photo by respres via Creative Commons license
A recent article from attorney and author Ellen Brown details a court ruling that I thought would be all over top-story news immediately. Curiously, that hasn’t happened. Considering how huge of an impact it could have, I think we all have a duty to get the word out.
Ellen writes that a recent California bankruptcy court recently held that banks do NOT own clear title to the properties held in the name of MERS. The “Mortgage Electronic Registration System” is an online computer software program for tracking mortgage ownership and rights devised in the ’90s as a convenient property shuffler to serve the needs of the mortgage-backed-securities speculators. Developed by financial titans like Bank of American, Countrywide, Fannie Mae and Freddie Mac, MERS allowed these institutions to securitize and shuffle their suspect mortgage deals behind a veil of anonymity.
The court held in the California case (In re Walker, Case no. 10-21656-E–11) that MERS could NOT foreclose and that Citibank could not collect on its claim. The reason is that while MERS is the mortgagee of record, legally, is merely a “nominee,” not the true owner of the property. Recent rulings have held that this is a fatal failure, and one that prevents the plaintiff’s legal ability to foreclose. In the latest California decision , the judge wrote:
Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.
The court concluded:
Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.
Essentially, MERS has not done proper legal paperwork to transfer title all the countless times the properties it’s holding were reshuffled.
Since MERS has been up and running, local governments been cheated out of their recording fees and the recording laws themselves — intended to guarantee purchasers clean title information — have been violated. Even worse, as Ellen points out, MERS fueled an “explosion in predatory lending in which lenders could not be held to account because they could not be identified, either by the preyed-upon borrowers or by the investors seduced into buying bundles of worthless mortgages.”
Other suits are taking up RICO and fraud charges against MERS. A class action suit was filed in Florida in July 2010 against MERS and an associated legal firm for racketeering and mail fraud. It alleges, “MERS was and is used in a way so that the average consumer, or even legal professional, can never determine who or what was or is ultimately receiving the benefits of any mortgage payments.”
What does all this mean, exactly? Well, MERS currently holds 62 million mortgages, including over half of all new US residential mortgage loans. As Ellen Brown writes:
The logical result could be 62 million homes that are foreclosure-proof. … The defaulting homeowners could wind up with free and clear title. … That means hordes of victims of predatory lending could end up owning their homes free and clear while the financial industry could end up skewered on its own sword.
You read that right — 62 million homes foreclosure-proof. 62 million homeowners with free and clear title. The chain of title has been broken and no one may have standing to sue. That seems like mighty big news to me. If I were one of those homeowners, I’d certainly want to know. Surely the obvious question arises: Why keep paying my mortgage to an entity that doesn’t really own the property, let alone an entity under suit for fraud and racketeering?
Ellen sums it up:
If courts overwhelmed with foreclosures decide to take up the cause, the result could be millions of struggling homeowners with the banks off their backs, and millions of homes no longer on the books of some too-big-to-fail banks. Without those assets, the banks could again be looking at bankruptcy.
Read Ellen Brown’s full article: Homeowners’ Rebellion: Recent Rulings Could Shield 62 Million Homes from Foreclosure
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