MERS Can’t Transfer Mortgages

MERS, which holds roughly half of all U.S. home loans, has no right to transfer mortgages, according to a Bankruptcy Court in Islip, New York. This could significantly affect the foreclosure process nationwide. MERS, which stands for Mortgage Electronic Registration Systems, tracks more than 60 million mortgages, and has filed thousands of foreclosure actions on behalf of lenders. While MERS was designed to speed up legal recordkeeping of mortgages and sales of mortgage loans through securitizations, critics including borrowers' lawyers and advocacy groups contend it has no right to pursue foreclosures because it does not own the mortgage loans.

What will be the impact of this decision? Essentially that in future cases involving MERS, at least in cases in which the court agrees with this case, parties seeking to pursue their foreclosure rights must show they own both the note and the mortgage. See In re Agard, U.S. Bankruptcy Court, Eastern District of New York, No. 10-77338.

Comments

[Alessandro Machi]

I don't feel that either Barack Obama or the republicans will do the right thing for oppressed and ripped off homeowners. It is time to turn back the clock and to accept that there is only one investor when it comes to homes, and that occurs during the construction of the home when an investor or group of investors pays to have homes made, then the banks and the realtors find buyers for these homes.

The money that is used to pay back the investors used to come from government, but via the banks, that watched over the investment for the next 30 years.

Now we have a second group of "investors", who are actually RE-INVESTORS, and the whole securitization investment paradigm that has followed is a scam. It means nothing.

It's about huge amounts of money available from pension funds and cities, looking for a stable return on their money, that has been funneled into securitizations THAT WAS NOT NEEDED.

Why pension funds chose to get into securitizations rather than the construction of homes and then even rent them out themselves is beyond me.

However, we must recognize that current investors in existing homes are RE-INVESTORS and in no way should they hold sway over a homeowner trying to re-fi their home.

http://www.swarmthebanks.com
http://www.parallelforeclosure.com
http://www.unfairforeclosures.com

[jpe]

"This could significantly affect the foreclosure process nationwide. "

Yes, nationwide in jurisdictions that are controlled by NY law, which this case was ostensibly interpreting.

Although we could shorten that awkward phrasing by just saying that it won't affect foreclosures anywhere, since other states aren't controlled by NY law and NY courts aren't bound by a bankruptcy court.

[Transor Z]

The precedential value of dicta from a bk court opinion as persuasive authority is pretty limited. Looks like the way the case developed resulted in a full hearing on the issue of MERS ability to convey (MERS actually intervened), although it was not necessary to decide the matter since it was clearly trumped by res judicata/Rooker-Feldman.

All you need to know is that the relief from stay was granted to the servicer because it had a state foreclosure judgment that could not be collaterally attacked.

[jo]

Yes jpe-but what if there is no judgment yet? The foreclosure itself can be defended on these grounds.

[rational]

Alessandro: its a federal bankruptcy court

[Ray]

The question of whether New York applies may be related to whether the mortgage involved is owned by a REMIC. The securities laws that control REMICS are based on New York law.

If you can identify who actually owns the Note, and it is a REMIC, the REMIC would be hard pressed to refute Grossman's ruling by suggesting that New York law does not apply to assignments in the REMIC's portfolio.

Ray

[Transor Z]

I highly recommend actually reading the opinion.

An overview of the Rooker-Feldman Doctrine (i.e., lower federal courts do not have jurisdiction to review state court judgments) can be found at the Duke Law Journal site here:
http://www.law.duke.edu/shell/cite.pl?56+Duke+L.+J.+643

Look, I would love to see Judge Grossman's views on MERS widely adopted, but it was dicta. The bank's standing as secured creditor was a status granted by an unreviewable state court judgment.

A court decides the case in front of it. The other cases in the wings the judge alludes to were not consolidated.

[Mike Dillon]

The In Re Agard decision itself is interesting... The OTHER shoe is that a state court appeal is still waiting to be filed. Hopefully, evidence has been properly preserved for the record.

MERS and FairbanksSelectPortfolioServicing potentially being ruffed up in the same appellate case? Say it ain't so...

[Transor Z]

@Mike:

Now somebody's talking. Is there publicly available info about Agard preparing to appeal the state court foreclosure judgment? THAT's where the action will be at...

[Mike Dillon]

Z,
No publicly available info - yet. Just conversation. Somehow, I get the impression that Agard is going to have a deeper bench next time around. Maybe better shoes too...

What was that law they passed in NY? Something about the firm having to attest to the veracity of documents being filed? I wonder if that applies to appellate cases as well...

[Jay Brizie]

How does MERS data fit with US Census household data? Census data show about 50 million households in the US have mortgages on their homes. Yet, as you explain, MERS has about 50% of US mortgages in its system, and MERS has more than 60 million home mortgages. That means that there are more than 120 million home mortgages in the US. These 120 million mortgages are on 50 million homes. This means, on average, each home with a mortgage has more than 2.2 mortgages. Is this correct?