Back in January I followed a chain of stories at MSNBC that led me to diary about April Charney's fight against predatory actions by banks and their agents foreclosing on homeowners when they didn't hold the note to the property. They had long ago sold off their interest, and therefore had no standing. The parties that bought that note were not signatories to the original contract and so they had no standing in court. Despite all of this, our courts had been allowing the predation of banks on those without the resources to fight. Then came Charney.
And now, as Ellen Brown breaks the story, the Kansas Supreme Court has just put a black eye in their game.
JerichoJ8's diary :: :: 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.
MERS was basically a conduit between banks and the securities market where these loans were churned into toxic bonds with subprime and subpar loans. MERS failed to keep up with the paperwork which means; as even the CATO institute's Bert Ely says; you're screwed:
Bert Ely,(see above) a longtime analyst... and a scholar at the...Cato Institute...said lenders may detest tactics like the ones Charney employs, but "this is well-established in bankruptcy practice, that you have to properly perfect the security interest, and if you haven’t, you’re screwed. ... Debtors’ lawyers immediately start looking for flaws in how the debt is protected. Creditor attorneys always worry about this."
Basically what the court found was that because of their crap documentation practices the banks are out of luck because they sold their interest. MERS is out of luck because they're just middlemen who screwed up the paperwork. The Wall Streeters are out of luck because they weren't the parties to the original contract.
By all rights, these parties should be in jail or hock for violating Securities Laws and selling imperfect securities to Pensions Plans across the country and globe.
That and all of their probable violations of the Truth In Lending Act are ripe for prosecutions. But who are they going after Madoff and his ilk. That's a bit like going after remora while a great white's tearing into your torso. But that's another diary...
MERS as straw man lacks standing to foreclose, but so does original lender, although it was a signatory to the deal. The lender lacks standing because title had to pass to the secured parties for the arrangement to legally qualify as a "security." The lender has been paid in full and has no further legal interest in the claim. Only the securities holders have skin in the game; but they have no standing to foreclose, because they were not signatories to the original agreement. They cannot satisfy the basic requirement of contract law that a plaintiff suing on a written contract must produce a signed contract proving he is entitled to relief.
As Matt Taibbiputs it:
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.
Continued>>>
http://www.dailykos.com/storyonly/2009/9/23/785389/-Show-Me-The-NoteKS-Supreme-Court-Slaps-Down-MERS-Foreclosures
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