Wednesday, October 13, 2010

Today's article du jour: The Foreclosure Game; Tricks and Traps in the Fine Print

By Ralph Nader,

Excerpt: So casual were the big banks about what they considered “mere formalities,” that they created a company called the Mortgage Electronic Registration System (MERS) to accelerate the loan securitization process and save the banks hundreds of millions of dollars by having them avoid the expense of filing mortgages and paying fees each time a loan is resold. How can a company—whether MERS or a bank—seize a home by foreclosure if it does not show proof of owning the mortgage? This is the question more attorneys general, including Texas, Maryland and Connecticut, are demanding an answer to from MERS and the Banks.

As the Washington Post reported: “mortgages were created, and sold, sliced and diced, packaged and repackaged so quickly that financial firms had neither the time nor the patience to file paperwork in local courthouses as the loans were traded. By using MERS, lenders were able to reassign loans quickly and cheaply but often the chain of ownership was not accompanied by an official paper trail. …These problems contributed to the use of flawed and fraudulent paperwork, including backdated assignments and forged documents.”

State supreme courts in Maine, Kansas and Arkansas have judged that MERS doesn’t own the loans and therefore cannot foreclose on the houses. Other courts have ruled in favor of MERS. But the lower courts have been caught up with the same robosigning. One judge in Florida admitted to signing off on 6000 foreclosures a week. Notaries followed with their robo-notorizations. The judiciary’s embarrassment may affect some appellate judges’ judiciousness.

Now the title insurers are the next link in the chain, especially when the foreclosed home has already been sold to a new buyer. The spider’s web spreads. A lawsuit in California charges that billions of dollars in land recording fees have not been paid by the responsible parties, including MERS and the big banks. Where have the bank regulators been all these years?

Underneath all this fine print abstruseness and the backhanded evasion of state rules is the contractual tyranny that infects the entire financial service economy and beyond. To use Professor Elizabeth Warren’s phrase—they are full of “tricks and traps” for the consumer. (Read more)

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