If you have been following the stories of MERS (Mortgage Electronic Registration System) involvement in the foreclosure crisis you are well aware of MERS and the robo-signers. Courts have been routinely ruling against MERS and the banks. The banks have dismal record keeping procedures and the courts have ruled in favor of the homeowners.
Let’s examine one possible bank scenario. Bank A makes the loan on a home and secures the loan with a mortgage. Bank A then sells the note and mortgage to bank B, who in turn sells it to bank C, who eventually sells the note and mortgage to an investor. The investor typically could be a pension fund or an insurance company. The actual process might be significantly more complex, but for this instance we will go with the above. MERS may not even be involved. Now, each of these additional transfers of the mortgage is supposed to be recorded by the county recorder. This is where the banks have skirted the law because each recording costs money and recording may even trigger additional taxes.
Next, the homeowner defaults on his payments, and the lender forecloses on the home. The practice has been that bank A, who made the original loan, conducts the foreclosure. The only problem is that bank A is no longer the owner of the note and no longer has legal standing in the case, and consequently has no right to foreclose. Only the owner of the note has that right, and they have tried to remain anonymous. This is the reason judges have been ruling against the banks and against MERS.
The situation may have just come to a head in a case involving U.S. Bancorp and another involving Wells Fargo. Neither of these cases involved MERS. The Massachusetts Supreme Court, in a unanimous decision, ruled that neither Wells Fargo nor U.S. Bancorp have standing and consequently have no right to foreclose because they failed to show that they were holders of the mortgages at the time of foreclosure.
Massachusetts Supreme Court Justice Robert Cordy, in a concurring opinion, blasted the banks for the “utter carelessness” they demonstrated in documenting their right to own the properties.
This ruling is expected to slow down the foreclosures significantly and consequently significantly affect the entire home loan process and market place.
Massachusetts is one of 27 non-judicial foreclosure states. If the banks were playing fast and loose in Massachusetts, what is the likelihood that they would have operated differently in any of the other non-judicial states?
Do we face the prospect of having foreclosures overturned too?