FOR more than a decade, the American real estate market resembled an overstuffed novel, which is to say, it was an engrossing piece of fiction.
Yes, and let’s never forget how that happened. Banks made loans they knew people couldn’t pay and didn’t meet quality standards (now a matter of sworn testimony, not presumption) and sold that trash to investors who were screwed out of their money. The government has “responded” by protecting the fraud instead of prosecuting it.
Judges, lawmakers, lawyers and housing experts are raising piercing questions about MERS, which stands for Mortgage Electronic Registration Systems, whose private mortgage registry has all but replaced the nation’s public land ownership records. Most questions boil down to this:
How can MERS claim title to those mortgages, and foreclose on homeowners, when it has not invested a dollar in a single loan?
That’s rather simple, really: In a world where the rule of law no longer means anything, you simple make it up as you go along.
The Arkansas Supreme Court ruled last year that MERS could no longer file foreclosure proceedings there, because it does not actually make or service any loans. Last month in Utah, a local judge made the no-less-striking decision to let a homeowner rip up his mortgage and walk away debt-free. MERS had claimed ownership of the mortgage, but the judge did not recognize its legal standing.
And, on Long Island, a federal bankruptcy judge ruled in February that MERS could no longer act as an “agent” for the owners of mortgage notes.
“This court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country,” he wrote, “that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.”
That’s the “we’re too big to fail, and if you don’t allow us to get away with whatever we’re doing, we’ll blow up the financial system.”
There’s a word for that somewhere…… threatening to detonate the world unless you get what you want…. does anyone remember what it is and whether such a thing is supposed to be a crime?
“They didn’t do the deep homework,” said an official involved in those discussions who spoke on condition of anonymity because he has clients involved with MERS. “So as far as anyone can tell their real theory was: ‘If we can get everyone on board, no judge will want to upend something that is reasonable and sensible and would screw up 70 percent of loans.’ ”
Ah, you mean it was intentional too, and not an afterthought now? Well well well……
Little about MERS was transparent. Asked as part of a lawsuit against MERS in September 2009 to produce minutes about the formation of the corporation, Mr. Arnold, the former C.E.O., testified that “writing was not one of the characteristics of our meetings.”
Uh, that could be a problem. See, there’s this thing about corporate formalities – you only have protection against the corporate liability shield being pierced if you follow them. Is that an admission that MERS didn’t follow them?
The results were not encouraging. “Fewer than 30 percent of the mortgages had an accurate record in MERS,” Mr. White says. “I kind of assumed that MERS at least kept an accurate list of current ownership. They don’t. MERS is going to make solving the foreclosure problem vastly more expensive.”
Ah, so this may be why the banks keep arguing they should be able to “attest” to owning a note instead of actually proving it: The documentary record doesn’t show that actually have the right to foreclose, and if it was produced they’d be screwed.
This in turn might result in massive lawsuits by the certificate-holders charging fraud in the inducement as the notes were never delivered and recorded even in the MERS system, say much less in county land records. In other words it appears the certificate-holders bought an empty box that was sold to them as containing good paper.
At heart, Judge Schack is scratching at the notion that MERS is a legal fiction. If MERS owned nothing, how could it bounce mortgages around for more than a decade? And how could it file millions of foreclosure motions?
These cases, Judge Schack wrote in February 2009, “force the court to determine if MERS, as nominee, acted with the utmost good faith and loyalty in the performance of its duties.”
The answer, he strongly suggested, was no.
When will the American Public stand and demand – not request, demand – that these artifices be torn down and the truth be laid bare on the table?
If that truth blows up major financial institutions then so be it.
We’re way beyond where we should be accepting these sorts of excuses and games simply to protect bankster bonuses and broken business models.
We cannot recover in our economy until the truth is laid bare on the table and the bad debt, such as it is, is forced out into the open and the people who hold are forced to recognize their losses. If this results in some of those people having legitimate fraud claims against major financial institutions then so be it. If that, in turn, results in the detonation of those institutions, then so be it.
We must have the truth, and a cleared market, before our economy can recover.