may.

 

It'll be nice to listen to the banks whine they can't continue to make billions on crap loans.

 

The Massachusetts Supreme Court issued a ruling today that home owners who bought improperly foreclosed homes do not own them. In order to gain a free and clear title they will need to reforeclose on the previous homeowner, sue the bank that sold them the property, and or make their title insurer gain them a free and clear title.

The court had already ruled that improper paperwork invalidates foreclosure filings. This includes the failure to register every transfer of ownership and paying the required fee to the county registrar of deeds. Without the register of title transfer the chain of ownership is not legally established. MERS is not the county registrar of deeds, it's records of transfer of ownership have zero legal standing and in fact create a huge liability for transfer fees and penalties for those transfers carried out by MERS that were not filed with the registrar. In Massachusetts this can be particularly troubling since failure to register a transfer of deed within 30 days can make it void.

It has been estimated that the MERS system has cost counties in the US some $500Million-1Billion in title transfer fees alone over the past ten years.

Interestingly, it was a registrar in Essex County in Massachusetts who first reported suspicions of robo-signing after noticing the same names with different signatures in the paperwork presented by companies rushing to file title tranfers. That said, Massachusetts did not have a lot of these foreclosure problems in the first place due to strong consumer protection and mortgage lending laws and an active attorney general whose job depends a lot on enforcing them. Perhaps that is why the registrar noticed the robosigning, it was not a particularly busy office.

There have been a lot of recent court rulings against MERS and the banks along these lines. There are now a number of courthouses where casual foreclosures without proper paperwork are being scrutinized closely instead of routinely granted. Some people questioning the legal standing of the foreclosing party to foreclose are winning in the courts.

It sometimes goes like this, the judge asks for proof of ownership of the property. The lawyers can provide only vague standing as agents for the owners of the mortgage and an incomplete chain of owership transfer. The judge gives them 30 or 90 days to come up with the proper paperwork. The lawyers fail to do so so the judge gives them one more try and makes a ruling that if they cannot come up with the proper paperwork that proves an uniterrupted chain of ownership for both the mortgage and the deed in 30 days he will declare the occupant owner in posession, void the mortgage and grant them the deed. Judges are getting really fed up with lawyers asking them to ignore the law.

 

A fascinating tidbit for those who think government can't help keep business in check from the insane practices that caused the meltdown.

Nice!

 

I know a guy who attempted to sell his home but could not get a deed from his mortgage company. He hired a lawyer to force them to provide one.

They went to court and the mortgage company was forced to refund every payment he made for ten years.

It is a real scenario to consider.

 

On a slightly related note I hope the housing industry gets worse for just long enough for me to buy a house. ;D