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A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose – on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.
via Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks.
This is a potentially gigantic story. It seems that a court has ruled that about half of the mortgage market has been run as a criminal enterprise for years, which would invalidate any potential forelosure proceedings for about, oh, 60 million mortgages. The court ruled that the electronic transfer system used by the private company MERS — a clearing system for mortgages, similar to a depository, that is used for about half the mortgage market — is fundamentally unreliable, and any mortgage sold and/or transferred through MERS can’t be foreclosed upon, at least not in Kansas.
Coincidentally I’d been working on something related to this all day yesterday. All over the country, lawyers are contesting foreclosures because of similar chain-of-custody issues. I have some material about this coming out in my next Rolling Stone story, so I can’t get into this too much, but suffice to say the lenders and the banks were extremely sloppy about their paperwork (at best — there is a fraud angle as well) and jammed up the system with missing and/or mismarked mortgage notes. Since a sale isn’t legal unless there’s full transfer of the physical note, a lot of the sales of mortgage-backed securities were not entirely legal, since the actual notes were often not transferred.
Nothing like waking up in the morning and finding out a whole sector of the economy is completely screwed. Are these good times or what?
Although this particular case pertains to MERS, non-MERS mortgages were often even worse. Anyway I have more on this coming next week. Thanks again to Eric at MonkeyBusiness for the heads-up.
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Looking forward to that article. We have our own hell breaking loose in Finland, with all the squirming campaign contributors drawn out of the shadows at the same time…
Our Prime Minister has Alzheimers. Honestly, he doesn’t remember – he took the money, wherever it came from. He closed his eyes, so nothing bad happened. Why is everybody so mad at him all of a sudden?
Funny thing is, nobody cares. I don’t care. Let him resign – let him stay in power. We want to see the old headlines, talk about the scandals on the reality tv show. We want our boring lives back. This makes no sense.
We have no writers like Matt Taibbi or Hunter S. Thompson in Finland. We have no writers with balls.
Matti, — just hold your balls with one hand and type with the other hand. Add a little smart editing if needed and you can show ‘em how it is done.
In the vast majority of cases, MERS is a good thing. As you mention in the last line of the blog post, non-MERS are often worse. MERS was set up to facilitate the efficient assignment of mortgages and minimizing the costs of recording every change in assignment. County recorders’ offices would often get backed up for months trying to keep up with all the recording. With MERS, the mortgage is originally assigned to MERS and it remains there and MERS updates the assignee records internally and electronically. This reduces the cost to county governments (but also reduces recording fee revenues) and also makes it a lot more efficient for mortgage holders to track who has a perfected security interest. In these cases where courts have ruled that MERS has no legal right or the lender has no legal right to foreclose through MERS, are they saying the borrower never agreed to pay the mortgage per the terms of the note and mortgage? Or are they saying this potential legal loophole will make the elected judge a hero to his community by “taking on” big banks? Every foreclosure that doesn’t happen efficiently simply adds to the cost of the mortgages the other 90% of the borrowers pay in interest now and in the future. Maybe you’ve uncovered some sinister stuff that wasn’t part of the main objective of MERS. I look forward to reading it.
Your defense of MERS actually exposes part of the problem. As noted in a similar Arkansas SC ruling, the MERS system BYPASSES the public recording system, which is the basic process by which homeowners/consumers can keep track of the title to property. MERS can’t simply “squat” on title while keeping a private set of records as to how the security gets split up and bundled and assigned all over the place. The borrower has the right to be able to examine complete and accurate PUBLIC records. These rulings provide a much-needed validation of the public notice system.
Furthermore, the MERS system may seem like streamlining, but it’s not. It actually complicates the process. The Kansas ruling showed that both the mortgage/deed of trust and the promissory note must be assigned together in order for the assignment to be valid. In other words, the secured party owning the debt must also be the party with the right to foreclose. But MERS is never the secured party, never holds the promissory note, yet they purport to assign the mortgage while somehow remaining the alleged mortgagee of record. The legal consequence of this “streamlining” is an effective “severing” of note and mortgage which renders both unenforceable.
Mortgage agents dishonest? Next thing you`ll tell me that most lawyers aren`t trustworthy….
One of my family members fought his MERS foreclosure all the way in court in Massachusetts and won. Nobody could prove they owned the paper on his house. The judge ruled he was the lawful owner. He now owns his house free and clear. No lawyer needed, did it all by research and holding on to his “human” rights.
Matt, I am soundman’s brother and I have a story for you and millions of Americans that will blow your mind! The twists and turns are too complex to get into here, but I must say that this is the way to get the country back in the hands of We The People and put an end to the fraud going on!
a way to break the thieves? do please tell.
Metalman, I would like to hear more about the success you had in winning your case in MA. I too am fighting for my home and have a MERS listing in my legal documents.
Thanks for your time!!
I love Matt Taibbi. I can rely on him to tell the stories no one else has the nerve to. I look forward to each and every article from him.
How can I find out if my mortage is registered with MERS?
Soundman. Sounds like your lawyer needs to be a bigger hero and file a national class action to invalidate all mortgages. That would be a good way to start over.
There was no lawyer involved. It’s my brother who is the hero, he did it all himself. As soon as you get a lawyer you give up your natural given rights.
Willie, You can find out if your mortgage is held by Mers by reading the deed of trust. Not only will there be a section explaining Mers but the printing at the bottom of each page will show it is a Mers form.
What do i do once i find out that my dded of tust states that my home is a mers ? thank You and God bless you for this article
Matt,
I was a First Vice President of Strategic Planning for Countrywide Administration and Real Estate. Time Magazine named Angelo Mozilo as the #1 cause of the economic meltdown. They had a 200 person trading floor (shades of Enron) and had retained servicing rights on $1.3 Trillion (with a T) of mortgages after selling the risk. These servicing rights allowed them to profit from fees and foreclosure as the underlying mortgages went under. Smart guys. Except the head of the division was leading the company to plan a 10,000 person facility – in Vegas of all places. They were acquired by who? B of A. And what’s going on with them now? I hope you’ll help connect the dots and make them public. Check out my blogs on this topic @ GoHuman.com – would love to chat with you about this some time.
Could someone please tell me where on the deed of tust that it states if Our Home is a MERS home so I cant stop the foreclosure slated for Oct 22? PLEASE
Kim,
Depending what state you are from, look on the first page of your MORTGAGE OR DEED OF TRUST, TOP OF PAGE 1 PARAGRAPH OR DEFINITION ‘C’. Do a search on google, Sample _____ (State you are located) MERS Mortgage (OR Deed of Trust); you should be able to find a sample on the interenet. Hope this helps,
Ruth
One guy who has been a champion of investigating mortgage fraud committed by banks and organizations like MERS is Steve Dibert. He runs a company called MFI-Miami (www.mfi-miami.com). I have a friend who he helped avoid foreclosure.
Real estate is fraud from top to bottom. From the NAR’s Chief Economist waving pompoms 5 places to the right of the decimal point, to appraisers inflating values, it is pure racketeering.
The FBI labeled the RE industry as the “New Mafia”, and warned Bush thoroughly in 2002 that mortgage fraud was rampant to no avail. Now, the FBI has been given at least 1/2 billion to move on the mortgage mafia, and the largest law enforcement effort in the history of this country is fully underway. Blogs like Mortgagefraudblog.com, and MortgagefraudReporter are reporting arrests, indictments, and sentencings on a daily basis.
AS far as foreclosures go, banks wouldn’t foreclose if they didn’t want to. That’s just common sense. The reason they’re all so trigger-happy is because they’re double-selling. They’ve already sold the mortgages once on Wall St., then kept a copy and are foreclosing on the properties with a simple affidavit and the stupid judges accept it every time. It’s pure profit, and they’ll put people and their belongings out in the street for pure profit.
Foreclosure Fraud – Guide to Looking up Public Records for Fraud
http://www.scribd.com/doc/20916919/Foreclosure-Fraud-Guide-to-Looking-up-Public-Records-for-Fraud
Ruth,thanks for your reply.I have the Deed of Trust in my hand and it says Option One Mortgage out of Irvine California even though our home is in Ft Myers,Florida and states in Paragraph one (C) the performance of borrowers covenents and agreements under this security instrument and this note.For this purpose does hereby mortgage, grant and convey to Lender the following described property in Lee county,Florida.Does that mean an MERS? I don’t Understand this at all. Thank you
They won’t let me see the Note and Mortgage.
I filed affirmative answer in chancery court when they filed foreclosure 8 months after I sent notice of rescission.
The chancery court has been dormant ever since they asked for sub judge when i filed production request.
I then took them to Fed court 4 months after they filed foreclosure (only had a year to file for failure to rescind). Demanded original note and mortgage in my complaint, they responded with a 12(b)(6). I responded with discovery request.
I couldn’t get a lawyer to take my case, in either case, due to complex nature without high retainer fee. I also was denied appointed counsel in both cases, although our paychecks barely cover living expenses.
Things were stagnant for 7 months in Fed case and judge ordered discovery after my asking 4 times – then once I sent out my discovery requests, the Bank Wells Frago demanded resolution of it’s 12(b)(6) – which the Judge granted (!), and the judge gave me 10 days to submit an amended complaint – and I still can’t get a lawyer! So now, I will attempt to amend my complaint, and throughout this almost 2-year ordeal, I STILL cannot get them to produce the original documents!
I went to the Title Company and paid $100 for “everything they have” regarding our refinancing – she refused to sign a statement saying it was “all they have”, (against policy, she says). I ask to see the original mortgage and she says the original lender has it – she says MERS has the note.
The original lender says he doen’t have it and to ask Wells Fargo, our servicer.
Now, over the past 2 years I had called MERs and I always get referred to Wells Frago.
At court, I have already asked Wells Fargo (and MERS, and the original lender, they are all defendants in FED), and they showed my a COPY of the mortgage and note(a different copy than what Wells Fargo presented in chancery court!).
How can I compel production in Fed if my case was dismissed with leave to amend in 10 days? If I need the original Mortgage and Note to prove my case in both Chancery and Federal courts?
OCC says it does not regulate MERS. The SEC says it can’t get my mortgage and note chain of title from MERS database.
FTC says it does not regulate MERS.
Who regulates MERS, and how can one get chain of title from MERS database without being a MERS member (Bank, Title Ins.Company, Trade Company)?
Does anyone know if I lose my case in Fed court (because I’m not a lawyer and can’t seem to write up my complaint correctly – there is fraud, TILA, RESPA, predatory lending)can I still compel production in foreclosure case, although the same things I previously brought up as affirmative defenses in foreclosure were dismissed in Fed case due to failure to state a claim?
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