The Good: Two very brave, resourceful and conscientious public servants, Registrars of Deeds
John O'Brien, Register of Deeds of Southern Essex County in Massachusetts, and Jeff Thigpen, Register of Deeds of Guilford County in North Carolina, wrote a letter to the attorney general, (Tom Miller of Iowa) stressing the need to appropriately settle terms with servicers based on the amount of damaged practices such as robo-signing caused..
These two local officials are two of thousands in similar positions throughout the United States. One wonders where the rest of them are right now, since most if not all states, counties and localities are suffering from the economy and should not have had to take the hit that the banks and mortgage servicers use of MERS to move mortgages around like a 3 card monte shell game...avoiding payment of the normal fees in registering deeds and ensuring chain of title clarity. Bravo to Jeff and John. Let's all make the call on Monday to our local Register of Deeds or Clerk or whatever local electeds or appointed folks to get them to join with these two.
The Federal Reserve of New York announced today that it single-handedly was going to "fix" the securitization problem that MERS and its allies created. Huzzah!... but take a look behind the curtain before you get too excited at this seemingly good news announced by Wall Street mouthpiece Housing Wire
"This division and fractionalization whereby there are entities that are owners of the loan and mortgage, or some part of the loan and mortgage, a servicer for the loan and mortgage, and a named mortgagee that is not necessarily the owner of the loan and mortgage has caused significant confusion," the New York Fed said in the paper.
so here comes the cavalry...on a white horse:
But the New York Fed said solutions are on the way. The Uniform Law Commission and the American Law Institute, which facilitated the recent meetings, seek to clarify and update federal and state laws governing the securitization process.
They "have joined forces with various stakeholders, including the Federal Reserve Bank of New York, to deal with the legal complexity and the fact that much of the applicable law no longer adequately reflects modern financial practice and technological developments," the N.Y. Fed said.
Not so fast says David Dayen over at FireDogLake:
The story from Housing Wire sounded pretty formal: the Federal Reserve Bank of New York was stepping up with a plan to fix the looming securitization and chain of title problems in housing, which could cost the big banks tens of billions, if not more, to fix. Given that the FRBNY is essentially controlled by Wall Street banks, the result of these meetings will undeniably be some kind of legal reverse engineering that will indemnify violations of the law and cure the system.
There’s only one problem with this. The Federal Reserve Bank of New York has about as much control over the legal issues in securitization as I do. They have no jurisdiction whatsoever over the process. State courts are the arbiter of these transactions and whether they were done legally.
Dayen's take is that the Fed of NY has no jurisdiction in attempting to whitewash several years of hanky-panky by the mortgage industry and in the process overturn hundreds of years of property law....something the Registers of Deeds would likely agree with.
So what's the better news?.... 2 women from the Administration are in the news today.... it's looking like the conventional wisdom now has Barack Obama naming Elizabeth Warren to the Consumer post in a recess appointment move sure to infuriate the right... and outgoing FDIC chair Sheila Bair had some interesting comments in Congressional testimony yesterday re. the banks and mortgage servicers...
The head of the Federal Deposit Insurance Corp. is warning that flaws may have “infected millions of foreclosures” and questioned whether other regulators’ inquiries into problems at the nation’s mortgage-servicing companies have been thorough enough.
“We do not yet really know the full extent of the problem,” FDIC Chairman Sheila Bair said Thursday in written remarks submitted to a hearing of the Senate Banking Committee. “Flawed mortgage-banking processes have potentially infected millions of foreclosures, and the damages to be assessed against these operations could be significant and take years to materialize.”
Federal and state officials launched numerous investigations last autumn after revelations that, to process foreclosures, banks used “robo-signers” who didn’t review documents prepared by their colleagues. Banking regulators’ have said their reviews of a sample of 2,800 foreclosure cases have found a small number of improper foreclosures.
MERS also has some other compounding and ongoing problems....
The Michigan Court of Appeals ruled last month that a company called Mortgage Electronic Registration Systems Inc. did not have the right to initiate foreclosure by advertisement on two homes because it didn't actually own any interest in the debt.
That might sound unexceptional, but for the fact that MERS, whose business is keeping electronic mortgage records, has initiated thousands of similar foreclosures in Michigan, 469 of them in Ingham County in just the last two years.
The court's decision could invalidate those proceedings and potentially impact foreclosed homes that since have been sold to new buyers.
and then there's this nugget:
Mortgage Electronic Registration Systems Inc. “illegally prosecuted” non-judicial foreclosures in Michigan and owes more than $100 million to people who lost their homes, lawyers for three homeowners said in a lawsuit.
The homeowners said Merscorp Inc.’s MERS, which runs an electronic registry of mortgages, used Michigan’s so-called foreclosure by advertisement process illegally and “misappropriated” their homes. Any foreclosures by MERS using this process in Michigan should be voided, they said in their complaint filed in federal court in Detroit.
Michigan is one of 27 states where banks don’t have to get a court’s permission to seize a property, meaning homeowners have to bring their own lawsuit to halt a foreclosure. Michigan law lets mortgage lenders or servicers foreclose after advertising a default in a newspaper for four consecutive weeks.
MERS “lacked the authority to foreclose by advertisement” because it didn’t own or have any interest in the underlying debt and “was not the servicing agent of the mortgage,” Maryla Depauw and Sharon and Terrance Lafrance, the homeowners said, in their complaint filed yesterday. MERS “knowingly, fraudulently and illegally” foreclosed on homes for years using a law it “had no authority or right to utilize,” they claim.
Enjoy your weekend folks, and be happy in the knowledge that the people who created this mess are not going to be sleeping as soundly as we are....