LANDMARK DECISION PROMISES MASSIVE RELIEF FOR HOMEOWNERS AND TROUBLE FOR BANKS
A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose – on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.
Eliminating the “Straw Man” Shielding Lenders and Investors from Liability
The development of “electronic” mortgages managed by MERS went hand in hand with the “securitization” of mortgage loans – chopping them into pieces and selling them off to investors. In the heyday of mortgage securitizations, before investors got wise to their risks, lenders would slice up loans, bundle them into “financial products” called “collateralized debt obligations” (CDOs), ostensibly insure them against default by wrapping them in derivatives called “credit default swaps,” and sell them to pension funds, municipal funds, foreign investment funds, and so forth. There were many secured parties, and the pieces kept changing hands; but MERS supposedly kept track of all these changes electronically. MERS would register and record mortgage loans in its name, and it would bring foreclosure actions in its name. MERS not only facilitated the rapid turnover of mortgages and mortgage-backed securities, but it has served as a sort of “corporate shield” that protects investors from claims by borrowers concerning predatory lending practices. California attorney Timothy McCandless describes the problem like this:
“
has reduced transparency in the mortgage market in two ways. First, consumers and their counsel can no longer turn to the public recording systems to learn the identity of the holder of their note. Today, county recording systems are increasingly full of one meaningless name, MERS, repeated over and over again. But more importantly, all across the country, MERS now brings foreclosure proceedings in its own name – even though it is not the financial party in interest. This is problematic because MERS is not prepared for or equipped to provide responses to consumers' discovery requests with respect to predatory lending claims and defenses. In effect, the securitization conduit attempts to use a faceless and seemingly innocent proxy with no knowledge of predatory origination or servicing behavior to do the dirty work of seizing the consumer's home. . . . So imposing is this opaque corporate wall, that in a “vast” number of foreclosures, MERS actually succeeds in foreclosing without producing the original note – the legal sine qua non of foreclosure – much less documentation that could support predatory lending defenses.”
The real parties in interest concealed behind MERS have been made so faceless, however, that there is now no party with standing to foreclose. The Kansas Supreme Court stated that MERS' relationship “is more akin to that of a straw man than to a party possessing all the rights given a buyer.” The court opined:
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http://www.opednews.com/articles/LANDMARK-DECISION-PROMISES-by-Ellen-Brown-090921-894.html">More»
If this ruling stands and the precedent is spread to other states (and countries), it will devestate banks. Be on the alert for potential bank runs if this gets more traction.
ETA: Here's more:
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This writer has been investor in real estate since 1976, and has owned properties in eight states and three countries. Over the last thirty two years I have witnessed and heard of many illegal or fraudulent schemes involving real estate finance.
The MERS “paperless system” is the kind of scheme that is hatched in some internet boiler room in Nigeria, not in the boardrooms of our once prestigious American financial institutions. This gigantic scheme completely ignored long standing law of commerce. The effect of the system has already had a catastrophic effects on both the American and global economy.
Yet many of the investment “trusts” which supposedly hold thousands of original promissory notes are hard pressed to produce them when legally required to do so. MERS admittedly does not hold any promissory notes. A party must have possession of a promissory note in order to have standing to enforce and/or otherwise collect a debt that is owed to another party.
Given these facts how will these investors ever recoup there investments if the debt they were suppose to own can not be legally enforce or collected? What will be the status of title to properties that were purportedly foreclosed by MERS where MERS admittedly had no legal right to foreclose or otherwise collect debt which are evidenced by promissory notes held by someone else.
http://loanworkout.org/2008/06/the-mers-fifty-million-mortgage-meltdown/">More»
And...
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MERS's contention that it was deprived of due process in violation of constitutional protections runs aground in the shallows of its property interest. As noted in the discussion of the first issue above, MERS did not demonstrate, in fact, did not attempt to demonstrate, that it possessed any tangible interest in the mortgage beyond a nominal designation as the mortgagor. It lent no money and received no payments from the borrower. It suffered no direct, ascertainable monetary loss as a consequence of the litigation. Having suffered no injury, it does not qualify for protection under the Due Process Clause of either the United States or the Kansas Constitutions.
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http://www.stopmyforeclosurehome.com/
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