Mortgage Shenanigans

**Backstop** · October 24th, 2011, 19:22

This is fucking huge.

Many folks have paid no mortgage payments for years, yet are still in their homes because they can't figure out who has the legal authority to boot them.

This is one of the greatest thefts of our time.

These fuckers need to be shot, then jailed for the rest of their lives.

http://www.mysanantonio.com/news/loc...es-2232965.php

Bexar to sue over lost fees
By Patrick Danner/pdanner@express-news.net
Updated 06:23 a.m., Monday, October 24, 2011

Bexar County is poised to challenge a private mortgage-tracking system that officials claim has cost it millions of dollars in filing fees.

The district attorney's office will ask the Commissioners Court at its Nov. 1 meeting for the go-ahead to hire a law firm to sue Mortgage Electronic Registration Systems Inc., which claims to hold title to some 60 million loans around the country.

“There has been a process developed specifically for the purpose of circumventing the recording procedures and statutes in reference to real property,” District Attorney Susan Reed said. She didn't immediately know how much the county will seek in financial damage. “I just know it's going to be high,” she said, adding that it's millions of dollars.

Dallas County last month sued MERS, claiming the county is owed at least $58 million and possibly more than $100 million from MERS-related mortgage assignments that never were recorded with the county clerk.

Harris County estimates that it's owed at least $10 million in unpaid fees and possibly as much as $100 million with penalties. On Tuesday, the county attorney's office will seek the authority from the Commissioners Court to hire the law firm that's representing Dallas County.

“MERS has jeopardized the clear title of every Texas homeowner with a mortgage and has cheated Texas counties out of millions of dollars in property recording fees,” County Attorney Vince Ryan said in an email.

In a statement after the Dallas lawsuit was filed, MERS said its “business model and practices are legal and comply with the recording statutes and regulations of Texas.” A MERS spokeswoman declined to comment for this report.

Virginia-based MERS was formed by the mortgage-banking industry in 1995 to “streamline the mortgage process,” it says on its website. Its shareholders include Bank of America, Chase, CitiMortgage Inc., Wells Fargo Bank, Fannie Mae and Freddie Mac.

A bank that makes a mortgage loan to a homebuyer may opt to sell the loan, allowing it to make new loans. Generally, the mortgage assignment then would be recorded with the county clerk to protect the security interest.

But that process was too burdensome for the industry with the advent of Wall Street's pooling of mortgage loans and selling them to investors, said Stephen Malouf of Malouf & Nockels LLP, the Dallas firm suing MERS on behalf of Dallas County.

“If you're packaging up 10,000 mortgages to issue mortgage-backed securities on, and you have to file 10,000 assignments in the (county) records, it's decidedly more cumbersome than if you don't have to file them,” Malouf said.

On its website, MERS says any loan registered on its system is “inoculated against future assignments” having to be recorded in county records because MERS remains the lender no matter how many times the loan is sold.

But circumventing the county recording system sets it up to be destroyed for lack of funding, according to Reed.

“The process we have is for the protection of purchasers and sellers of property,” she said. “What supports that — all of the filings, all of the record maintenance — (are) the fees that are collected in relation to the transactions.”

Bexar County reported that some 257,000 documents involving MERS were recorded from 1998 through the middle of this month. The county's filing fee for a mortgage assignment is $16 for the first page and $4 for each additional page of a document. Most assignments are only one page.

Malouf said that “the saving of filing fees was a secondary benefit” for the industry.

Nevertheless, he cited a 2009 deposition of MERS' former CEO, who estimated that the company had saved the industry $2.4 billion in recording costs on mortgage assignments.

Those assignments are at the heart of lawsuits filed nationwide by homeowners challenging the validity of foreclosure postings because of concerns over the chain of title on the mortgage documents. Lenders can't prove they have standing to foreclose because of sloppy paperwork, many homeowners contend.

But Texas counties are not joining the homeowners' battles.

Dallas County's lawsuit seeks to “pierce the corporate veil” of MERS so its shareholders, which included the big banks, also are held liable if a court rules that filing fees must be paid.

“MERS is being used by the shareholders inappropriately as a shield against liability for the shareholders' conduct,” Malouf said.

Similar lawsuits have been filed in other states. And other Texas counties are preparing their own lawsuits. Theodore Lyon Jr., a Mesquite lawyer, said he represents Hidalgo County and is preparing to file a federal lawsuit in a few weeks alleging violations of the Racketeer Influenced and Corrupt Organizations Act.

James Gaines, research economist at the Real Estate Center at Texas A&M University, expects plenty of legal wrangling and discussion about the function of MERS and whether the sale of loans was legally required to be recorded at the county courthouse.

“If lender A sells the loan to investor B, is he selling real estate or is it just a financial security?” Gaines asked. “It's an issue. This is going to get so complicated. I don't think there is a simple answer to it.”