MCOA rules that MERS lacks standing to foreclose by advertisement (via Great Lakes Law Blog)

I’ve been a consistent critic of MERS, Mortgage Electronic Registration Systems. I consider incredible that the mortgage industry could set up this monstrosity which was in violation of state laws across the nation without trying to get some legislation from somebody somewhere to at least give it some iota of legality. Instead they just adopted it with an ethical sense very similar to listing your five grey tabby cats as children on your income tax. As far as I’m concerned, MERS is a semi-sorta legal device used to evade paying state registration fees and avoiding the basic work of transferring title by paper and all this so that these mortgages could be used as chips in global speculation.

This is an excellent brief discussion of MERS and the court system in Michigan.

James Pilant

In my introduction to MERS post, I indicated that a lot of litigation revolved around whether the Michigan Electronic Registration System (MERS) has standing as a party.  On April 21, 2011, the Michigan Court of Appeals decided that it did not in Residential Funding Co v Saurman.  The court said that MERS is not a party with an interest in the mortgage and cannot foreclose by advertisement.  MERS, as mortgagee, only holds an interest in the prope … Read More

via Great Lakes Law Blog

Bank of America Sued Over Countrywide Mortgage Related Investments

I’m surprised this hasn’t already happened. When you buy securities you expect that they be “secure.” These are not supposed to be the equivalent of penny stocks. Countrywide packaged securities that it knew were risky and packaged securities that it knew had serious ownership issues.

This is hard legal question. What is the first warranty guarantee that a seller gives automatically (implied)? Answer, that they own the product they are selling. That is the first thing you are supposed to do. And Countrywide sold a product that it knew it didn’t have a clear title to.

Is this going to be hard lawsuit to win? If it can be proved that Countrywide knew that its title to these properties was not secure, Bank of America which now owns Countrywide is going to be pay out more. I have heard estimates of up to 40 billion dollars in possible paybacks over these bad securities.

From CBS Money Watch

A lawsuit alleges Countrywide Financial Corp. and two of its former executives misled institutional investors who were stuck with huge losses from mortgage-related investments that they say were portrayed as low-risk.

The lawsuit was filed Monday in New York State Supreme Court by investors who bought hundreds of millions of dollars in Countrywide’s mortgage-backed securities from 2005 to 2007, before the housing market went bust. The list of a dozen plaintiffs includes New York Life Insurance Co., TIAA-CREF Life Insurance Co. and Dexia Holdings Inc.

The complaint names Countrywide, various subsidiaries that issued the securities, two former company executives including ex-CEO Anthony Mozilo, and Bank of America, which bought Countrywide in 2008.

The big guns are out on this one. Read a little more –

The plaintiffs allege they wanted conservative investments that Countrywide portrayed as being backed by low-risk mortgages written according to strict underwriting criteria.

Materials that Countrywide subsidiaries circulated to potential investors indicated all the mortgage-backed securities had been assigned investment-grade ratings, and most had top-rung “AAA” ratings, according to the lawsuit.

But as of last month, more than 31 percent of the mortgage loans underlying those securities were over 30 days delinquent, in foreclosure, bankruptcy or repossession, the lawsuit says. The securities “are no longer marketable at or near the prices the plaintiffs paid for them,” leaving them with “significant losses,” the complaint says.

The lawsuit seeks unspecified damages for alleged securities fraud.

These investments were marketed as conservative (solidly secure), given a triple AAA rating (higher than any paper you ever wrote could get) and are now sinking in value daily.

The American mortgage crisis just keeps rockin’ on.

James Pilant

Can Thinking In The Long Term Help With The Future Of The Mortgage Industry?

Jim Russell writes in an article posted on “Media Center,” the web site of Tom Gyepes, Loan Doc Originator & Broker. He addresses a question that has also been on my mind. How is the mortgage industry going to change in the face of this, at the very least, public relations disaster?

He has several suggestions but I like this one best. Make the mortgage “originator” a long term actor in the deal than just a one time salesman.

Read how he puts it

Mortgage originators have long been compensated just for getting loan applicants to the closing table. After funding many mortgage originators simply lose interest in the borrower’s financial situation until they see another opportunity for origination income. The insurance industry dealt with this issue long ago. Today every insurance agent is tied to his/her client with a golden rope…

Most insurance companies do not fully compensate independent agents at the time of sale like the mortgage industry. Instead agents are partially compensated at the time of sale while the remainder of their income is paid out at a later date depending on the performance of the insurance policy they sold. This compensation practice is called “contingent commission” and it creates an incentive for every agent to act in the insurer’s best interests because if they don’t, they won’t be paid.

Let me share an example. There are two active groups of golfers at my club; mortgage originators and insurance agents. These two groups have very similar economic profiles, they are all high net worth income earners and they all constantly manage their book of business. There is one big difference in the way these two groups maintain their lifestyles though; the mortgage originators are highly dependent on landing new deals while the insurance agents are dependent on the long-term performace of the deals they’ve already written. This forces insurance agents to fully understand the risk profile of their clients before they close the deal and it also forces agents to maintain contact with their book of business.

If you are a business student, this is a great topic for a paper. But beyond this it is an idea that needs to be taught across our society, to think and act in the long term. Thinking only of the next quarter is an excellent way to convert a successful society into an apparently successful one, just as long as you believe the numbers.

There are a lot of areas in our economy where thinking in terms of the long haul would be in the best interest of all the players as well as our nation as a whole.

James Pilant

White House Should Stop Protecting Banks

Simon Johnson writes in the web site, the Baseline Scenario, about the Obama Administration’s protection of banks and failure to hold the mega financial institutions to standard of law and justice.

From the article –

The premise – and central mistake – of the Obama administration in 2009-10 can be summed up in what the president said to leading bankers on that fateful day, March 27, 2009: “My administration is the only thing between you and the pitchforks”.

The organizing notion then, provided by Larry Summers and presumably Tim Geithner, was that the “responsible” administration would protect global megabanks from “dangerous” populists, in return for cooperation and better behavior.  This kid gloves strategy turned out to be a very bad bet – not only is it far from best practice with regard to handling failed financial systems (there must be consequences for executives and shareholders, at the very least), but it also allowed banks and their close allies to bounce back to profitability and use that cash (underwritten by the taxpayer) to oppose the administration on financial reform and, according to credible public reports, to funnel large amounts of money into various “populist” anti-administration midterm campaigns.

The article calls for White House support for Elizabeth Warren and the new agency to protect consumers from the depredations of financial predators. I strongly support that.

I want you to understand that I come to criticize the Obama Administration reluctantly but their actions make a mockery of ethics, of doing the right thing, and of carrying out their obligations to the law.

James Pilant

Do EVERYTHING You Are Supposed To AND Still Lose Your Home?

This is an AP report about one woman’s struggle to stay in her home.

Next time someone says, “They knew what they were signing!” – Ask them, “Should the banks should have to abide by their agreements?” Because what we are seeing across this country over and over and over again are banks renegotiating the loans, making a deal, and then foreclosing anyway.

Where do we go to find the bank’s personal responsibility?

James Pilant

Are Our Homes Just Monopoly Board Houses?

From The Mail Online –

Standing as a monument to the credit crunch, this life-sized Monopoly house was created as an ironic statement on the global financial crisis.

Created by Canadian artist An Te Liu, 44, the 36ft by 44ft work called ‘Title Deed’ was built in Willowdale, in the Canadian province of Ontario.

Art is a political statement. The artist wants to let us know that what we find to be important in our lives, something we hold in affection and dear in our memories is now just a toy for financiers. First a chip in the global securities market, then a bailout bad debt to get money from the government, then a cash cow to be mortgaged not refinanced because while refinancing makes sense, the numbers on paper are more important. In brief, the homeowner gets it in the shorts, every time, with any possible exception.

Seeing property as a home, a loan, a debt, an investment and something that is more monetised than we realise, the artist wanted to use the iconic board game as a metaphor.

‘Just as the sub prime mortgage crisis hit America and was caused by traders and bankers playing their games in Wall Street, so the common man was squeezed because of that,’ he said.

‘Our homes are not necessarily what we think they are. They are property just like in Monopoly to be remortgaged and used as collateral.

I admire the sentiment and I like the artist’s willingness to send a message. Surely, we need more messages, more senders and less compliance with a state of mind that allows mind boggling evasion and contempt for the law.

James Pilant

Andrew On Mortgage Foreclosure Lies

My friend, Andrew, once again displaying his usual knowledgeable approach adds to the discussion on my essay on the mortgage foreclosure crisis.

I live, and have a mortgage, in Georgia, which is a non-judicial foreclosure state. Here, the banks are required to register all mortgages in a computer system called MERS. I believe that stands for Mortgage Electronic Records Service or something along those lines. The bank has to input all information regarding all of its mortgages in Georgia into this system.

Whats scary is that if the MERS system sees a lapse in mortgage payments for an account, it can automatically initiate the foreclosure process. With Georgia being a non-judicial foreclosure state, its very hard to fight a foreclosure once it has begun.

Every now and then I hear about people here who make all of their payments on time, and the bank forgets to enter the payment information into MERS. MERS then initiates the foreclosure of the property, and the homeowners have to hire a lawyer to have the process stopped. Its scary to know that I can make all of my payments on time and do everything that I am suppose to, but if my account information happens to fall through the cracks due to a lack of diligence on the part of the bank, that I can be burned for it.

It is always good to have Andrew’s thoughts on a subject.

James Pilant