Taibbi: Waking up to discover the mortgage market was a giant criminal enterprise

[seafan]

Whoa.

This is part of a large story that Matt Taibbi is working on for Rolling Stone.



September 22, 2009


Taibbi writes:

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.

via Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks.

This is a potentially gigantic story. It seems that a court has ruled that about half of the mortgage market has been run as a criminal enterprise for years, which would invalidate any potential forelosure proceedings for about, oh, 60 million mortgages. The court ruled that the electronic transfer system used by the private company MERS — a clearing system for mortgages, similar to a depository, that is used for about half the mortgage market — is fundamentally unreliable, and any mortgage sold and/or transferred through MERS can’t be foreclosed upon, at least not in Kansas.

Coincidentally I’d been working on something related to this all day yesterday. All over the country, lawyers are contesting foreclosures because of similar chain-of-custody issues. I have some material about this coming out in my next Rolling Stone story, so I can’t get into this too much, but suffice to say the lenders and the banks were extremely sloppy about their paperwork (at best — there is a fraud angle as well) and jammed up the system with missing and/or mismarked mortgage notes. Since a sale isn’t legal unless there’s full transfer of the physical note, a lot of the sales of mortgage-backed securities were not entirely legal, since the actual notes were often not transferred.

Nothing like waking up in the morning and finding out a whole sector of the economy is completely screwed. Are these good times or what?

Although this particular case pertains to MERS, non-MERS mortgages were often even worse. Anyway I have more on this coming next week. Thanks again to Eric at MonkeyBusiness for the heads-up.

This is something I've been hearing for more than a year now, and this is my understanding:


If you are threatened with foreclosure, demand that the holder of your note produce it. If the lender cannot produce it, they have no standing to force you out of your home.

[FiveGoodMen]

1. K&R

[Why Syzygy]

2. K&R . Some GOOD news for a change!

Let those bastids EAT CAKE! :bounce:

[TxRider]

12. Like that's going to happen...

[Nuclear Unicorn]

3. After healthcare reform..

...on to housing reform.

[blindpig]

4. Capitalism is a giant criminal enterprise.

Just sayin'.

[earth mom]

21. You got that right. nt

[Me.]

5. This Is Huge

I have a thread going about the ruling because it's so important. There is also a judge in Brooklyn who is holding the bank's feet ti the fire. What Congress isn't doing the courts are. K & R

[Why Syzygy]

7. The Judiciary is the only branch currently functioning as intended.

Our only hope. Thank the fates they are bound by LAW.

[anonymous171]

40. Yep. That and they are harder to buy off. nt

[KoKo]

15. Can you post the link? I can't find your thread.

thanx :hi:

[Myrina]

6. Oh please, tell me CITI uses MERS ...

... I just went through 'mortgage recalculation' after losing my job in Feb and taking a job in June that pays $6k a year less .. and my mortgage payment went down $33/month.

And how much of my portion of TARP money did CITI and CEO Vikram Pandit waltz away with?? :mad: :mad:

[Me.]

8. Scroll Down The Page

MERS MEMBERSHIP INFORMATION

http://livinglies.wordpress.com/2009/01/27/mers-membership-information-reveals-index-to-securitization-and-investors-allegation-that-mers-is-authorized-or-even-nominal-beneficiary-is-false/

[Myrina]

10. :-D

Both my original 'loaner' (Tucker Mortgage, LLC) AND CITI - who they sold me to - use this thingamajiggy.

Can I breate now?

[Me.]

16. Well, If You Get In Trouble

You can demand they actually produce the paper for your mortgage, thus proving they actually own it. That's turning out to be trouble for the banks as they bundled so many mortgages, which then got re-bundled, and no one knows where the paper is. Legally, they can't foreclose without it and judges are now demanding they produce it.

[JDPriestly]

13. Ours is on there, but we don't have a subprime mortgage.

We did not buy our mortgage from the company that holds it at this time.

[Myrina]

18. Mine isn't subprime either, its FHA.

I don't think that matters so much as 'who holds the magic paperwork', and whether or not they can produce it.

:shrug:

[earth mom]

24. OMG-all THREE mortgage companies we've been with are on that list!

The first one we got our mortgage from and the second one they sold it to and the third one the second one sold it to!

:wow:

[ddeclue]

9. In other news: Sun rises in East... Sets in West... Film at 11

no kidding Matt... you didn't know that?

the big tip off is the fact that housing prices kept rising 10 to 15% a year while workers wages remained stagnant. The only way that was possible was through crookedness.

[TxRider]

11. A better way to see it

Is housing prices rising at a multiple of inflation.

The didn't here, and what do ya know, we took the least hit in the housing crisis.

Had the repubs in our state not rescinded the strict regulations against home equity loans a few years ago that we used to have, it would have hit us even less.

The sharks descended on our state in a feeding frenzy when home equity was opened up as collateral for ARMs etc.

[closeupready]

14. They'd declare martial law before admitting that 60 million mortgages do not have to be repaid.

n/t

[TxRider]

17. Yup, congess would make a new law if it came down to it.

[TroubleMan]

26. It would be ex-post facto, so it wouldn't be applicable to loans already made.

No way they could get around that.

[earth mom]

22. No kidding.

:yoiks:

[earth mom]

23. delete

[alcibiades_mystery]

37. They'd have to...money would no longer be worth anything

Life savings? Gone. And forget about running to the store for diapers, water, or food. It'd be Mad Max.

[malaise]

19. Today is a good day

This is great news

Rec

[Odin2005]

20. It's insane that this was allowed to happen.

:banghead:

[underpants]

25. Having only taken Bus.Law 101 I understood that

I was aware, of course, of the "produce the note" thing but this brings it all together.

They didn't do the paperwork they didn't have "back up" and documentation as we say in the accounting world.

Amazing well not really, the movers-and-shakers were so busy with their oh so glorious egos and contrived smarts they didn't do (or hire someone) to do the basic tasks.

[TroubleMan]

27. Best news all year.

nt.

[earth mom]

28. I really hope this is true and those mortgages are void. Then I would believe there really is a god.

I'd love to see those greedy bastards learn what it's like to lose everything.

Payback's a bitch.

p.s. Still can't believe all 3 mortgage companies that have supposedly held the note for our house are on that list!

[underpants]

29. Welcome to MERS!

MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.

http://www.mersinc.org/

[sicksicksick_N_tired]

30. MERS sounds like merely a "collection system". How does that imply NO ONE has foreclosure rights?

Just because this company was hired to collect does not mean they were given the contracts: as is with all collectors, they are hired to collect ON a contract.

I am confused by the contention made in this post.

[flvegan]

31. MERS acts specifically "as nominee for" whichever lender

and the subsequent holders of the notes. Unfortunately, as we found out here in Florida, an assignment of the note and a Motion to Substitute Plaintiff is all that's needed to get around the MERS problem. Many courts will even simply accept an Assignment of Bid at the sale.

Of course, if nobody has the original Note...

[mother earth]

32. I can't get enough of Matt Taibbi. He's good. He's really good.

:toast:

Thank you, seafan, for giving us the heads up on this.

[Subdivisions]

33. Another thread about this:

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=6603004&mesg_id=6603004

[Subdivisions]

34. Now I wish I had taken the sub-prime mortgage bait when I had the chance.

After all, if this holds and then spreads to other states, I may have ended up with a home for the price of equity already paid. And, even if my mortgage had not been held by MERS and I was forced to default had I become a victim of the sup-prime mess, not to worry. With the banks and economy taking this asteroid-strike, there would be no need for a good credit score.

[KatherineEgan]

35. Marcy Kaptur is

all about this:

http://www.progressohio.org/page/community/post/daveharding/C2gB


Here is where you can check your actual mortgage:

https://www.mers-servicerid.org/sis/

[alcibiades_mystery]

36. I did mortgage and asset backed deals for a couple of years

Nothing EVER moved without the physical NOTES. If you damaged or lost the notes, you'd pretty much get fired. It was that simple. Of course, this was 1999-2002. God knows what happened after that. But I definitely remember the near sacred character of the fucking notes, largely because they were a total pain in my ass.

[Stand and Fight]

38. Credit repair works much the same way.

Collection agencies and original creditors have to NOT simply verify an account, but VALIDATE their claims with paperwork. Having done some credit repair for myself and others, it is no surprise that this same tactic can be used in relation to mortgages.

[anonymous171]

39. SWEET! nt

[jasi2006]

41. This is really HUGE!! I think the terror alerts are to divert our attention

and the media's attention from this. It means almost the total collapse of the mortgage industry in the US and you know damn well they don't want that to happen. No wonder my friend was foreclosed eventhough she was paying her mortgage on time. Found out later that where she was sending her money was to the wrong place and no one told her. I hopw this means she can recover her loss. This happened about nine months ago and she had to move out of her home...she lost it. I wonder if it is too late for her? She lives in Maryland.

[ms.smiler]

45. Please pass on this link to your friend

http://livinglies.wordpress.com/2009/09/16/kansas-supreme-court-sets-precedent-key-decision-confirming-livinglies-strategies/

"Title carriers take notice — all previous foreclosures falling within the scope of this opinion are subject to either compensation to the homeowner or reinstatement of the homeowner as possessor and owner of the home, or both. The implications of this ruling cannot be overstated — but neither should it be overused."

Perhaps your friend, or anyone who was wrongly foreclosed is entitled to their home and/or compensation.

[jasi2006]

42. Help me get this to the media. It is really important.

I am sending copies to CNN. MSNBC, and yes, FOX, ABC, CBS. If there is more than just one call for them to report this story, they may do it. Thanks.

[jasi2006]

43. At a maximum, the loans could revert to the original terms. nt

[Piewhacket]

44. $6 trillion (approx) in mortgages. yea, that IS pretty big. n/t

60,000,000 loans x $100,000 mortgage = $6,000 billion = $6 trillion

[defendandprotect]

46. k

[BlooInBloo]

47. Yep - CalculatedRisk and other knowledgeable folks have noted the "produce the deed"...

response several times over the last year or so.

EDIT: And Tabbi has been one of the emerging bright spots in the press, too.

[ms.smiler]

48. I started reading about this decision prior to the arrival of my

accountant. She & I have discussed the banksters before and the articles I showed her helped to fill in some blanks. She immediately seized upon MERS as the party that helped facilitate securities fraud. We wondered who were the stockholders in MERS and I found this page after she left for home.

http://www.mersinc.org:80/about/shareholders.aspx

Eventually I dug out my mortgage papers and used the MIN, (Mortgage Identification Number) on this page:

https://www.mers-servicerid.org/sis/

Sure enough, my mortgage is listed so I believe I am one of the 60 million. My mortgage started with what I considered a good lender and it was sold, transferred, whatever to a company that I consider unethical and crooks. Both companies are listed as members of MERS.

Since my mortgage was sold/transferred, that unethical company has been sending letters encouraging me to modify my loan in order to save me $329 per month on my mortgage. I've been setting the letters aside since I've never been motivated by greed. I've been wondering why those crooks would modify my loan to save me money since I knew it wasn't out of the goodness of their hearts.

I dug into these issues last night and came across discussions from attorneys. The one stated that they always do a forensic audit of the mortgage prior to any loan modification because in 80% of their cases, there are TILA violations. The individual also stated that most often, as part of the loan modification, companies expect consumers to sign away their rights to any legal action due to missing paperwork or errors.

At that moment I understood why my new, supposed mortgage holder wanted to save me money.

I doubt that there was any fraud or violations with my loan origination, but I suspect the Deed of Trust was later securitized. My own accountant said the Deed of Trust and the Promissory Note should never be separated. She also believed my original mortgage company had "double dipped." I think I understand that comment now. They securitized my loan and received payment from that side, then perhaps sold the Promissory Note and again received payment.

MERS supposedly acts as a "Nominee" on behalf of all its members. Those members can sell or transfer loans all they want and MERS supposedly keeps track of the loans and can act to foreclose in the event of default. I need to read through my original mortgage agreement because I don't recall any authorization for a "Nominee" to act on the lenders behalf. I suspect my agreement doesn't allow for any "Nominees."

I consider it prudent to sit down with an attorney and request that this new company produce both the Promissory Note and the Deed of Trust. I would also like a forensic audit of my mortgage.

I'm sitting here thinking that those crooks I send mortgage payments to, are not legally entitled to the money.

http://en.wikipedia.org/wiki/MERS