Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

[due_indigence]

Re: Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

The MERS mess could deliver a debt jubilee to the American consumer and put a stake through the heart of Wall Street all at the same time. One can hope, yes? Maybe the US judiciary will deliver us from the Capitol Hill-Wall Street cabal. Cross your fingers for good old-fashioned checks and balances. Has it still got one more trick up its sleeve?

MERS is the poster child for greed and arrrogance (okay, one of umpteen poster children), particularly in its attempt to usurp centuries of common law and property conveyance.

The MERS motto can easily be summed up as "we have an electronic database Mr. Locke, so *#&^ off."

[c1ue]

Re: Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

I still don't get how these decisions help homeowners.

Yes, I can see how fraudulent or nonexistent mortgages could be a problem for MBS's, but those are largely held by the Fed now anyway.

Is the implication that MERS not being able to foreclose on homeowners mean no one can foreclose? If so, then indeed a debt jubilee is possible.

But the assumption of MERS being illegal does not guarantee that the mortgages are.

And if the mortgages are legal - all that will happen is a delay in foreclosure. If someone chooses to take the chance that their mortgage is one of the 'illegal' ones, then the flip side is if this decision is incorrect then the homeowner get nailed with penalties and back payments owed.

Perhaps I'm missing something but any homeowner who intends to walk away from the home isn't going to pay whether or not the MERS/non-MERS administered mortgage is legal or not.

To extrapolate an illegal servicing entity to a forgiveness of debt seems a stretch.

[grapejelly]

Re: Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

What's illegal is the current foreclosure process using MERS as the foreclosing party. THis will slow things down for the lenders and investors. No more fast and loose. But I don't think too many mortgages will be expunged, just delayed in foreclosure proceedings which are being delayed anyway.

[cjppjc]

Re: Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

This is a fascinating thread. You would think the 'brains' behind MERS would have foreseen this legal possibility. TIme for this story to be told by Steward or Taibbi.

[MulaMan]

Re: Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

I also support the death penalty but prefer...

A large event with executives from Goldman Sachs, JPM, Bank of America, Federal Reserve, US Treasury, and Fox News inside the Houston Astridome fighting off a pack of hungry lions with thier bare hands.

That would be the only confidence boost needed in the bond markets.

[ThePythonicCow]

Re: Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

I also support the death penalty but prefer...

A large event with ...

Usually, MulaMan, your posts are not my style. But this time you've hit the mark. Good work.

[lurker]

Re: Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

I also support the death penalty but prefer...

A large event with executives from Goldman Sachs, JPM, Bank of America, Federal Reserve, US Treasury, and Fox News inside the Houston Astridome fighting off a pack of hungry lions with thier bare hands.

That would be the only confidence boost needed in the bond markets.

Too .... Rome.

Just make them poor. Do a "Trading Places" and make them go live in an inner city ghetto. Revoke their ability to work and make them live on minimal welfare in a housing project for the rest of their days.

It's what the rich and poweful fear the most ... becoming poor and powerless.

[Diarmuid]

Re: Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

I still don't get how these decisions help homeowners.

Yes, I can see how fraudulent or nonexistent mortgages could be a problem for MBS's, but those are largely held by the Fed now anyway.

Is the implication that MERS not being able to foreclose on homeowners mean no one can foreclose? If so, then indeed a debt jubilee is possible.

But the assumption of MERS being illegal does not guarantee that the mortgages are.

And if the mortgages are legal - all that will happen is a delay in foreclosure. If someone chooses to take the chance that their mortgage is one of the 'illegal' ones, then the flip side is if this decision is incorrect then the homeowner get nailed with penalties and back payments owed.

Perhaps I'm missing something but any homeowner who intends to walk away from the home isn't going to pay whether or not the MERS/non-MERS administered mortgage is legal or not.

To extrapolate an illegal servicing entity to a forgiveness of debt seems a stretch.

I don't think the problem is with the deeds themselves or so called "complexity" - I think the problem may lie in what a stinking pile of fraud and corruption, tracing and unraveling the securitization process might uncover. If this is the case, until a system is devised to keep this under wraps, foreclosures may well be problematic.

[Rajiv]

Re: Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

Is the implication that MERS not being able to foreclose on homeowners mean no one can foreclose? If so, then indeed a debt jubilee is possible.

I believe that may indeed be the case. From Martens article

In a decision handed down on October 14, 2009, Judge Keith Long of the Massachusetts Land Court wrote:

“The blank mortgage assignments they possessed transferred nothing...in Massachusetts, a mortgage is a conveyance of land. Nothing is conveyed unless and until it is validly conveyed. The various agreements between the securitization entities stating that each had a right to an assignment of the mortgage are not themselves an assignment and they are certainly not in recordable form...The issues in this case are not merely problems with paperwork or a matter of dotting i’s and crossing t’s. Instead, they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts legislature. To accept the plaintiffs’ arguments is to allow them to take someone’s home without any demonstrable right to do so, based upon the assumption that they ultimately will be able to show that they have that right and the further assumption that potential bidders will be undeterred by the lack of a demonstrable legal foundation for the sale and will nonetheless bid full value in the expectation that that foundation will ultimately be produced, even if it takes a year or more. The law recognizes the troubling nature of these assumptions, the harm caused if those assumptions prove erroneous, and commands otherwise.” [Italic emphasis in original.] (U.S. Bank National Association v. Ibanez/Wells Fargo v. Larace)

As stated earlier in the same article

The problems grew out of the steps required to structure a mortgage securitization. In order to meet the test of an arm’s length transaction, pass muster with regulators, conform to accounting rules and to qualify as an actual sale of the securities in order to be removed from the bank’s balance sheet, the mortgages get transferred a number of times before being sold to investors.
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Because of the expense, time and paperwork it would take to record each of the assignments of the thousands of mortgages in each securitization, Wall Street firms decided to just issue blank mortgage assignments all along the channel of transfers, skipping the actual physical recording of the mortgage at the county registry of deeds.

[due_indigence]

Re: Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

Of course mortgages were salami-sliced and tranched into numerous securities. However there are reports that the same mortgage was securitized more than once. And with the shuttering of many mortgage companies, record-keeping is dubious. Paper trails have vanished.

MBS were first and foremost commission-earners i.e. meant to be sold, never unravelled or frankly rationalized. They played fast and loose with common law notions of property conveyance. This is not trivial.

Twilight Zone might be a more apt term than jubilee. Many people are sitting in their houses because no one can establish the lender of record. That's not to say some lender won't be able to establish his legal standing at some point in the future.

[LorenS]

Re: Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

The troubling part in all of this for the debtors is how do they prove they have been paying payments to the true holder of the note?

What if the company collecting your payments wasn't collecting on behalf of the holder of the note, what if they were crediting your payments to someone not entitled to them instead?

This really is a sticky issue. My mortgage was supposedly transferred at least twice since I bought my house. MERS and the issuing bank are the only entries in the county database. I really don't have any proof that the GSE that claims to own my note and BOA who claims to have servicing rights really have the rights they claim.

The whole system is a crock.

[due_indigence]

Re: Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

People, in their naivete, assume that when one coupon arrives in the mail, that is their mortgagee or at least mortgage servicer. Now, if two mortgagees suddenly sprung up demanding the same monthly payment, that would warrant some investigation.

Hubris and greed cut so many corners, it's hard to recognize the table anymore. Centuries of common law got codified for a reason.

[c1ue]

Re: Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

What's illegal is the current foreclosure process using MERS as the foreclosing party. THis will slow things down for the lenders and investors. No more fast and loose. But I don't think too many mortgages will be expunged, just delayed in foreclosure proceedings which are being delayed anyway.

This is consistent with my understanding - hence my original question.

I don't think the problem is with the deeds themselves or so called "complexity" - I think the problem may lie in what a stinking pile of fraud and corruption, tracing and unraveling the securitization process might uncover. If this is the case, until a system is devised to keep this under wraps, foreclosures may well be problematic.

Certainly it may be possible that the MBS's were even more fraudulent than their ratings. But MBS fraud is irrelevant to a mortgage jubilee.

As it is the appears the banks aren't trying very hard to foreclose on properties anyway: between the immediately recognized losses on loans due to negative equity, to the additional costs incurred due to the foreclosure process, to the carrying costs for homes which are not yet resold, I'd think this is more of a 'free rent' to otherwise evicted former owners than any debt jubilee.

For one thing - unless the original deeds are truly disappeared, there is a powerful financial incentive to dig them up. The majority of mortgages - negative or otherwise - are still be paid.

A question of mortgage validity means even those who aren't negative equity can stop paying and that means a complete breakdown of the system.