Notes of Note from John F. Ince

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.

A committed homeowner movement to tear off the predatory mask called MERS could yet turn the tide.

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.

via The Legal Problem of MERS and Mortgages: Could 62 Million Homes Be Foreclosure-Proof?.

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Comments on: "Could 62 Million Homes Be Free and Clear from Foreclosure?" (2)

  1. Michael Stern said:

    John-If mortgages are not identifiable as being held by the servicer, and the lender cannot then get paid, the debt on the balance sheets of financial institutions can’t be paid down. They can’t write it off and can’t get paid. So, the trillions in outstanding mortgage debt can sink the entire banking system, don’t you agree? And if that happens, will it matter that people stay in their homes, if the entire economy falls off a cliff? When Bernanke estimated the TARP funding needs, he was short by 2/3s. The perhaps unintended consequences of this is the election of more of those who were responsible for allowing this mess to happen in the first place, and getting rid of those who have been trying to find a workable solution. I feel for those who have lost their homes, in many situations through no fault of their own. However, most mortgages were not predatory and were reasonable for the lender and the buyer. And most mortgages are still in force and being paid on time. Breaking the banking system again doesn’t seem to me to be the most reasonable approach. Interesting though is having this in an arsenal if needed. Also of consequence is the payment of local property taxes which don’t get paid if mortgages default. Tough on schools, and other local gov needs. Mike

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