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Thursday
Feb102011

MAN BEATS BANK - And Creates Mortgage Banking MERS Bomb - Lost Paperwork Means Free Homes

Very interesting story, and not without ramifications for other states.

Walter Keane poses for a portrait at his office.  Keane filed and recently won a lawsuit that resulted in several homeowners in Utah getting title to their property, even if they owed the full mortgage, all because of chaos introduced into the nation's property recording system by MERS.

The attorney for another man in Draper, Utah, says he has won two other cases this way, and another attorney in Utah got a default judgment giving title to borrowers who owed $417,000 on a home.

Utah Professor Chris Peterson weighs in on the significance of the rulings.

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In Utah, missing paperwork means a lot; Borrowers gain title for free.

Source - FDL

A Utah court case in which the owner of a Draper townhouse got clear title to the property, even though he still owed $132,000 on it, raises new legal and financial questions about a property-records database created by mortgage bankers.

The award of a title free of liens means that whoever owns the promissory note on the Draper property — likely a group of faraway investors — no longer has the right to foreclose to collect on a delinquent loan. Indeed, the townhouse owner has sold the property and kept the money. Those who own the promissory note probably don’t even know what occurred.

Decisions such as the one 3rd District Judge Glen Iwasaki handed down in the Draper case could have a big impact as the state wends its way through hundreds of lawsuits involving foreclosures, loans on properties for more than they’re worth and predatory lending practices that led Utahns to lose their homes as the real-estate bubble burst.

More from David Dayen...

This is all tied up with MERS, the online database that has stood in for the land records system in as many as 60% of the mortgages in America over the past decade or so.  As we’ve seen, MERS is essentially a way for the largest banks to avoid recording fees, by naming them as the mortgagee on the original record and then transferring the mortgage and the note through their database.  The problem is that MERS is named as an owner on loans in which it has no financial interest, and the judicial system doesn’t yet know how to manage that.  This has confused the hell out of title insurance companies, who cannot determine who holds the note or even who can collect payments on it.  As a result, in this case, the courts and the title company failed to figure any of that out, so they gave title back to the homeowner.

The attorney for the man in Draper, Utah, says he has won two other cases this way, and another attorney in Utah got a default judgment giving title to borrowers who owed $417,000 on a home.

The owners of the note could always go back and try to recoup this money, but as Christopher Peterson of the University of Utah says in the article, MERS calls into question their ability to succeed:

Under laws adopted by all 50 states, the owner of a “negotiable instrument” such as a promissory note must be in physical possession of the document, said Peterson. Otherwise it would be like someone trying to cash a photocopy of a check instead of the actual check.

“One cannot be a holder of a note unless one is in physical possession of that note,” he said.

But Peterson said evidence is coming out in courts that shows the actual promissory notes or mortgages signed by buyers were not transferred as the notes made their way into the mortgage-backed securities investment pools.

That could mean in these cases that no one is in a position to try to collect because the actual notes are lost or destroyed, potentially making some promissory notes investors think they hold worthless.

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Hearing begins at the 1-minute mark.  Includes testimony from foreclosure lawyer Thomas Cox, and Utah professor Dr. Chris Peterson - Dec. 15, 2010.

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Spoiler ALERT -- Do not miss #7:

 

 

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Reader Comments (8)

Jan 17, 2011 at 6:17 PM | Registered CommenterDailyBail
This is flat out awesome. May there be many more...
Jan 17, 2011 at 6:26 PM | Unregistered CommenterCheyenne
The part they forget to mention is that creditors can force you into Bankruptsy for not paying your debts as they become due. In bankruptsy, the court is going to force the sale of the house and the borrow is in the same situation or worse.
Jan 19, 2011 at 1:40 AM | Unregistered CommenterThe Canary
Please came and review our blog on the foreclosure crisis at piggybankblog.com

Gregory Dean Lemke
Jan 19, 2011 at 5:17 PM | Unregistered CommenterGregory Lemke
Gregory Dean Lemke
Press Release of Senator Cantwell


In letter to DOJ, Cantwell demands full investigation into robo-signing scandal and ‘pump and dump’ mortgage bubble scheme ... ...
... ...
“Cantwell also raised the concerns that not enough reforms are in place to effectively prevent another crisis and that victims of fraudulent mortgage schemes are not adequately compensated. Cantwell encouraged Holder to require reforms to ensure mortgage servicers don’t abuse the system again. She noted that confidence in the proper transference of notes and mortgages must be restored and clear chains of titles should be available for all mortgages. Until financial institutions can prove they have the legal authority to foreclose, Cantwell asked for the Mortgage Electronic Registration System to be shut down.”

“A settlement with mortgage servicers must also require reforms to ensure such abuses do not happen again,” Cantwell wrote. “The goal of servicing mortgages must be accuracy and adherence to the law, not expediency and corner-cutting. Confidence must be restored that proper transference of notes and mortgages was followed and clear chains of titles are available for all mortgages. Until then, the burden of proof must be on financial institutions to prove that they have the legal authority to foreclose. The Mortgage Electronic Registration System should be dissolved and shut down, and the shortcut that allowed banks to avoid hundreds of millions, if not billions, in local fees to local registrars of deeds be closed off.”


http://cantwell.senate.gov/news/record.cfm?id=335169

See More
Maria Cantwell - U.S. Senator from Washington State cantwell.senate.govSee More Maria Cantwell - U.S. Senator from Washington State<http://cantwell.senate.gov/news/record.cfm?id=335169>
cantwell.senate.gov



Dear Gregory,

I hope that you're getting the chance to relax and enjoy this holiday season. I wanted to send you a quick note to tell you how much I appreciate all your hard work and support this past year.

Thanks to you, we're in a strong position as we prepare to take on the special interests and keep fighting for middle class families in Washington, and around the country.
...
I know I can count on your commitment to this fight no matter how tough it gets. Please know, I couldn't do it without you.

My very best wishes to you and your family this holiday season.

Maria
Dec 31, 2011 at 9:30 PM | Unregistered CommenterGregory Dean Lemke
Do You Have a MERS Mortgage?
Since 2007 I've been in a constant fight with Deutsche Bank National Trust Company and so far I am winning, mortgage free because they can't prove "standing", it is now 2012. Over the last 5 years I've researched illegal foreclosures and I've written a book called "Do You Have a MERS Mortgage?" the purpose for this book is to tell average homeowners what has happened to their mortgage and to raise funds for "The US Foreclosure Defense Fund. Homeowners don't know anything about securitization and Robo-Signers, and most of all they don't know that they may be in an "illegal foreclosure with a MERS assignment". So, if anyone wants more information they can go here to learn 7 easy steps to find out if MERS is in their mortgage:

http://www.ismersinyourmortgage.com/
Sep 23, 2012 at 12:00 AM | Unregistered CommenterRichie Collins

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