PART 1 of 3
Marilyn M. Barnewall
October 31, 2010
Disgusting disclosures that our financial services industry and our foreclosure courts are corrupt and have perpetrated fraud on the American populace are everywhere.
In an October 17th article, David Dayen responds to Housing and Urban Development Secretary Shaun Donovan who, supporting the Obama Administration, opposes putting a national moratorium on foreclosures until fraud can be weeded out of the process.
Dayen says “it’s really interesting that he” (Secretary Donovan) “picks out the Cleveland area as his example of how we can’t stop what’s working in the housing market.” Dayen then provides examples of how the housing market doesn’t work in Cleveland:
“Michael and Pamella Negrea have never been late on a mortgage payment in the 15 years they’ve owned their home in Eastlake. But they’ve been foreclosed on three times.
“Martin and Kirsten Davis, meanwhile, lost their home in Cleveland to foreclosure two years ago. The reason: A mess that started when they accidentally paid 14 cents too little on their monthly payment.
“And Michael Rendes of Berea had his mortgage sold last year to Bank of America. The bank foreclosed on him in November, after insisting for months that it didn’t hold his loan and wouldn’t accept his payments.
“Tales like these portray the ugly side of the world of mortgage finance, a world embroiled in controversy amid claims of fraudulently signed foreclosure documents.”
In the examples given above, the lender charged Mr. and Mrs. Davis a $2,200 fee when the monthly payment was 14 cents short. As for the Bereas, no one notified them that their loan had been sold to Bank of America. They kept sending their payments to the original lender who never forwarded them.
Finally, a senior federal bank regulator directed major offenders (the too big to jail bunch strikes again) – J.P. Morgan Chase, Bank of America, HSBC, PNC Bank, U.S. Bank and Wells Fargo – to review their foreclosure procedures.
The word “lien” is used often in this article. To be clear: A lien is a legal claim on someone’s property and brings with it the legal right to keep or sell that property. It is security for a debt. Regarding mortgage loans, a lien is placed against the Deed of Trust to the property being purchased until the borrower pays the loan in full. The lien serves as the lender’s loan collateral – if the borrower doesn’t pay as agreed, the lender gets the property to offset any losses.
On November 22, 2009, I advised readers who might lose their homes to “get the foreclosing party into court and into discovery” to make them prove they were the lien holder. Make them provide evidence of lawful ownership of the property. In many instances, those doing the foreclosing cannot provide evidence.
If a little old lady knew this a year ago, where have the high-paid mainstream media business experts been hiding? Where are Bloomberg and Fox Business News when you need them? This potential mortgage fraud involves (as I calculate it) at least 62 million American mortgages. If the average mortgage loan outstanding is $150,000, multiply 62,000,000 by 150,000 to find the total dollars involved.
A major part of the foreclosure nightmare starts with a software program that registers property liens to a computer system called Mortgage Electronic Registration System (MERS). MERS serves as a document custodian. Thus, if ABC Mortgage Company makes the loan and takes the house as collateral against the loan, ABC’s lien against the house is registered to MERS, not to ABC Mortgage Company.
When ABC tells MERS it wants to foreclose on a property, the property is foreclosed in the MERS name, not that of ABC. MERS registers the lien in its own system naming itself lien holder, but it holds no financial interest in the property and uses outside “legal resources.” It was created by mortgage bankers to simplify the transferring of mortgage liens. It will ease your mind to know that Freddie and Fannie are part owners of the MERS system. MERS’s Legal services companies produce documents needed for foreclosure. It appears those documents often have forged signatures. One guy at a foreclosure mill “legal service” admitted to forging over 10,000 documents.
MERS forecloses on properties when a certifying officer registered with (not employed by) MERS tells it to foreclose – and MERS turns the request over to a “foreclosure mill.” Like magic, signatures appear on documents the lender didn’t sign. The legal services company kindly signed for the “certifying officer” who says “I hold the lien” – which may or may not be true.
By recording property liens in the MERS name, it is supposed to create a Trust – but does it? Courts now question whether this process of “securitization” creates legal ownership of anything. It asks the question: How can a legal Trust exist when the homeowner, a primary party responsible for payment to the Trust for property in the Trust (the home), is unaware the Trust exists?
Because of the MERS process, lawyers and property owners are no longer able to turn to the public recording system at your local County Clerk's office to find the name of the property’s lien holder. Why? Because the name “MERS” appears on the document, not the name of the lender who made the mortgage loan.
MERS now forecloses nationally in its own name on liens belonging to mortgage lenders – even though it has no financial interest in the transaction. Because it’s just a computer system, MERS provides no customer service so consumers can’t call and ask why MERS is foreclosing on a property. You can’t work out payment arrangements with a computer system. Maybe you’re the beneficiary of a large inheritance, but won’t get it until next month. A sane lender would wait for you to get the inheritance and let you pay the past due loan payments. Until now, MERS, in theory if not in law, has remained an innocent proxy functioning on behalf of realtors and mortgage bankers.
Read your mortgage loan papers. Loan documents have for years given the loan originator the right to sell your loan. If they choose, they can sell your loan to Freddie or Fannie who can sell it to J.P. Morgan Chase or Citigroup or Bank of America or Goldman Sachs to be placed in a mortgage-backed derivative. At each sales point (when it’s sold to Freddie or Fannie, then to a brokerage firm to create a derivative), the lien holder of your mortgage may be registered as MERS. Your lender’s name may appear nowhere on the documentation as the real lien holder.
What does it mean to you?
First, here are two links that report glowing things about MERS – fair and balanced reporting. You need to read them, too. Article one (for homeowners).
However, regardless of what “they” say:
WARNING: If you are thinking of buying a home that was financed between 2004 and the current time, BE VERY CAREFUL. It may be a home whose legal ownership is yet to be determined by the Courts. If the word MERS appears on the property lien… well, I don’t give investment advice – but I’d walk away from it. It wouldn’t be fun to buy a new home and be evicted six months later because the Courts decide that the MERS securitization process is illegal and the original owners (two owners ago, maybe) still own the property.
Investigate your existing property’s chain of ownership evidence. Start by going here. Once you get the data, sleep with a copy under your pillow in case your local Sheriff shows up some night with eviction papers in his hand.
If your mortgage loan originated between 2004 and the current time, the lien filed against your home (and unless your mortgage loan is paid in full, there is a lien against it) may well be in MERS’ name, not your lender’s. Over half of all new residential mortgage loans in America are registered with MERS and are recorded in that name. And, if your home doesn't have a mortgage, don't feel too safe. Some people with no mortgage -- some who never even had a mortgage -- have been evicted from their homes.
Let’s say you financed a house in 2005. Your mortgage loan may have been sold by the lender to Freddie or Fannie who may have sold it to J.P. Morgan Chase or Citigroup or Bank of America or Goldman Sachs. Your mortgage may have been placed into a mortgage-backed derivative investment product sold by one of the too big to jail brokerage houses.
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Investors all over the world are trying to reclaim their losses from mortgage-backed derivatives gone bad. They file suit against the brokerage house that sold the worthless derivative. The brokerage house (or insurance company) files suit against companies that sold them the mortgages in the worthless derivatives. Thus, your home on which the payments are current, may be foreclosed because foreign investors are suing brokers who created derivatives that got fried – and your mortgage was part of the package.
MERS is just part of the problem. For part two click below.
© 2010 Marilyn M. Barnewall - All Rights Reserved
Marilyn MacGruder Barnewall began her career in 1956 as a journalist with the Wyoming Eagle in Cheyenne. During her 20 years (plus) as a banker and bank consultant, she wrote extensively for The American Banker, Bank Marketing Magazine, Trust Marketing Magazine, was U.S. Consulting Editor for Private Banker International (London/Dublin), and other major banking industry publications. She has written seven non-fiction books about banking and taught private banking at Colorado University for the American Bankers Association. She has authored seven banking books, one dog book, and one work of fiction (about banking, of course). She has served on numerous Boards in her community.
Barnewall is the former editor of The National Peace Officer Magazine and as a journalist has written guest editorials for the Denver Post, Rocky Mountain News and Newsweek, among others. On the Internet, she has written for News With Views, World Net Daily, Canada Free Press, Christian Business Daily, Business Reform, and others. She has been quoted in Time, Forbes, Wall Street Journal and other national and international publications. She can be found in Who's Who in America (2005-10), Who's Who of American Women (2006-10), Who's Who in Finance and Business (2006-10), and Who's Who in the World (2008).
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