MERS? It May Have Swallowed Your Loan

Let's see: Mortgages are a specific type of legal device. Roughly they are designed to conditionally transfer the ownership of real property, contingent upon the faithful discharge of regular payments.

To create this legal device, the law had to define very specific conditions that had to be met, in order to ensure that these devices -- powerful as they are -- were not misused for unintended purposes. Unlike other collateralized loans, in this case the collateral is the holders dwelling or home. You'll, no doubt, note that bankruptcy courts treat homes as an asset that is different than other types of assets. If you read up on why this is, you'll begin to understand mortgages must use a different standard when treating a home as collateral.

Okay, that said, the point is this; unless the rules for legally creating a mortgage are followed very carefully, a court of law cannot ascertain if it is legal to treat a home as "mortgage collateral" or as a mere "security collateral".
The difference being in how the court should go about treating the home, in the instance of a loan default.

For example, if you purchased a $5,000 big screen tv and pledged your home as collateral, if you failed to pay, the courts would not take the home away from you to settle the debt. Contractors and others with non-mortgage claims against the home, have to wait for the home to be sold, before they can recover their claims. Not so with mortgages! So there is a very big class of difference between how the loan(s) against a home are arranged, and there are rules that must be followed, to create the special class of claims against real property known as mortgages.

So now enter MERS! To list the home on the MERS system, MERS is filed with the registration authorities as the beneficial owner of the home. But this is different than the real owner, and it is different than the real beneficial mortgage holder/servicer(s).

Okay, here's the catch, the documents filed with the registration authorities, do not convey truthful information that the filers are legally entitled to give.
(Just because information is not truthful, does not mean it's improper, since the law may allow untrue information be filed for various procedural reason. However I note that no such exceptions exist for the class of machinations that MERS is seeking to use, because it did not exist when these laws were formulated.)
Thus the laws for creating a specific mortgage class of home-as-collateral are not met. Thus the mortgage is not legally enforceable, since the law cannot "see" a real mortgage, that was created according to the existing mandates of law.

Thus the loan made upon these representations and unapproved filings, must devolve to being "not a mortgage", or a mere "securitized loan", that does not include the special privilege of the lender being able to repossess the home on default. Thus any claim made against a home registered to MERS, does not have the force of mortgage law, required to protect the lenders interests, in the way that a legitimate mortgage properly filed, would.

In short, if your home was registered as being owned by MERS, you do not have a legal mortgage! What you have been given is; at best, a colleralized loan. Meaning that the lender has little choice but to wait for the sale of the home to collect his due. AND, must hazard extinguishment of the loan if submitted to bankruptcy court, just as any other ordinary loan would. By not faithfully fulfilling the exacting requirements of the laws governing the creation of a legal mortgage, the lender has forgone obtaining one.

Which is why the courts have ruled in several cases, that MERS registration does not fulfill the legal requirements for the establishment of a mortgage! Thus the attempt to substitute MERS for a proper filing completion, cannot be claimed to confer to the lender, the specific protections that a legal mortgage would.

That is the point that many lawyers and homeowners miss in foreclosure cases.
That since the requirements of a legal mortgage had not been faithfully fulfilled the loans made, if any, must be considered mere secured lending and not mortgage loans. Thus the lender must wait in line for payment, until the property is sold.

Naturally you are not to take the word of an opinion read on the internet as legal advice, you are tasked with obtaining legal confirmation of it yourself. Of course, in my opinion, from what I've been reading, you will probably meet with success more likely than not.

Paul Krugman Says We Need To Hold The Bankers Accountable

Posted: 19 Jul 2011 07:00 PM PDT

Paul Krugman says that letting the bankers walk is a really big mistake -- and is a major factor in the recession:

Last fall, we learned that many mortgage lenders were engaging in illegal foreclosures. Most conspicuously, “robo-signers” were attesting that banks had the required documentation to seize homes without checking to see whether they actually had the right to do so — and in many cases they didn’t.

How widespread and serious were the abuses? The answer is that we don’t know. Nine months have passed since the robo-signing scandal broke, yet there still hasn’t been a serious investigation of its reach. That’s because states, suffering from severe budget troubles, lack the resources for a full investigation — and federal officials, who do have the resources, have chosen not to use them.

Instead, these officials are pushing for a settlement with mortgage companies that, reports Shahien Nasiripour of The Huffington Post, “would broadly absolve the firms of wrongdoing in exchange for penalties reaching $30 billion and assurances that the firms will adhere to better practices.”

Why the rush to settle? As far as I can tell, there are two principal arguments being made for letting the banks off easy. The first is the claim that resolving the mortgage mess quickly is the key to getting the housing market back on its feet. The second, less explicitly stated, is the claim that getting tough with the banks would undermine broader prospects for recovery.

Neither of these arguments makes much sense.

The claim that removing the legal cloud over foreclosure would help the housing market — in particular, that it would help support housing prices — leaves me scratching my head. It would just accelerate foreclosures, and if more families were evicted from their homes, that would mean more homes offered for sale — an increase in supply. An increase in the supply of a good usually pushes that good’s price down, not up. Why should the effect on housing go the opposite way?

You might point to the mortgage relief that would supposedly be extracted as part of the settlement. But if mortgage relief is that crucial, why isn’t the administration making a major push to reinvigorate its own Home Affordable Modification Program, which has spent only a small fraction of its money? Or if making that program actually work is hard, why should we believe that any program instituted as part of a mortgage-abuse settlement would work any better?

Sorry, but the case that letting banks off the hook would help the housing market just doesn’t hold together.

What about the argument that getting tough with the banks would threaten the overall economy? Here the question is: What’s holding the economy back?

It’s not the state of the banks. It’s true that fears about bank solvency disrupted financial markets in late 2008 and early 2009. But those markets have long since returned to normal, in large part because everyone now knows that banks will be bailed out if they get in trouble.

The big drag on the economy now is the overhang of household debt, largely created by the $5.6 trillion in mortgage debt that households took on during the bubble years. Serious mortgage relief could make a dent in that problem; a $30 billion settlement from the banks, even if it proved more effective than the government’s modification program, would not.

So when officials tell you that we must rush to settle with the banks for the sake of the economy, don’t believe them. We should do this right, and hold bankers accountable for their actions.

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