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Thread: "Nuclear Bomb" dropped on US Banks re Mortgage Foreclosures ( MERS )

  1. #1
    Banned Melonie's Avatar
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    Default "Nuclear Bomb" dropped on US Banks re Mortgage Foreclosures ( MERS )

    this NY court ruling affects all of the major banks / mortgage lenders with HQ in New York ...

    (snip)"In sum, because MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the corrected assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to the plaintiff. Consequently, the plaintiff failed to show that it had standing to foreclose. MERS purportedly holds approximately 60 million mortgage loans (see Michael Powell & Gretchen Morgenson, MERS? It May Have Swallowed Your Loan, New York Times, March 5, 2011), and is involved in the origination of approximately 60% of all mortgage loans in the United States (see Peterson at 1362; Kate Berry, Foreclosures Turn Up Heat on MERS, Am. [*6]Banker, July 10, 2007, at 1). This Court is mindful of the impact that this decision may have on the mortgage industry in New York, and perhaps the nation. Nonetheless, the law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership, to secure the dependable transfer of property, and to assure the enforcement of the rules that govern real property. Accordingly, the Supreme Court should have granted the defendants' motion pursuant to CPLR 3211(a) (3) to dismiss the complaint insofar as asserted against them for lack of standing. Thus, the order is reversed, on the law, and the motion of the defendants Stephen Silverberg and Fredrica Silverberg pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against them for lack of standing is granted.

    FLORIO, J.P., DICKERSON, and BELEN, JJ., concur."(snip)


    ... or stated another way, unless the bank / mortgage servicer can produce and present to a judge the actual promissory note signed by the mortgage borrower, they do not have legal standing to be granted a foreclosure / eviction in response to non-payment.

    From a 'real world' standpoint, this probably means that any mortgage borrower / homeowner that is so inclined can probably stop making mortgage payments and continue living in their home free of charge for the rest of their lives ( facetious comment ) !!! But it's guaranteed that it will take the mortgage lending industry YEARS to sort out their packaged mortgage bond paperwork to the point of being able to produce original promissory notes.

    Also from a 'real world' standpoint, this probably means that hedge funds / major financial institutions / the US FED, and anybody else currently owning mortgage backed securities is going to take a MAJOR 'haircut' on the value of those securities. That loss of 'collateral value' will then force REactions ... from another Lehman Brothers to another TARP to another FANNIE bailout, to US Taxpayers being stuck for hundreds of billions ( if not trillions ) of dollars worth of defaults on already existing mortgages that the US Treasury has explicitly guaranteed !!! Because of those US taxpayer guarantee costs, we can expect a major effort by FANNIE / FREDDIE to execute 'putbacks' of delinquent mortgages to the originating banks and financial institutions if the original promissory note investigations that must now occur also turn up any arguable grounds for fraudulent loan origination ( i.e. stated income of mortgage borrowers was not accurate etc. ).

    Other REactions will undoubtedly be a major reduction in the types of mortgages that will continue to be available to new borrowers, higher interest rates on any future mortgages written, and much tighter screening of future borrowers regarding their long term ability to repay. Also, the 'foreclosure freeze' will also 'freeze' much of the US real estate market given the strong implication that clear property title for sale / purchase of property will now also require physically producing the original promissory note.

    Undoubtedly this court decision will be appealed to the highest level !

    much more complete discussion at

    ~
    Last edited by Melonie; 06-13-2011 at 01:04 PM.

  2. #2
    Featured Member Vamp's Avatar
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    Default Re: "Nuclear Bomb" dropped on US Banks re Mortgage Foreclosures ( MERS )

    I am bbbbaaacccckkkkk!!!! With boobs and everything!!!

    The snippet you posted makes it sound like MERS is a bank. It is not. There are alot of different issues at play and not just in New York.

    http://www.bloomberg.com/news/2011-0...udge-says.html

    All the court is saying is that MERS can not act on behalf of the bank. The bank can still forclose providing they can prove ownership. The problem in this case is that banks that were members of MERS were transfering the loan between them WITHOUT due process. Because the members had signed MERS as their agent; the agent was just passing around the loan.

    "By MERS’s own account, the note in this case was transferred among its members, while the mortgage remained in MERS’s name,” Grossman wrote. “MERS admits that the very foundation of its business model as described herein requires that the note and mortgage travel on divergent paths.”

    The judge said that the membership agreement wasn’t enough to assign the mortgage and that to do so the lender would have to give power of attorney or similar authority to MERS."

    There are many pending cases and past cases in regard to this issue. A list of some of these cases provided here. http://en.wikipedia.org/wiki/MERS

    At the bottom of this wiki page I found another interesting snippett.

    "Because the MERS system is electronic, it depends on the electronic storage and transmission of legal documents. On the question of notarization of electronic signatures and the honoring of notarized signatures across state lines, the United States House of Representative had passed bills to legalize these steps, and in 2010 the United States Senate passed the legislation without debate. However, President Barack Obama publicly opposed the legislation on October 7, 2010. As a result, the bill died, and state laws govern whether electronic signatures can be notarized or whether a notarized signature in one state must be accepted in another."


    Long story short, the Federal Government is throwing it back to states in regards to all these issues. Which is insane! But also why there are so many lawsuits and will continue to be lawsuits on robosigning, electronic files, MERS and many other issues. In turn slowing down the forclosure process which is what they want. Anything to slow the bleeding. Keep in mind these processes were done for at least a decade and never questioned. At some point all this will reach critical mass.
    Nature knows no indecencies; man invents them. ~ Mark Twain


  3. #3
    Banned Melonie's Avatar
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    Default Re: "Nuclear Bomb" dropped on US Banks re Mortgage Foreclosures ( MERS )

    Agreed that the banks want ONE aspect to slow down ... the regulatory requirement that they must acknowledge the losses associated with loan defaults.

    However, this court ruling now brings a new issue to the table concerning acknowledgement ( or lack thereof ) of the actual value of packaged mortgage bonds, real estate trust holding etc.

    Our old friend Karl Denninger sums up the 'new issue' ...

    (snip)"This case, however, make an interesting point that may go well beyond that.

    In October 2006 the defendants Stephen Silverberg and Fredrica Silverberg (hereinafter together the defendants) borrowed the sum of $450,000 from Countrywide Home Loans, Inc. (hereinafter Countrywide), to purchase residential real property in Greenlawn, New York (hereinafter the property). The loan was secured by a mortgage on the property (hereinafter the initial mortgage). The initial mortgage refers to MERS as the mortgagee for the purpose of recording, and provides that the underlying promissory note is in favor of Countrywide. Further, the initial mortgage provides that "MERS holds only legal title to the rights granted by the [defendants] . . . but, if necessary to comply with law or custom," MERS purportedly has the right to foreclose and "to take any action required of [Countrywide]." On November 2, 2006, the initial mortgage was recorded in the office of the Suffolk County Clerk.

    Ok, so the original loan was funded by Countrywide and MERS was named as the nominee. So far we have the standard way that securitized junk, er, paper was originated during the go-go years.

    Also in April 2007, the defendants executed a consolidation agreement in connection with the property in the sum of $479,000 in favor of MERS, as mortgagee and nominee of Countrywide . Countrywide was the named lender and note holder. The consolidation agreement purportedly merged the two prior notes and mortgages into one loan obligation. The consolidation agreement was recorded in the office of the Suffolk County Clerk on June 12, 2007. The consolidation agreement, as with the prior mortgages, recites that MERS was "acting solely as a nominee for [Countrywide] and [Countrywide's] successors and assigns . . . For purposes of recording this agreement, MERS is the mortgagee of record." Countrywide, however, was not a party to the consolidation agreement.

    There was a second (which I've elided) and the borrowers consolidated both loans. That consolidation was recorded. The borrowers then (nine months later, roughly) defaulted.

    In December 2007 the defendants defaulted on the consolidation agreement. Meanwhile, on April 30, 2008, by way of a "corrected assignment of mortgage," MERS, as Countrywide's nominee, assigned the consolidation agreement to the Bank of New York, as Trustee For the Benefit of the Certificate Holders, CWALT, Inc., Alternate Loan Trust 2007-14-T2, Mortgage Pass-Through Certificates Series 2007-14T2 (hereinafter the plaintiff). On May 6, 2008, the plaintiff commenced this mortgage foreclosure action against the defendants, among others.

    In June 2008 the defendants moved pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against them for lack of standing. In support of their motion, the defendants submitted, inter alia, the underlying mortgages, the summons and complaint, the second note, and an attorney's affirmation. In the affirmation, the defendants argued, among other things, that the complaint failed to establish a chain of ownership of the notes and mortgages from Countrywide to the plaintiff. In opposition to the defendants' motion, the plaintiff submitted, inter alia, the corrected assignment of mortgage dated April 30, 2008.


    Oh oh.

    Borrowers defaulted and it appears that there was an attempt to "fix" the loans by assigning them late to a trust that should have been closed in 2007.

    On appeal, the defendants argue that the plaintiff lacks standing to sue because it did not own the notes and mortgages at the time it commenced the foreclosure action. Specifically, the defendants contend that neither MERS nor Countrywide ever transferred or endorsed the notes described in the consolidation agreement to the plaintiff, as required by the Uniform Commercial Code. Moreover, the defendants assert that the mortgages were never properly assigned to the plaintiff because MERS, as nominee for Countrywide, did not have the authority to effectuate an assignment of the mortgages. The defendants further assert that the mortgages and notes were bifurcated, rendering the mortgages unenforceable and foreclosure impossible, and that because of such bifurcation, MERS never had an assignable interest in the notes.

    There it is; the assertion that the assignments never happened as required under the PSA and UCC. The "assignment" couldn't take place as MERS lacked the authority to do so.

    The principal issue ripe for determination by this Court, and which was left unaddressed by the majority in Matter of MERSCORP (id.), is whether MERS, as nominee and mortgagee for purposes of recording, can assign the right to foreclose upon a mortgage to a plaintiff in a foreclosure action absent MERS's right to, or possession of, the actual underlying promissory note.

    "Can you assign something you never possesed?" It is amusing that this is a novel issue, but apparently it is.

    However, as "nominee,"MERS's authority was limited to only those powers which were specifically conferred to it and authorized by the lender (see Black's Law Dictionary 1076 [8th ed 2004] [defining a nominee as "(a) person designated to act in place of another, (usually) in a very limited way"]). Hence, although the consolidation agreement gave MERS the right to assign the mortgages themselves, it did not specifically give MERS the right to assign the underlying notes, and the assignment of the notes was thus beyond MERS's authority as nominee or agent of the lender.

    DING DING DING DING DING!

    You can only execute on those powers as a nominee that you have had conferred to you via some means. If the power you seek to use was never conferred to you, such as a beneficial interest in the note, you cannot assign that which you never had the power to act upon.

    ....Coakley indicates that this Court has determined that such broad provisions in mortgages, such as the initial mortgage and second mortgage here, standing alone, grant MERS, as nominee and mortgagee for the purpose of recording, the power to foreclose. On the contrary, the Coakley decision does not stand for that proposition. This Court's holding in Coakley was dependent upon the fact that MERS held the note before commencing the foreclosure action.

    Exactly. You cannot bring a foreclosure unless you have acquired the interest in the indebtedness prior to filing the action. Such a transfer can be by many means, but it must have taken place. It did not in this case, ergo, what MERS attempted to execute upon was without standing.

    MERS purportedly holds approximately 60 million mortgage loans (see Michael Powell & Gretchen Morgenson, MERS? It May Have Swallowed Your Loan, New York Times, March 5, 2011), and is involved in the origination of approximately 60% of all mortgage loans in the United States (see Peterson at 1362; Kate Berry, Foreclosures Turn Up Heat on MERS, Am. [*6]Banker, July 10, 2007, at 1). This Court is mindful of the impact that this decision may have on the mortgage industry in New York, and perhaps the nation. Nonetheless, the law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership, to secure the dependable transfer of property, and to assure the enforcement of the rules that govern real property.

    Thank you New York Supreme Court.

    Now, about those alleged Trusts that appear to not have anything actually in them ......(snip)


    Hmmm ... 60 million MERS registered mortgages worth a total of ~ $10 TRILLION dollars that were supposedly repackaged into trusts / bonds that are supposedly owned by banks, uber-rich investors, hedge funds, pension funds, US taxpayers via the FED etc. may now actually be nothing but worthless paper ??? 5 TRILLION dollars worth of original promissory mortgage notes that may actually be 'lost' thus not enforceable if the mortgage borrower chooses to default ??? 5 TRILLION dollars worth of real estate that can't be legally bought and sold with clear title in the future ( thus can't be used as collateral ) ???

    ~
    Last edited by Melonie; 06-14-2011 at 03:10 AM.

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