Steadfast FinancesMERS Fallout: 50% of All Mortgages in U.S. Now in Question

MERS Fallout: 50% of All Mortgages in U.S. Now in Question

Filed in Banking , Mortgages , Real Estate 2 comments

The Mortgage Electronic Registration System, known as “MERS”, fallout just keeps getting better.

In recent months legal challenges have arisen regarding alleged inadequacies and improprieties in the foreclosure process including allegations of insufficient or incorrect supporting documentation and challenges to the legal capacity of parties right to foreclose.

Consistent with the Membership Rules there will be a 90-day comment period on the proposed Rule. During this period we request that Members do not commence foreclosures in MERS name.

MERS Announcement No 2011-01 16 Feb 2011

I’m not so sure “alleged” is the word I would use considering bankruptcy courts are finding MERS to be non-compliant with existing law.

MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage-recording process. The court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.

Honorable Robert E. Grossman, U.S. Bankruptcy Judge

It would appear, contrary to Fight Club dogma, that someone with slower motions than a hummingbird can indeed catch Tyler at work in this real life version of Project Mayhem.

But what I find so amusing, is that I haven’t heard one whiff of this story from mainstream media. And why would they? Imagine the financial and sociological fallout of telling 50% of Americans with a mortgage that their mortgage is non-compliant with existing law. Moreover, with such a dependency upon MERS (to save a few bucks on paperwork) over the last few years, it will be interesting to see if the “wet ink” note can be produced to prove ownership.

That’s mayhem on a scale even The Joker would envy.

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Posted by CJ   @   17 February 2011 2 comments
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2 Comments

Comments
Feb 17, 2011
1:21 pm

This one is going to be interesting to watch. The fallout could be huge if mainstream Americans catch wind of it and find out their mortgages are invalid. If that happens my guess is that congress will do the bailout dance again. I don’t really think they should but I’m pretty sure it would happen in that scenario.

Feb 17, 2011
1:28 pm
#2 Matt SF :

Agreed. I’m not sure if the mortgage can be deemed 100% “invalid”, but even if it was, Congress would almost certainly draft some retroactive legislation overnight to make it legal. Can’t have uncertainty or lose confidence in the market can we?

Nevertheless, that would likely cause enough fuss to keep the courts backlogged for a significant amount of time.

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