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July 14th, 2010 (Modified on June 8th, 2011)

Has MERS ripped you off?

by Gina Pogol


There has been a lot of publicity surrounding the Mortgage Electronic Registration System (MERS) and the lawsuits filed against the company that owns it. MERS serves as the mortgagee of record for the actual mortgage lenders, investors and their loan servicers on the records filed with counties across the U.S. Lenders use MERS because it eliminates the need of filing with the county every time a mortgage changes hands on the secondary market.

For those who are unfamiliar with MERS, here’s some background info from the New York Times:

For centuries, when a property changed hands, the transaction was submitted to county clerks who recorded it and filed it away. These records ensured that the history of a property’s ownership was complete and that the priority of multiple liens placed on the property — a mortgage and a home equity loan, for example — was accurate.

During the mortgage lending spree, however, home loans changed hands constantly. Those that ended up packaged inside of mortgage pools, for instance, were often involved in a dizzying series of transactions.

To avoid the costs and complexity of tracking all these exchanges, Fannie Mae, Freddie Mac and the mortgage industry set up MERS to record loan assignments electronically. This company didn’t own the mortgages it registered, but it was listed in public records either as a nominee for the actual owner of the note or as the original mortgage holder.

Borrower Lawsuits: There Is No Free House

Many lawsuits have been filed by borrowers in default, individually and in class actions, on the principle that because MERS doesn’t actually own mortgages, the borrowers have no obligation to the firm and it has no right to foreclose.

These claims have been met with mixed results in various jurisdictions. For example, the Minnesota Supreme Court held in 2009 that MERS could not only foreclose on homeowners, it was not even required to disclose the names of the lenders that had bought, sold and owned the mortgages.

MERS has lost such lawsuits when judges disagree that it has an agency relationship, or when it couldn’t produce original documentation for the loan, such as a note signed by the borrower agreeing to the terms of the mortgage (when a loan changes hands frequently it’s not unusual for documents to be lost). Cases in Nevada and Kansas went against MERS in both district courts and bankruptcy courts.

Note, however, that even when MERS loses, no one has been awarded a house for free.

A Bigger Lawsuit: Is MERS Going Down and Why Should You Care?

MERS has always pushed its services as a way for lenders to avoid filing with counties when a loan’s ownership changes, and thus mortgage lenders, servicers and investors can avoid paying county filing fees. On its website, the company claims to have kept $2.4 billion in recording fees out of county coffers and in the hands of mortgage lenders. Well, local governments are starved for cash and a scheme to avoid paying fees does not exactly sit well with them. Christopher Peterson, a law professor at the University of Utah Law School and an expert in MERS activities, says that means fewer police officers, libraries, firefighters and teachers in many counties. “What (MERS) has done in avoiding these legally-required payments looks an awful lot like fraud,” he claims. “It probably is fraud.”

If you live in any county where MERS operates, you have been allegedly ripped off and you should care.

Suits in Nevada and California have been filed against MERS under the False Claims Act, which allows citizens to file complaints on behalf of governments concerning fraud and waste. In Nevada, the False Claims Act allows for triple damages and penalties of $5,000 to $10,000 per individual offense. The local governments (a.k.a. you, the taxpayer) would collect most of the damages.

In Nevada, MERS has been listed as owner on about 890,000 mortgages. Attorneys estimate that MERS and its members (47 mortgage lender members have also been named as defendants) face a potential judgment of $6 billion to $12 billion in Nevada alone. Rest assured that if this litigation is successful, other governments will be quick to “follow suit.”

(This blog post was written by HSH staff writer Gina Pogol. To read more of Gina’s contributions to our website, visit HSH.com.)

14 Responses to “Has MERS ripped you off?”

  1. Huckleberry Hound Says: July 14th, 2010 at 8:41 am

    TN has a suit filed against MERS http://www.foreclosurehamlet.org/profiles/blogs/state-of-tennessee-v-mortgage

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  3. Steve Says: July 14th, 2010 at 3:46 pm

    Far from being a nefarious shadowy company bent on defrauding mortgagors and county recording agencies, MERS arose as an efficient way to track mortgages as they are bought and sold. The background summary quoted from the NY Times is accurate. A useful analogy might be the securities industry. Think of how many stock trades are done electronically, and how few are done by paper certificates. Now think of how expensive, cumbersome, and slow the system would be without electronic trading. When a loan is closed with MERS as the original mortgagee (called a MOM loan), the actual lender is listed on the mortgage, and MERS acts as nominee for said lender; the borrower(s) sign the mortgage, and are thus demonstrably aware of MERS. Closing a MOM loan means that any time the loan is sold, a paper assignment will not need to be prepared, sent for recording, and monitored until it is recorded and returned. Everything is done electronically–for a fraction of the cost and within minutes, not weeks. In 2006, the New York court of appeals unanimously upheld the MERS registration process as valid, and recently a federal court in Missouri upheld MERS. I believe that there were other court cases in which MERS was upheld, but I cannot give a specific citation. For professor Christopher Peterson to claim that MERS is committing fraud in avoiding “legally-required payments” is specious at best. A fee is charged when a service is performed. If the service is not rendered, the fee is not earned. The fact that MERS does not need or avail itself of the service of recording multiple assignments over the life of the underlying mortgage loan does not constitute fraud. Using professor Peterson’s reasoning, a bank could claim that checking customers who do not overdraw their checking accounts are committing fraud against the bank by avoiding overdraft fees. Full disclosure: My bank keeps all its mortgage loans, and so does not close any loan in the name of MERS as the original mortgagee.

  4. Elyse Says: July 14th, 2010 at 5:18 pm

    MERS is responsible for the bankruptcy of America!! MERS has not paid the filing fees in every County in every State in AMerica and MERS is the reason our Country is in the toilet! Sue them, I am. MERS is a computer…that’s all! MERS violates the County Recording practice that has been the way people file any important documents. The boys on Wall Street began this computer system in order to slice & dice up the mortgages and sell them over and over and over again to investors in Russia and China and who knows where else. This situation is beyond belief and not one news media outlet is exposing their fraud. Thank God for these blogs online. elyse@gte.net (888) 771-6611 for more information

  5. Warren Pease Says: July 15th, 2010 at 7:43 am

    While this is a theory, I don’t think it is a very good one. The is a whole body of law that distinguishes government “fees” from “taxes.” Fees must bear a reasonable relationship to the cost associated with providing the public service for which the payer is being charged. If the service is not needed (as is the case in Minnesota), then there is no “lost” revenue. There is no tax in Minnesota for the assignment of mortgage, so, while the fee is being avoided by use of the MERS system, it is not tax avoidance. This is a big difference. I would argue further, as well, that the old system led to a maddenly fragmented system where paid off mortgages frequently could not be effectively released (for example, where authority to release defunct S&L liens could not be located). This frequently clouded titles to properties and DECREASED the flow of transaction taxes for deeds and mortgages to the government, as well as the fees. I am agnostic on the larger role of MERS in the financial crisis, but I do think fairness requires that its role did not diminish tax collection, while providing a private alternative to a government service that should be roughly revenue neutral, that is, not a cash cow that subsidizes unrelated services.

  6. Marty Says: July 15th, 2010 at 8:37 am

    How about this..in FLorida..so long as MERS is on the mortgage note..the lender doesn’t EVEN HAVE TO EXIST for the mortgage to be valid…LoL..so you could fake up a lender..register the mortgage with MERS and POOF..it is a VALID NOTE!!!

  7. Gina Pogol Says: July 15th, 2010 at 5:16 pm

    Well, not being a lawyer I can only guess how this will unfold. But it seems reasonable that if a state law requires a filing with the county when a mortgage changes hands, then MERS violates both the spirit and letter of the law. Fannie Mae is avoiding the issue with MERS-related foreclosures; in April it began requiring loan servicers to transfer mortgages back into their own names before foreclosing rather than foreclosing in the name of MERS. I think the issue becomes more problematic when borrowers are trying to negotiate mortgage modifications or workouts and no one can come up with anything showing the terms of the loan or who the investors are. And the GAO found that the majority of servicers were improperly applying HAMP guidelines and denying eligible borrowers mortgage modifications. Finally, I think that most people intuitively feel that when anyone claims that you are in default on an obligation and files to take your home from you, you should be able to know who they are.

  8. james harry fosbinder Says: July 16th, 2010 at 7:21 pm

    What is MERS MERS is a membership organization made up of more than 90% (by gross lending) of the mortgage lenders active in U.S.. The Situation Prior to MERS Land records such as title, mortgage and foreclosure documents were only recorded locally. Foreclosures were typically done by local attorneys (this was often required by statute) and the lending was done in large part by local lenders. People and corporations speculated in land and buildings, but it took time to transfer and record title, and profits were made from appreciation of land values over time. Compared to the present refinancing loans was infrequent. In 1983 less than 10% of mortgages were ever refinanced by 2001 44% were Banks made money by charging a more interest than they paid depositors. There was little spreading of the risk; if banks made bad loans, the bank lost income. For this reason, banks made serious investigation of the mortgagor’s ability to pay back the loan. When a bank approved your application, it meant something; it meant there really was a good chance that you would be able to repay the loan. Someone, whose job depended on being correct, had looked carefully at your situation; even if you were not sophisticated financially, someone who was thought you’d be able to repay the loan. Although people speculated on real estate, it was generally a long-term investment. It was relatively difficult to sell short on residential real estate. Day trading in securities based on real property didn’t exist, and the securitization of home mortgages was non-existent. The inherent complexity of the process of recording documents, and the complexity of buying small pieces of large projects, meant that the only way to aggressively buy and sell an interest in mortgage-related assets on a frequent basis was to buy stock in corporations set up to invest/speculate in real estate, such as real estate investment trusts (REITs). Most important, it was almost impossible to invest in a speculative way in single family homes. You could invest in the stocks of companies which built single family homes, or in the stock of lenders that financed home loans, but that was about it. There was competition between lenders based upon their local reputation for fair dealing, local charitable giving, and so on. Most importantly, there was competition between banks, with some banks having a reputation for helping mortgagors with problems to work things out and avoid foreclosures. These banks charged more and took more chances with marginal borrowers. Other borrowers went to more risk averse banks, which demanded more proof of the borrowers’ ability to pay and were less likely to carry loans with problems. Securitization and the Rise of MERS Markets for mortgage debt were created to generate more capital for home loans. The lender sells the mortgage note into the secondary mortgage market, most often to one of the government or government-sponsored entities created by statute to purchase residential mortgage loans from banks and other lenders, such as Ginnie Mae, Fannie Mae and Freddie Mac. These entities re-sell bundles of mortgage notes into the tertiary, mortgage-backed securities market, creating pools of notes held in trust for investors. A trustee holds the pool for the benefit of many people, who buy and sell shares in the pool. Servicing rights on the loans could also be transferred from the original lender to a mortgage servicer. The original lender receives money from the sale of mortgage notes and servicing rights, which enables it to make more loans. In 1993, the Mortgage Bankers Association, Ginnie Mae, Fannie Mae, Freddie Mac and others in the real estate finance industry created MERSCORP, Inc., an electronic registration system which tracks beneficial ownership interests in mortgage loans (transfers of mortgage-backed securities) and transfers of servicing rights. Mortgage Electronic Registration Systems, Inc. (“MERS”) is a separate corporation created to hold mortgages as the lenders’ nominee. The mortgage may name MERS as the original mortgagee, or a lender may assign the mortgage to MERS. The borrower signs a mortgage or deed of trust that names MERS as the mortgagee (or beneficiary, in deed of trust jurisdictions), in each case as the nominee for the lender and its successors and assigns. The borrower contractually agrees that, in the event of default, MERS is a proper party to foreclose on the home. The mortgage or deed of trust with MERS as the named mortgagee or beneficiary is recorded. When the note is sold by the original lender, and re-sold in the mortgage-backed securities market, the sales are tracked on the MERS® System. This eliminates the need to record these sales in the local real property offices, because the named mortgagee (or deed of trust beneficiary) of record is still MERS, which continues to act as a nominee for the new holder. If a note is transferred to an entity that is not a MERS member, MERS assigns the note to the transferee, and this assignment is recorded in the local real estate office. The loan is then “de-activated” from the MERS® System. The original lender is now getting paid up front, shifting (and spreading) the risk of loss onto the investors in the mortgage-backed securities pool. Lenders shifted to a marketing fee based structure, eliminating their incentive to analyze the long-term risk of default on the loans they wrote. The banks no longer cared about a careful evaluation of mortgage applications; they just approved them to generate more fees. There was no risk to the bank, because the bank was selling the risks and benefits as the ink of your signature dried. All of the members/owners of MERS agreed to purchase a new bundle of products exclusively from MERS. This bundle included access to the new digital recording system for real property identification, purportedly to reduce the cost of transactions. It is clear that there was an agreement among all MERS owners to create a new product and maintain a monopoly in the business of digitally recording real property interests. Digital property identification makes securitization of the income stream from mortgages practical. Within 20 years, they accomplished their goal and have maintained control of 100% of the digital real property identification business. It is now very big business, however it is tiny compared to the size of the members of MERS. The owners have also maintained control over another product, called “foreclosure assistance.” Their monopoly here is roughly 90%. There is no doubt that the MRS cartel controls the digital real property identification process as well as the mortgage foreclosure business. Securitization seems to have been the primary reason for the vast majority of large financial institutions’ early involvement in MRS. The small cash savings on the cost of transferring interests in real property (a cost traditionally born by the purchaser) was a net wash for the banks. This seems particularly compelling given the tremendous risk of taking over the system 20 years ago when computer backup was not as reliable as it currently seams to be. In many ways, MERS was a merger of the big banks. In order to be a member, numerous detailed rules must be followed. Recently a large lender who had been a member of MERS sued for injunctive relief, claiming they had been expelled from MERS and that this would be disastrous for their business because the MERS membership was necessary for their business; they specifically alleged that MERS is a monopoly. Much of the writing about antitrust cases involves esoteric mathematical analysis of claimed price manipulation by companies controlling as little as 10% of an industry in relatively small area. Complex math is not necessary in this case. Under any test, the membership of MERS controls the mortgage industry, the foreclosure assistance industry and the digital identification of real property industry. The members of MERS have also allegedly conspired to rig the credit scoring system by purchasing credit scoring companies (see Pittsburgh antitrust with regard to consumer lending case). They also seem to be buying up the larger real estate sales chains, such as Century 21. What MERS did was to turn Poker in the back of the neighborhood bar where their were no sharks and everyone knew each other and the pace was leisurely into Monte Carlo, Las Vegas and internet gambling all rolled into one. As a result the real property markets were destabilized; Banks made fabulous income on fees and a million families will lose their homes to foreclosure this year. The people at the top were well aware that this had become a Ponzi scheme but they had gotten in early and if you get in and out early Ponzi schemes are darn fine investments. The question is should they have to disgorge their profits? Should they go to jail? Should their employers be required to pay the damages of unsophisticated borrowers?

  9. MERSCORP, Inc. Says: July 20th, 2010 at 11:45 am

    The mortgage industry created MERSCORP Inc. to more easily identify and track individual mortgage loans and the information related to those loans, including the servicer and investor. When a borrower signs the mortgage security instrument at closing, they grant and convey the legal title to the mortgage to Mortgage Electronic Registration Systems Inc. (MERS) and MERS is the mortgagee. As the agent for the promissory note owner, upon instructions from the owner, MERS will commence a foreclosure. The mortgage instrument states that MERS has the right to foreclose and sell the property. Courts around the country have repeatedly upheld and recognized this right. In the foreclosure process, MERS has been and continues to be an outspoken advocate for all parties, producing all the required evidence, including the note. If that means taking more time to gather the necessary documents before rushing in and filing a pleading, MERS strongly recommends doing so. It often takes time to produce the note. Attorneys for mortgage companies usually are under very tight time pressures from investors to act quickly. Instead of actually producing the note, many attorneys rely on the practice of filing a “lost note” affidavit. This is a practice that MERS does not support. When MERS forecloses, we require that the promissory note be in our possession endorsed in blank, making MERS the note-holder with the right to enforce it.

  10. Virginia Ferrer Says: July 21st, 2010 at 9:33 pm

    Where, Mr. MERScorp, did you come up with the “agent” for the Promissory Note scenario? I’ve never seen anyone who had a signed agreement or document to allow an “agent” handle their note – this must be something new? There hasn’t even been a mention of MERS in a Promissory Note. In fact, all the documentation I’ve seen is that the mortgages have become securities and sold to “investors” including foreign countries (Russia, China, Saudi Arabia), unions, etc. MERS apparently has no legal right to foreclose. MERS has no “dog in the hunt.” MERS has no beneficial interest in the mortgage instrument that it could assign. In Carpenter v. Longan, 16 Wall. 271, 83 U.S. 271, 274, 21 L.Ed. 313 (1872), the U.S. Supreme Court stated “The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.” “Where the mortgagee has ‘transferred’ only the mortgage, the transaction is a nullity and his ‘assignee,’ having received no interest in the underlying debt or obligation, has a worthless piece of paper.” (4 RICHARD R. POWELL, POWELL ON REAL PROPERTY, § 37.27[2] (2000); In re Mitchell, Case No. BK-S-07-16226-LBR (Bankr.Nev. 3/31/2009) In the consolidated cases of In re Foreclosure Cases, 521 F. Supp. 2D 650, 653 (S.D. Oh. 2007), a standing challenge was made and the Court found that there was no evidence of record that New Century ever assigned to MERS the promissory note or otherwise gave MERS the authority to assign the note. Beginning with this case, courts around the country started to recognize that MERS had no ownership in the notes and could not transfer an interest in a mortgage upon which foreclosure could be based. In LaSalle Bank NA v. Lamy, 824 N.Y.S.2d 769 (N.Y. Supp. 2006), the Court denied a foreclosure action by an assignee of MERS on the grounds that MERS itself had no ownership interest in the underlying note and mortgage. In the case of In re Mitchell, Case No. BK-S-07-16226-LBR (Bankr.Nev., 2009), the Court stated “In order to foreclose, MERS must establish there has been a sufficient transfer of both the note and deed of trust, or that it has authority under state law to act for the note’s holder.” The Court found that MERS has no ownership interest in the promissory note. The Court found that though MERS attempts to make it appear as though it is a beneficiary of the mortgage, it in fact is not a beneficiary. The Court stated “But it is obvious from the MERS’ “Terms and Conditions” that MERS is not a beneficiary as it has no rights whatsoever to any payments, to any servicing rights, or to any of the properties secured by the loans. (http://www.scribd.com/doc/20954805/Foreclosure-Subprime-Mortgage-Lending-and-MERS) The Abstract to the document link noted above: At the roots of the worst recession since the Great Depression were unaffordable home mortgages packaged into securities, sold to investors, and used as capital assets by financial institutions. The process of securitization, as well as financial institution over-leveraging associated with it, has been well documented and explored. However, there is one company that was a party to more questionable loans and foreclosures than any other and yet has received virtually no attention in the academic literature. Mortgage Electronic Registration Systems, Inc., commonly referred to as “MERS,” is the recorded owner of over half of the nation’s residential mortgages. MERS operates a computer database designed to track servicing and ownership rights of mortgage loans anywhere in the United States. But, it also acts as a proxy for the real parties in interest in county land title records. Most importantly, MERS is also filing foreclosure lawsuits on behalf of financiers against hundreds of thousands of American families. This Article explores the legal and public policy foundations of this odd, but extremely powerful, company that is so attached to America’s financial destiny. It begins with a brief explanation of the origins of the county real property recording systems and the law governing real property liens. Then, it explains how MERS works, why mortgage bankers created the company, and what MERS has done to transform the underlying assumptions of state real property recording law. Next, it explores controversial doctrinal issues confronting MERS and the companies that have relied on it, including (1) whether MERS actually has standing to bring foreclosure actions; (2) whether MERS should be considered a debt collector under the federal Fair Debt Collection Practices Act; and (3) whether loans recorded in MERS’ name should have priority in various collateral competitions under state law and the federal bankruptcy code. The article culminates in a discussion of MERS’ culpability in fostering the mortgage foreclosure crisis and what the long term effects of privatized land title records will have on our public information infrastructure. The Article concludes by considers whether the mortgage banking industry, in creating and embracing MERS, has subverted the democratic governance of the nation’s real property recording system. But let’s get to the crux of the issue. As long as we allow this Little MERS Shop of Horrors to continue to feed on foreclosures – the economy will not bottom out and climb back. The credit bidding process allowing MERS to buy back properties at the inflated pricing that the predatory lenders contracted for will just prolong the dire state of the economy. Honest Courts around the country have shut out MERS… not to mention all of the out of court settlements” to keep this quiet. And the more information that the public obtains the faster this will come to a head. Here is my thought (for what its worth): H.R. 4173: Restoring American Financial Stability Act of 2010 aka “Wall Street Reform Bill.” Section 9306 – Directs the HUD Secretary to study and report to Congress on: (1) the root causes of home loan defaults and foreclosures, including the role of escrow accounts in helping prime and nonprime borrowers to avoid defaults and foreclosures; and (2) the role of computer registries of mortgages, including those used for trading mortgage loans. Congress needs to immediately place a moratorium on foreclosures (Hilary was right)… And I think we should “help” them document their “study” for Congress… because by this Sec. 9306 alone… somebody understands MERS … no one else other than MERS is doing more than 60 million computer registries of mortgages. Congress needs to immediately: 1. PLACE A MORATORIUM ON FORECLOSURES; 2.APPOINT A RECEIVERSHIP ON MERS & MERScorp (there are enough lawsuits to justify this now); GOALS – due to the bank fraud and predatory lending – a penalty in lieu of being sued for anti-trust, fraud and collusion: All primary loans made between 1996 – 2010 are mandated to be reduced to 2% for 30 years; Loans must be of market value – or reduced to meet market value: a) Government financed and approved appraiser value based on current market sales, and b) judicial review and approval of appraised value All 2nd mortgages stripped (removed – we do this in bankruptcy for Ch. 13); All back payments and penalties, attorneys fees and costs forgiven / removed.

  11. Virginia Ferrer Says: July 21st, 2010 at 10:25 pm

    And why, Mr. MERScorp are “Attorneys for mortgage companies usually are under very tight time pressures from investors to act quickly” – when its a known fact that the transactions are covered by various insurance policies – all paying off due to the defaults… many of which were holding customers in a modification mode while insurance or the government paid off…? And why would the investors be in a hurry because most of these foreclosed homes are REO (bank owned real estate) – not purchased by actual buyers… and they sit there vacant for months if not years?? Wouldn’t it have been more humane to modify and reduce the payments and allow the families to stay in their homes – since the predatory lending is at the root of the economic crisis to begin with? If you would have reduced the inflation, we might have been out of this downturn by now – instead we have hundreds of thousands of homeless out-of-work families in a dying economy. Those investors aren’t just knocking on the door to hurry you up – sounds like they’re inside about to take you over already.

  12. Bill Turner Says: July 23rd, 2010 at 8:47 am

    The original promissory note endorsed in blank form is only way to foreclose. The rush to foreclose only prolongs the liquidation of the asset with the Lost Note Count, if challenged. BTW – MERS is not listed as beneficary on the Promissory Note. Therefore, most AOM are incorrect because an entity cannot transfer photocopy of a Note as a substitute for the original, a negotiable instrument, especially when the photocopy is endorsed in blank form. The Servicers and the LPS system are messing up the foreclosure process. The servicers rush to foreclose believing only a small % of borrowers in judical foreclosure states challenge the summary judgment, which is true. The attorneys rely on the LPS system for information and documentation of which is partially complete that is why LPS executes assignments all day long for MERS. Replacing missing documents to recreate a chain of title. Oh yes, LPS will have a problem with the US/FL Attoney General’s Offices about DocX “Bogus Assignee” assignments because the forelcosing attorney creates the AOM and the LPS employees were the ones executing the docs under MERS. That is why they closed DocX. No Note & No Assignment recorded before filing means the case is lost if challenged. Now in Florida foreclosure will be more difficult in the court system without proper documentation due to the recent Supreme Court Amendment requiring attorney to swear under penalty of perjury their documents are correct, when most of them are not. You can thank LPS and the Servicers for that change, too many lost notes and too many post filing AOM, of which many of them are not correct or legally binding.

  13. Virginia Ferrer Says: July 24th, 2010 at 1:54 pm

    FINANCIAL INDUSTRY ANTI-TRUST MONOPOLY MERGER UNDER MERS CREATED THE INJURY AND DAMAGE TO AMERICAN HOMEOWNERS “The construction industry plays a powerful role in sustaining economic growth, in addition to producing structures that add to our productivity and quality of life.” If this segment of the population isn’t moving well – it will obviously affect the rest of the community. Whose fault is it that they are unemployed? Whose fault is it that they can’t meet their mortgage payments? Who actually injured them? Reckless, careless disregard, negligence… the time has come for a moratorium on foreclosures and the restructure of home loans. ——————————————————————————– There is a very important point being that Courts will likely continue to allow foreclosures to proceed (without a mandated moratorium)due to non-payment unless: “the borrower may be able to show that the proper mortgagee would not have foreclosed and, thus, the foreclosure was an injury” The injury began with the inflation caused by the “bubble” in the mortgage lending market stemming back to the late 1990s that created a false economy. At the roots of the worst recession since the Great Depression were unaffordable home mortgages packaged into securities, sold to investors, and used as capital assets by financial institutions. The process of securitization, as well as financial institution over-leveraging associated with it, has been well documented and explored. However, there is one company that was a party to more questionable loans and foreclosures than any other – MERS, whose culpability in fostering the mortgage foreclosure crisis and the long term effects of the fraud and kayos within the mortgage banking industry, that created, embraced and profited by, through and from MERS, has subverted the individual rights and liberties of hundreds of thousands American homeowners. Due to the massive foreclosures, glut on the market of empty homes and inflated values used to re-purchase the REO (bank owned real estate), the economy cannot rebound. Homeowners remain unemployed. Construction, the housing market, as well as other viable industries are at a standstill because the questionable legal and public policy foundations of this odd, but extremely powerful, company are so interwoven and attached to America’s financial destiny. With the growth of the mortgage industry during the turn of the century came a rise in profits for associated industries and vast employment opportunities. Construction, a trillion+ dollar industry, was in full force until 2007. It plays a vital part in the economic wheels that drive our economy. The damage to this key industry has far reaching implications caused directly by the corporate greed, lack of sense of consequence, consideration and compassion of the financial institutions along with their investment firms’ and insurance companies’ partners who, as alleged in numerous lawsuits, formed Mortgage Electronic Registration Service with an intent to defraud. Historically, residential investment has also recovered before the overall economy, leading the way out of recession. The role of residential investment as an engine of recovery has been missing in this instance. Since reaching a peak in the spring of 2006, payroll employment in residential construction has declined from 3.45 million (seasonally adjusted) to 2.15 million, or nearly 38% (nearly the same rate on the average as the home loan inflation). Overall employment did not reach a peak until December 2007, and has declined by 6% (from 138 million to 129.5 million). The over-leveraging and fraudulent mortgage market is totally to blame on this closely related industry’s injury, failure and continued decline. Sectors related to residential investment have fallen even more, with declines of 29.8% in wood products, 21.9% in nonmetallic minerals (including window glass, gypsum products and fiberglass insulation), 18.7% in fabricated metals (ductwork, metal windows and doors) and 19.3% in HVAC equipment. Although housing starts have stabilized in recent months, at the lowest rate of production since World War II, employment in residential construction and related industries has continued to decline, due to the lag between housing starts and completions. Moreover, growing weakness in nonresidential building construction will produce further declines in employment. The declines in residential and nonresidential construction activity have created large reservoirs of unused capacity in labor markets and production facilities. The unemployment rate for experienced workers in construction was 24.7% in January 2010. Although that figure partly reflected seasonal factors, the average for 2009 was 19.1% – representing 1.77 million workers – and the latest unemployment rate value was 6.5 percentage points higher than in January 2009. The overall capacity utilization rate in manufacturing was only 68.9% in December, but it was even lower for wood products (51.5%), nonmetallic mineral products (54.0%) and fabricated metal products (63.9%). The monthly data on capacity utilization from the Federal Reserve do not provide more detailed industry categories, but housing-related manufacturing is undoubtedly operating at even lower levels of capacity utilization. Quarterly data, with more detail, from the Census Bureau, show capacity utilization for paint, coatings and adhesives at 56.7% in the third quarter of 2009, even though overall capacity utilization for the chemical industry group was around 72%.* When this sector of the economy is injured it has a domino effect on the rest of the markets. And in Hawaii, construction, along with tourism are the primary income tickets to a healthy economy. Their decline and loss are a direct result of the financial crisis stemming from the over-leverage fraud and collusion caused by a “merger” of banks, investment firms and insurance companies that have impacted and injured homeowners and their ability to maintain their mortgages. This specific financial crisis is attributed to and stems directly from the financial industry’s (banks, investment firms, insurance) creating a monopoly designed purposely to over-leverage and foreclose; which knocked out the housing and construction industries, creating injury to homeowners due to unemployment, downturn in the economy and other related issues. “The construction industry plays a powerful role in sustaining economic growth, in addition to producing structures that add to our productivity and quality of life.” If this segment of the population isn’t moving well – it will obviously affect the rest of the community. Whose fault is it that they are unemployed? Whose fault is it that they can’t meet their mortgage payments? Who actually injured them? Reckless, careless disregard, negligence… The population was injured in the purposely over-leveraged banking crash. The injury was a direct result caused by the greed and manipulation of the creation of MERS. * Statistics provided by: CONSTRUCTION INDUSTRY EMPLOYMENT SURVEY FEBRUARY 2010 The Home Performance Resource Center is a national 501(c)(3) nonprofit organization formed to conduct public policy and market research in support of the Home Performance industry.

  14. Tom Says: July 29th, 2010 at 4:41 pm

    If there is no standing to foreclose.. then Yes …. the house is for FREE. The homeowner only needs to happily skip down to the recorders office and make the appropriate request for a “free and clear” title/deed. Now tell me, If MERS lacks the standing to foreclose on the collateral what makes you think they can successfully challenge any deed actions??? Looks to me like theres nothing “with any legal Standing” getting in the way. Case Closed!!

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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