I am not sophisticated enough in either law or finance to be able to judge this bit of news with any reliability. I hope someone (Sackerson, you there?) might be able to look at this and enlighten further.
A court in Kansas has ruled that MERS, the mortgage clearing-house(I've never heard of it, but what do I know?), which has been the party filing foreclosures on behalf of bondholders, is in reality a straw-man, without standing to foreclose on anyone's house in Kansas.
It seems that a court has ruled that about half of the mortgage market has been run as a criminal enterprise for years, which would invalidate any potential foreclosure proceedings for about, oh, 60 million mortgages. The court ruled that the electronic transfer system used by the private company MERS — a clearing system for mortgages, similar to a depository, that is used for about half the mortgage market — is fundamentally unreliable, and any mortgage sold and/or transferred through MERS can’t be foreclosed upon, at least not in Kansas.
If this means what it seems to mean, then all those mortgages that were sliced-and-diced into mortgage-backed-securities, insured by credit-default-swaps, are now unenforceable, at least in Kansas. Would that mean all those holders of MBS's are left holding the bag, in possession of literally worthless paper?
They would want their money back, wouldn't they? All at once, once the word got out?
I don't know, that's why I'm posing the questions.
Toto, I don't think we're in Kansas anymore...
3 comments:
Hi, OS. It'll be like that 1968 Minnesota court judgement that ruled mortgages based on fractional reserve lending are invalid: it'll be overruled in a higher court, or somebody's going to wind up not alive anymore.
http://www.foreclosurefish.com/blog/index.php?id=439
Thanks, Sackerson, for that link. It will be interesting to see how the Kansas case will fare upon appeal at the Federal level.
I'm not truly certain that I would cheer for it being upheld. After all, we pay mortgage payments because someone made the money available for the house to be purchased that we now live in. I haven't checked, but I believe the mortgage, both deed and note, are held by the local bank to which I send the payments.
I have an ethical problem with declaring that we should live in a real house for free because a bank 'created' the money for its purchase, or further securitized the mortgage. They held up their end, we should make every effort to hold up ours.
But I have an ethical problem as well with a banking system that created hostages on every point of the compass, from the local home purchaser to the pensioners who trusted in Fannie Mae paper, to my grandchildren who will pay for this mess.
So, I'm in a contradiction!
I'm glad the judge ruled the way he did, because it was a correct reading of the law. Even if our mortgage is held by MERS, I don't see this as a 'get out of jail card'. No one lied to us to get us to assume our mortgage. Given a choice of several options, including interest-only, we chose a simple standard amortization mortgage, and did take on a HELOC, which was mainly invested in much needed improvements on the property.
Perhaps this ruling will set the stage somehow to lead to some true resolution of the mess that continues to fester.
Thanks for your insight.
Hi OS,
I just found this site and saw your posting on the MERS case in Kansas. This is not the same as the MN case because here the foreclosure was upheld, it was MERS claiming to have standing without possesion of the note that was the issue. Banks have been failing to keep track of the note (ex. title to your car) and still foreclosing anyway. Problem is, if people are legit in trying to work something out with the Bank, only the holder of the note has legal standing to sue, as only they are entiled to collect. Securitization broke that chain up, so the banks could save money during the boom, but now, they can't find key paperwork (basic stuff really) and judges not only in Kansas but a few other states are getting tired of it.
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