Judge Ruling Denies MERS the Right to Initiate Foreclosure Cases

Posted on November 4, 2009
Filed Under foreclosure | Leave a Comment

The MERS or Mortgage Electronic Registration System was the brain child of Freddie Mac and Fannie Mae together with some banking giants. It made its debut in 1997. With the green signal from the rating services a new game of securitization of mortgages began. The mortgages were made into packages, sliced, re-packaged and again cut into pieces and sold as CDO or collateralized-debt-obligations to global investors in remote corners of the world. These securities were backed by risky sub-prime mortgages. When the borrowers defaulted the value of the securities also fell causing huge losses to investors.

With AAA ratings given by the agencies authorized to do so, even teacher’s pension funds and the like came be invested in these. But the value fell to less the amount of the property causing a crisis of tsunami proportions.

The MERS by virtue of its computer capability noted the myriad of times the loans were sliced and changed hands. But according to the rules of the mortgage game each time a mortgage changed hands it was to be noted with the relevant authority in the county. It meant time consumption and also payment of fees at each point of transfer. All this was avoided by the introduction of the MERS.

The matter became further complicated with servicers standing between the loan giver and taker. These servicers, often large banks, did the job of collecting mortgage dues. For this the servicer gets handsomely paid although it had no stake in the deal – it had nothing to lose but everything to gain from it.

Thus there is in effect a huge gap between the loan taker and loan giver that becomes prominent when a foreclosure starts off. The borrower who wants to negotiate cannot pick up the phone and talk to the lender. There is a maze in which the borrower tends to get lost while the foreclosure engine chugs ahead relentlessly. The ordinary American does not have a clue as to who is the lender and from whom relief can be sought. The first door to knock on seems to be that of the servicer who has contact with both sides.

A ruling by Kansas Supreme Court has pulled the carpet from under the feet of MERS by barring its right to foreclose. Although the ruling does not apply beyond Kansas it has opened up a can of worms. Other judges and housing advocates are sure to pursue the matter. It involves 60 million mortgages and the ruling could be applied to foreclosures enacted two decades ago!

Popularity: 1% [?]

Related Tags

• mers ruling florida

• ruling that affects Florida foreclosures

• MERS foreclosures california
• MERS cases
• MERS
• vs mers california
• freddie mac ruling on loan amounts for foreclosures in nov 2009
• mers in california
• seo forum

Comments