Could half of all U.S. mortgages — some 60 million — be protected from foreclosure?
That’s how some are interpreting a ruling from the Kansas Supreme Court.
Ellen Brown/Huffington Post: A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose — on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.
That, says Karl Denninger, “sounds much more definitive than it really is, yet outlines a potential major problem for the secutized loan industry.”
Market Ticker: The underlying issue is that many of these so-called “securities” (MBS, CDOs, etc) were issued “light” of the required legal mandates to keep the chain of assignments and actual consent signatures required for enforcement. Many people charge that the reason behind this was simple volume. I disagree.
I believe that a large part of the root cause of these “lost” documents is to cover up blatant and in many cases outrageous fraud. It is difficult to prove that a bank or other lender knew and ignored stated-income fraud (or allegedly “investigated” and “underwrote” a file when it did not) when the original file has been turned into ticker-tape confetti courtesy of the closest paper shredder!
MERS has thus given cover to a tremendous amount of fraudulent conduct – the very conduct that predatory lending statutes, “wet signature” and “chain of title” laws are supposed to prevent.
The real bottom line here is that securitized bondholders may in fact be holding worthless pieces of paper.
Here’s the full thing if you want to analyse the wording yourself.
The Kansas decision needs to be closely examined and watched, but it doesn’t affect the rest of the country — yet.
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