Reply #83: Legal challenges to foreclosure middleman are mounting [View All]

[54anickel]

http://westlawnews.thomson.com/Securities_Litigation/News/2010/11_-_November/Legal_challenges_to_foreclosure_middleman_are_mounting/

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In the wake of the housing market meltdown, banks have been a common target of plaintiffs' lawyers representing homeowners facing foreclosure. Now, MERS is emerging as another defendant-of-choice in the exploding foreclosure crisis, as lawyers seize on its role as a foreclosure middleman in their ongoing effort to attack the legitimacy of foreclosures. It's certainly a juicy target: from the beginning of 2007 through October, MERS served as the lender, servicer or plaintiff in 508,268 foreclosure auction notices, 12 percent of the nationwide total, according to data provided exclusively to Reuters Legal by research firm RealtyTrac. That's roughly the same amount as for major lenders such as Bank of America and Wells Fargo.

Since September, lawyers have filed class-action lawsuits against MERS on behalf of homeowners in Georgia, Florida, New York and Kentucky. The lawsuits allege that MERS did not have legitimate title to the foreclosed properties, so the foreclosures were fraudulent. Besides seeking damages, many of the lawsuits are asking for court orders to vacate all foreclosures in the states where MERS was involved. And in the last six months, judges in at least six states have halted foreclosures because they found that MERS either lacked standing to be an agent for mortgage firms or had improperly transferred ownership rights.

If the trend continues, it's not only MERS that could suffer. The legal assault on MERS casts doubt on the ownership rights of countless foreclosed properties. And because foreclosed properties represent such a significant segment of the current housing market -- a full quarter of all homes sold in the U.S. during the second quarter were in foreclosure, according to RealtyTrac -- the broader housing market is exposed. "A lot of people who have bought homes or are looking to buy homes are going to have a lot of problems because of MERS," said Alan White, an associate professor at Valparaiso University School of Law in Indiana who has written extensively about foreclosures.

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