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Archive for the ‘MERS’ Category

Live video streaming starts Wednesday May 25, 2011 at 9:45 AM.   Tune in right here to see it. Just click the photo below.

Bill Hultman of MERS will testify before the Banking and Financial Services Committee, of which Marty Knollenberg is the Chair.

Marty is my Representative and a long-time follower of FedUpUSA.  The following is my letter to him:

Marty,

I understand you are having a meeting with a representative from MERS tomorrow.  I wanted to be there tomorrow, but I can’t because I must be at work.  While I know this is rather a late message, I just wanted to urge you to take no BS from these guys.  I know you’ve been a VERY long time follower of FedUpUSA and have therefore, gotten ALL of the truth about MERS sent to you pretty much on a weekly basis for the past three years – but I wanted to personally urge you to get some hard questions answered.

1.  I’m sure you’re familiar with the recent Michigan Court of Appeals ruling that states (among other things) that MERS is in breach of MCL 600.3204(1)(d).    Further, the Appellate Court stated that MERS never had standing to foreclose on anyone because they never had the notes to begin with.  Which then begs the question:  If they never had the notes, then how can they ‘convey’ those notes to anyone else?   This is how the majority foreclosures in Michigan are being done and how MERS is going to circumvent the Appellate Court in the future.  They’re going to ‘create’ documentation that states they have transferred their rights to foreclose to the servicer. 

2.  MERS sells ‘corporate kits’ for $25.00.  For $25.00 anyone can be any officer of any banking entity they’d like.  I could buy a $25.00 MERS corporate kit  and become CEO of Bank of America for signing purposes tomorrow.  Exactly how is this remotely in compliance with contract law that requires parties act in ‘good faith’?   How could one not come to the conclusion that MERS was intentionally circumventing contract law?  (And I’m not even going to mention the outright forged documents.)

3.  MERS is an entity entirely owned by the banks for which they ‘transferred’ property.  Their corporation is nothing but a shell, their ‘officers’ being various officers of those banks.  They hold no assets and have no employees.  Their sales pitch to smaller mortgage lenders specifically stated that their purpose was to circumvent taxing authorities and recording fees.  Ask them exactly how anyone is supposed to believe this was legal or to believe that their very existence was not based on the idea of defrauding municipalities.  Why should state government be amenable to allowing fraud to be perpetrated upon its municipalities?

This was no ‘paperwork snafu’; this was intentional fraud from MERS’s very inception.  It is no small consideration that MERS was created by the big mortgage servicers for THEIR purposes.  While MERS may have done the dirty work, they were created specifically for that purpose by the big banks which are now being entirely propped up by the US taxpayer.

Marty:  stop the fraud.  Protect the citizens of Michigan.  This is precisely why I felt it was so important to educate you with all the information I have provided over the past three years.  You are now in a position to truly do something about the fraud and corruption.    Don’t let these guys walk without asking these hard questions.  Then, let’s work on getting some legislation, some HARD CORE legislation, in place to protect property rights in Michigan.  No entity should EVER be able to initiate foreclosure proceedings without first proving their right to do so with original documentation, with wet-ink signatures, and without fake signatures from phony corporate officers.

Sincerely,

Stephanie S. Jasky
Troy, MI
(248) 250-8700
http://www.FedUpUSA.org

As we reported here on April 26th, the Michigan Court of Appeals handed down a ruling that pretty much shuts down non-judicial foreclosures by MERS in Michigan.  As we indicated at the time, this is probably the most sweeping mortgage foreclosure case since Ibanez and has even further reaching consequences than any of the other MERS decisions handed down this year.   (See Residential Funding LLC v. Saurman, Case No. 290248 ).

As we had hoped at the time, this means things are a-changin’ in Michigan.  Since appellate court rulings set precedent in their respective states, lower courts are now required to take their cues from this case when hearing foreclosure suits before them.  Now it is just a matter of getting suits filed on behalf of wronged homeowners. 

Taking the lead in this regard is Justin Grove of the Dailey Law Firm, P.C. in Royal Oak, Michigan.  In addition to filing a class action lawsuit against Bank of America, Justin has now filed more than 15 actions to quiet title.   While these suits will take time, and there are no guarantees, the precedent now set by the Michigan Court of Appeals has given these homeowners a shot at leveling the playing field against the rampant and prolific number of fraudulent foreclosures perpetrated by the big mortgage banks in this state.

Just as important, is that the Dailey Law Firm is getting the word out about the fraud and corruption.  They’re bending more than a few ears, too.  With a weekly radio program airing in two markets, Detroit and Chicago, they are educating homeowners in a vast portion of the Midwest on two of the biggest mega-watt radio stations, WJR and WLS. 

In the past couple of years, almost as many scam law firms have sprung up taking advantage of homeowners, as there are fraudulent mortgage companies.  Unfortunately, an unsuspecting homeowner, desperate for help, may not recognize a scam when they see one.  A page everyone should bookmark and keep for reference for helping to spot a scam is READ THIS FIRST — DON’T GET SCAMMED!  This is also permanently linked on our Links page here on FedUpUSA.

However, let me assure you that Justin Grove and the Dailey Law Firm, P.C. are no scam.  They’ve not only done their homework, but as the Founder and Director of FedUpUSA, I’m going to personally vouch for their integrity.  Much of their work in this area to date has essentially been pro bono.  Filing suits on behalf of homeowners in foreclosure in a non-judicial state with absolutely no case precedent for defense, is a heck of a long shot.  Yet, they did it anyway.  Why?  Because fraud is a crime, but it is not a crime to default on a debt. 

As we’ve said before, this isn’t about anyone getting a free home; this is about the rule of law.  Those rules have been thrown three sheets to the wind in the past 4 years.  Property law has been violated by the banks; rules of accounting have been violated and circumvented (much with the blessing of Congress making special ‘exceptions’); and tax law has been completely thrown out the window, which has resulted in horrific losses of revenue for municipalities.  All of this is FRAUD.  Yet, no one has gone to jail.  Sure, there’ve been fines handed out here and there, but no one has been prosecuted — but many people have lost their homes, and a good portion of those have been the lenders utilizing the aforementioned methods of fraud.

So where does it end?  That’s the question we here at FedUpUSA have been asking since April of 2008.  Perhaps it ends when good people no longer remain silent and good attorneys are willing to stand up and say, ‘You know, there’s no point in my having a job, no point to my profession, unless the rule of law can actually be restored and followed.’  Justin Grove is one of those lawyers.

So, if you’re facing foreclosure, if you’re worried about the chain of title to your home, if you know MERS is part of that chain of title, tune in to The Law Show With Brian Dailey.   Get educated, and if you’re in Michigan and MERS has initiated foreclosure proceedings on your home, then call the Dailey Law firm.: (248) 744-5005 or (866) 66-Lawyer (866-665-2993)

FedUpUSA will be featuring permanent links to The Law Show in our side bar and the Dailey Law Firm, P.C. contact information can be found on our Links page.

Live Video Stream DETROIT Sunday 11:00 AM Eastern:

Live Video Stream CHICAGO Saturday 10:00 AM Central:

And in case you missed it, Justin Grove talked foreclosures and the recent Michigan Appeals Court ruling on their May 8, 2011 show.  Give a listen.

Justin Grove, Esq.

From western Michigan:

I suppose the fact that the New York Fed hosted a meeting last week with a group of solons is a sign that it is finally taking mortgage documentation and resulting foreclosure issues seriously. But the Fed’s spin is diverges from the reading I got from attorneys who have a vantage on the process. Per Housing Wire:

But the New York Fed said solutions are on the way. The Uniform Law Commission and the American Law Institute, which facilitated the recent meetings, seek to clarify and update federal and state laws governing the securitization process.

I’m bothered by the dishonest presentation, which a close reading of the related NY Fed document confirms. Let’s start with its opening paragraph:

Problems with mortgage foreclosures have been in the headlines during the past several months. The media attention arises from several concerns. One concern relates to whether lending institutions have followed proper foreclosure procedure. Another reflects a popular misconception among many that a mortgage can become separated from the note it secures. Yet another concern arises out of the complexity of some of the structured transactions involving the mortgages.

This seeks to present the concerns as mere noise in the media, rather than a result of troubling incidents and widespread abuses. In addition, notice the failure to mention the elephant in the room: chain of title issues, which are so widespread that a borrower challenging a foreclosure in a post 2004 securitization has a decent chance of winning if he argues that the trust lacks standing.

The Big Lie here is that the problem lies with “the complexity, and the outdated nature of the relevant law.” The NY Fed argues that the real estate regime was fine when banks held the mortgage to maturity and everything that was important that needed to happen took place in the same local area.

The paper, astonishingly, acts as if the operational requirements of mortgage securitization have led servicers to lose money. The argument made in these two paragraphs is pure fabrication:

The process of selling loans and mortgages requires that there be some method of determining the current owner of each particular loan and mortgage. In fact, that is a necessary component of the foreclosure process. The loan and mortgage owner, or a servicer who is acting as the owner’s agent, must determine whether it is appropriate to exercise foreclosure rights. When a loan and mortgage securing the loan is created, the initial lender will ensure that the mortgage is recorded in the correct real estate records based upon the location of the real property. However, when the loan and mortgage are sold, the manner of transferring the right to realize on the security for the loan does not typically require that an assignment of the mortgage be recorded in the real estate records. In many cases the loan and mortgage will be registered with an entity called MERS, which is a tracking system, so that interests in it can be followed when the loan and mortgage are transferred. In some cases, MERS also is listed as the mortgagee in the mortgage as an agent of the initial lender and all of the initial lender’s subsequent assignees (buyers of the loan and mortgage).

This division and fractionalization whereby there are entities that are owners of the loan and mortgage (or some part of the loan and mortgage), a servicer for the loan and mortgage, and a named mortgagee that is not necessarily the owner of the loan and mortgage has caused significant confusion. Mark Kaufman, Commissioner of the Maryland Office of Financial Regulation (OFR) testified about the remarkable changes in securitization and third-party servicing before a Congressional legislative committee, noting that these developments “forever changed the mortgage landscape.” Today, he said community banks only hold a fraction of mortgage loans in Maryland and account for next to none of the foreclosure complaints received. “The unbundling process may have facilitated the flow of cheap capital, but it has also fragmented roles, distorted market incentives, and severely complicated the task of modifying loans to avoid preventable foreclosures.” Moreover, Kaufman continued, the same economies of scale drove consolidation in the mortgage servicing business line, so that today the top five mortgage servicers are responsible for over 60% of the mortgages serviced. Every one of the five is owned by a major bank holding company. He noted that this concentration not only created an enormous management challenge, but left money losing servicers trapped in too-big-to-fail institutions. As a result, “the invisible hand of the market will not fix this.”

Notice how there is no timeline in this discussion? If you were to read the paper, you’d think banks created this great system called securitization which “enables the initial lender to replenish its supply of capital to make new loans.” But whoops! They somehow didn’t realize there would be a lot of operational demands, and now we have “money losing servicers trapped in too-big-to-fail institutions.” Notice NO OTHER EXPLANATION is offered. The only possible culprit is therefore those pesky but important legal requirements that bit the securitizers in the ass.

Utter hogwash. Securitization has been around since 1970. Private label securitization started to become a meaningful activity in the later 1980s. And most important, the industry managed to satisfy all those operational requirements and servicing was seen as a decent, even attractive business Remember how Bank of America was falling all over itself to buy Countrywide? The prize was Countrywide’s servicing unit.

An aside: that dramatic quote also implies these horrible servicing operations are a serious drain on those fragile too big to fail banks. Yes, they are cash flow negative, but no, they do not pose a threat to their health.

So what happened? Three things. First, the banks created MERS to improve their profits. That took place in the later 1990s but it did not start to be widely used until the early 2000s. Second, starting in the 2002-2003 refi boom, originators and packagers started cutting corners on the carefully crafted procedures for notes (the borrower IOU) to be conveyed to the securitization trust. This change not only ran afoul of some legal requirements but also was a violation of the requirements of the pooling and servicing agreements, the contracts that govern the securitization. Third was the global financial crisis left a record number of foreclosures in its wake, far higher than ever contemplated when these deals were designed. Servicing highly delinquent portfolios is a money-losing proposition.

So the real reason that industry is having trouble with foreclosures and servicers are losing money has absolutely nothing to do with the reasons suggested by the Fed. Two of the three are due to the industry running roughshod over the law. MERS was vetted only on a Federal law level; no review was ever undertaken of whether it would work under the laws of all the states. It was brazenly assumed that if MERS was imposed, the states would roll. That proved to be a tad optimistic. The second reason, the abandonment of established procedures, is fraud pure and simple. The packagers and trustees lied in the PSAs and the ongoing certifications.

And since any fix is going to be prospective rather than retrospective, invoking the losses servicers have now is irrelevant. The “invisible hand” contention is nonsense. If the servicers are losing money on their current pricing, they have to live with that and figure out how to reprice their offerings once their current portfolios run off. Businesses make bad decisions all the time and get in situations where they are losing money on a product or in a certain geography. They don’t go running to some of the best legal minds in the US demanding waivers to fix their business models. Oh, I forgot, we are dealing with banks, who will try any and every trick they can if there is a buck to be made.

There was another worrisome bit, per Housing Wire:

The two organizations also drafted a report to guide judges and lawyers involved in the transactions, and, the central bank said, should make the application of present laws more transparent.

The Housing Wire declaration that “solutions are on the way” is wildly premature. At this stage, the legal heavyweights are simply discussing whether to draft to provisions. Thus the Fed is trying to prod them to do so.

The good news is the lawyers who are watching the state of play seem to think this is more bluster than real. If anything were to happen, it would involve amending the Uniform Commercial Code, which is about as fast-moving a process as drafting and implementing new Basel rules, but with more philosophizing involved (see here for an overview). Moreover, the fact that a change to the UCC is published does not mean states will adopt it. A major revision to Article 2 of the UCC was proposed in 2003 and no state has implemented it.

One DC source indicated this was all theatrics to try to sway state court judges; all stressed that any change would have no impact on the current mess.

I’m nevertheless disturbed by the Fed trying to insert itself in a process in which it has no legitimate role, and as its paper indicates, in which it is willing to misrepresent facts to assist banks. Its concern instead should be for the public and the integrity of the housing market, both of which are victims of securitization industry greed and recklessness. But it will take root and branch reform of the Fed before that could ever happen.

Naked Capitalism

May wonders never cease.  To my knowledge Michigan is the first NON-judicial state to rule that MERS has no authority to convey interest in indebtendess secured by the mortgage or to service the mortgage.

The Michigan Court of Appeals handed down a ruling on Thursday (April 21, 2011) that would seem to pretty much shut down non-judicial foreclosures by MERS in Michigan.  This is probably the most sweeping mortgage foreclosure case since Ibanez and has much more far reaching consequences than any of the other MERS decisions handed down this year.  The decision is:

Residential Funding LLC v. Saurman, Case No. 290248, April 21, 2011

http://coa.courts.mi.gov/documents/opinions/final/coa/20110421_c290248_94_290248.opn.pdf

The Docket for the case may be found at:

http://coa.courts.mi.gov/resources/asp/viewdocket.asp?casenumber=290248&fparties=&inqtype=public&yr=0

There is also a dissenting opinion at:

http://coa.courts.mi.gov/documents/opinions/final/coa/20110421_c290248_95_290248d.opn.pdf

The sole question presented in this case was whether MERS is an entity that qualifies under MCL 600.3204(1)(d) to foreclose by advertisement on the subject properties, or it is must instead see to foreclose by judicial process.  The Court held that MERS does NOT meet the requirements of MCL 600.3204(1)(d) and, therefore, may NOT foreclose by advertisement.  This means a non-judicial foreclosure is not possible on a property ‘held’ by MERS.

There may be tens of thousands of foreclosed borrowers who have been wrongfully dispossessed of their properties.  They have been put out of their property, BUT THEY STILL OWN IT, because the non-judicial foreclosure by MERS was actaully a nullity as to its ability to convey valid title.  The PURCHASER of these properties at foreclosure sale DOES NOT OWN THE PROPERTY.

In other words, you can’t convey what you never had.  While this is a major step forward for protection of homeowners in Michigan, it doesn’t directly address the epidemic of fraudulent assignments to and from MERS.   Although, I imagine eventually, this opinion will be cited in future foreclosure actions where the lender was assigned by MERS.   I think this is a pretty clear statement that the chain of title has been broken if MERS was involved, which has been our position here at FedUpUSA for 3 years.

h/t MSFraud