Friday, September 25, 2009

More Foreclosure Revolts

As the foreclosure freight train continues on its path, more and more homeowners are discovering they have options.

For way too long, banks have had the upper hand in calling the shots, but now savvy homeowners are calling them out and in more and more cases, are winning.

Rolling Stone writer Matt Taibbi recently wrote in his blog about one company, Mortgage Electronic Registration Systems, that holds over half the mortgages in the country. They lost an important decision in front of the Kansas Supreme Court that ruled MERS had no legal standing to foreclose on properties in that state. The ruling came down because MERS could not provide certified documentation of their right to have anything to do with individual mortgages. No documentation, no right to foreclose.

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.

via Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks.

The ruling states in part...

“By statute, assignment of the mortgage carries with it the assignment of the debt. . . . Indeed, in the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable. The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust.” [Citations omitted; emphasis added.]

Matt Taibbi is currently working on this story for his next Rolling Stone article. While the court decision applies strictly to Kansas, it sets precedence for other courts in other states grappling with the same problems.

If you or any one you know is facing foreclosure, all is not lost. Many Americans have been able to stop foreclosure of their property, and some have walked away with clear title.

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