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==Role of MERS==
==Role of MERS==
{{main|MERS}}
{{main|MERS}}
The Mortgage Electronic Registration Systems, known as MERS, is a [[privately held company]] that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States.<ref>{{cite web|url=https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/mers|title=Mortgage Electronic Registration System, Streamline Assignments of Mortgages|accessdate =2009-04-30}}</ref><ref name="Reuters"/> As of the crisis 62 million mortgages are held in the name of MERS,<ref name="Yes!">{{Cite news |author= Brown, Ellen |title= Foreclosuregate: Time to Break Up the Too-Big-to-Fail Banks? |url= http://www.yesmagazine.org/new-economy/foreclosuregate-time-to-break-up-the-too-big-to-fails |work= [[YES! Magazine]] |date= October 15, 2010 |accessdate= October 19, 2010}}</ref> and MERS has initiated thousands of foreclosures in the United States, claiming to be the mortgagee of record. Lawyers have contended in court that MERS has no legal right to initiate a foreclosure, because MERS does not own the loans in question. US lending laws state that only the owner of a loan can initiate a foreclosure.<ref name="Reuters"/><ref name="Yes!"/> [[Class action law suit]]s against MERS are pending in [[California]], [[Nevada]], and [[Arizona]], while state supreme courts in [[Maine]], [[Arkansas]], and [[Kansas]] have already ruled against MERS right to file for foreclosures. MERS has however won court cases in several other states, affirming its right to initiate foreclosures in those states.<ref name="Reuters">{{cite web|url=http://www.reuters.com/article/idUSTRE69C69720101013|title=Factbox: The role of MERS in foreclosure furor|date=October 13, 2010|accessdate=October 18, 2010}}</ref> The MERS numerous legal inconsistencies, which might look trivial, in fact reflect the dysfunctionality of the whole mortgage securitization approach itself and therefore would have a profound impact on financial system if challenged.
The Mortgage Electronic Registration Systems, known as MERS, is a [[privately held company]] that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States.<ref>{{cite web|url=https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/mers|title=Mortgage Electronic Registration System, Streamline Assignments of Mortgages|accessdate =2009-04-30}}</ref><ref name="Reuters"/> As of the crisis 62 million mortgages are held in the name of MERS,<ref name="Yes!">{{Cite news |author= Brown, Ellen |title= Foreclosuregate: Time to Break Up the Too-Big-to-Fail Banks? |url= http://www.yesmagazine.org/new-economy/foreclosuregate-time-to-break-up-the-too-big-to-fails |work= [[YES! Magazine]] |date= October 15, 2010 |accessdate= October 19, 2010}}</ref> and MERS has initiated thousands of foreclosures in the United States, claiming to be the mortgagee of record. Lawyers have contended in court that MERS has no legal right to initiate a foreclosure, because MERS does not own the loans in question. US lending laws state that only the owner of a loan can initiate a foreclosure.<ref name="Reuters"/><ref name="Yes!"/> [[Class action law suit]]s against MERS are pending in [[California]], [[Nevada]], and [[Arizona]], while state supreme courts in [[Maine]], [[Arkansas]], and [[Kansas]] have already ruled against MERS right to file for foreclosures. MERS has however won court cases in several other states, affirming its right to initiate foreclosures in those states.<ref name="Reuters">{{cite web|url=http://www.reuters.com/article/idUSTRE69C69720101013|title=Factbox: The role of MERS in foreclosure furor|date=October 13, 2010|accessdate=October 18, 2010}}</ref>


==Attempted legislative fix==
==Attempted legislative fix==

Revision as of 01:46, 10 February 2011

The 2010 United States foreclosure crisis, sometimes referred to as foreclosure-gate,[1][2] is an ongoing and unresolved issue in the United States and refers to an apparently widespread epidemic of improper foreclosures initiated by large banks and other lenders. The foreclosure crisis was extensively covered by news outlets beginning in October 2010, and several large banks, including Bank of America, JP Morgan, Wells Fargo, and Citigroup temporarily responded by halting their foreclosure proceedings in some or all states.[3][4] The foreclosure crisis has caused significant investor fear in the US.[5]

Early signs of trouble

In spring 2010 news stories begin to emerge detailing erroneous foreclosures and evictions, including banks variously foreclosing on homes which were paid for without a mortgage, accidentally foreclosing on the wrong home, and providing fraudulent documentation in courts.[6] Many of the frauds and abuses being investigated in foreclosuregate were first identified over a dozen years ago by consumer advocate, Nye Lavalle.

Robo-signing controversy

In the fall of 2010, major U.S. lenders such as JP Morgan Chase,[7] Ally Financial f/k/a GMAC, and Bank of America[8] suspended judicial and non-judicial foreclosures across the United States over the potentially fraudulent practice of robo-signing, a practice first identified and reported in a 1999 white paper by Nye Lavalle titled "21st Century Loan Sharks."[9] However, the term robo-signer was first coined by attorney Matthew Weidner of Florida.

In an October 21, 2010 Wall Street Journal Article titled "Niche Lawyers Spawned Housing Fracas" the Journal reports that foreclosure lawyer/advocates, Thomas Ice and Matthew Weidner, were discussing the deposition testimony of employees of mortgage employees. "Tom and I were talking, and it was, 'Jesus, they're like robots!'" Mr. Weidner says. Mr. Weidner, a blogger, on January 8, 2010 wrote a blog post with an appellation for the routine signers. "We know from depositions taken of these 'robo signers,'" he wrote, "that they don't even read the documents placed in front of them and the notaries and witnesses that are supposed watch them as they sign are not present." This conclusion paralleled Lavalle's findings a decade earlier.[10]

The terms robo-signing and robo-signers then gained wider exposure by other mortgage fraud activists Michael Redman and Lisa Epstein via their blogs.[11] Robo-signing is a term used by consumer advocates to describe the robotic process of the mass production of false and forged execution of mortgage assignments, satisfactions, affidavits and other legal documents related to mortgage foreclosures and legal matters being created by persons without knowledge of the facts being attested to. It also includes accusations of notary fraud wherein the notaries pre and/or post notarize the affidavits and signatures of so-called robo-signers.

Beginning in 2009, the allegations of robo-signing by Lavalle, Epstein and Redman were proven by local Palm Beach Attorney, Tom Ice of Ice Legal, who proved up the wide-scale practice of robo-signing in depositions taken of GMAC's Jeffrey Stephan and other robo-signers.[12] News outlets have reported that on September 14, 2010, Jeffrey Stephan testified that he had signed affidavits which he hadn't actually reviewed on behalf of Ally Financial Inc.[6][13] This revelation led to increased scrutiny of foreclosure documentation. The practice was apparently common practice in the mortgage industry, and was given the term Robo-signing.[6] In the weeks following the robo-signing revelation other large banks have come under fire for employing robo-signers as well, including JPMorgan Chase and Bank of America.[14]

Identification of robo-signing and foreclosure fraud

At the 2000 National Consumer Law Conference in Broomfield, Colorado, Lavalle released two white papers and reports he authored. The reports released were titled Predatory Grizzly "Bear" Attacks Innocent, Elderly, Poor, Minorities, Disabled & Disadvantaged[15] and the 21st Century Loan Sharks" report.[16] In the reports, Lavalle listed dozens of predatory practices that are now widely classified as robo-signing activities that include: failing to record in country records the true and real ownership, assignment and endorsements of promissory notes, deeds and other mortgage documents which were part of sale, assignment or transfer; filing of fraudulent and false affidavits by predatory lenders claiming that they own the note when in fact they are only the servicer; filing of fraudulent and false affidavits by predatory lenders claiming that they lost the note when in fact they never had control of the document; filing of fraudulent and false affidavits by predatory lenders claiming an indebtedness that is not owed; filing of fraudulent and false affidavits by predatory lenders claiming amounts owed that are nonrecoverable from the borrower; filing of fraudulent and false affidavits by predatory lenders claiming control and custody of documents that are not in their control and custody; filing of fraudulent and false affidavits that claim to support knowledge of facts not known by the affiant; filing of frivolous motions for summary judgement; and using corporate dummies as corporate reps that are trained to avoid questioning and obstruct justice.

In a follow-up report in 2008, titled "Sue First, Ask Questions Later,"[17] Lavalle detailed the wide-scale practice of robo-signing in the mortgage servicing industry. On page 1 of the report Lavalle states "one of the many predatory servicing practices developed was the use of known false, fraudulent, and forged affidavits, assignments, and satisfactions of mortgages." In this report, Lavalle identifies a number of non-conformances in the handling of mortgages, power of attorneys, affidavits, and satisfaction of liens in public records across the United States. Among other problems with these records, Lavalle states that he found evidence of documents being forged by using "squiggle marks" that are not the marks or signatures of the officer that is authorized to be the signatory on the document in question. In addition, Lavalle finds that "initials only" marks were used so that anyone can sign an officer's signature. Lavalle also states that he found significant variations in the marks for individuals that suggest multiple signers. Also noteworthy was the revelation that a named officer of a bank or lender was found to have signed documents which would imply that the officer was in many different cities across the United States at once.

A primary focus of the Sue First report was Scott Anderson of Ocwen Financial in West Palm Beach, Florida. On January 5, 2011, a Palm Beach Post report on robo-signing stated that Paul Koches, executive vice president of Ocwen, acknowledged Tuesday that the signatures were not all Anderson's, but that doesn't mean they were forged, he said. Certain employees were given authorization to sign for Anderson on mortgage assignments, which Koches noted do not need to be notarized. Still, Ocwen has since stopped allowing other people to sign for Anderson, Koches said.[18]

A Washington Post article about the robo-signing foreclosure crisis on October 7, 2010, concluded with Lavalle's warning to the industry when the Post wrote "several years ago (2003), on a message board still active on the MERS Web site,[19] one participant (Lavalle) accused the company of participating in fraud and concealing the transfer of loans from public scrutiny." "The company's president and chief executive, R.K. Arnold, responded by insisting that MERS actually increased the transparency of the mortgage system and reduced the cost of homeownership by making the industry more efficient." "We're not perfect," Arnold wrote, "but there's nothing sinister about who we are and what we do."

Role of MERS

Main article: MERS

The Mortgage Electronic Registration Systems, known as MERS, is a privately held company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States.[20][21] As of the crisis 62 million mortgages are held in the name of MERS,[22] and MERS has initiated thousands of foreclosures in the United States, claiming to be the mortgagee of record. Lawyers have contended in court that MERS has no legal right to initiate a foreclosure, because MERS does not own the loans in question. US lending laws state that only the owner of a loan can initiate a foreclosure.[21][22] Class action law suits against MERS are pending in California, Nevada, and Arizona, while state supreme courts in Maine, Arkansas, and Kansas have already ruled against MERS right to file for foreclosures. MERS has however won court cases in several other states, affirming its right to initiate foreclosures in those states.[21]

Attempted legislative fix

In an apparent attempt to resolve some of the issues with missing, lost, and sometimes fraudulent paperwork both the United States house of representatives and the United States senate passed H.R. 3808 which would force courts to recognize out of state and electronic notarizations. The bill passed the Senate through a verbal vote, and wasn't publicly debated. President Barack Obama, fearing "unintended consequences on consumer protections"[23] utilized his veto powers, at first using a pocket veto by simply not signing the bill, and later by issuing a more formal protective-return veto.[24]

The Interstate Recognition of Notarizations (IRON) Act of 2010 would have required “any Federal or State court to recognize any notarization made by a notary public licensed by a State other than the State where the court is located when such notarization occurs in or affects interstate commerce.”[25] The bill, written by U.S. Rep. Robert Aderholt (R-AL) to help court stenographers in his district alleviate issues with getting courts in other states to accept depositions notarized in Alabama,[26] came under criticism in October 2010 from homeowner advocates who said it would have made it easier for mortgage processors to foreclose on homeowners without proper documentation or chain of title.[27]

The first version of the IRON Act (H.R. 1979), sponsored by Aderholt in 2005, passed the House of Representatives in December 2006.[28] The same bill was later sponsored by U.S. Sen. Tom Carper (D-DE) and introduced in the U.S. Senate Judiciary Committee as S.2083 in 2007, but it ultimately stalled.[29] The bill was again sponsored by Aderholt (R-AL) and introduced in the U.S. House of Representatives as H.R. 3808 on October 14, 2009. It passed by voice vote in the House on April 27, 2010. The bill was co-sponsored by Rep. Bruce Braley (D-IA), Rep. Mike Castle (R-DE) and Rep. Artur Davis (D-AL). The bill was voted on in the U.S. Senate on Sept. 27 at the urging of Senate Judiciary Chairman Patrick Leahy (D-VT). Leahy’s staff said that they had received calls from “constituents” pressing for passage of the bill.[30] But Leahy may have supported the bill after being lobbied by notaries at a September event in D.C. honoring President Calvin Coolidge.[31]

Sen. Robert Casey (D-PA), who was ushering through many pieces of last-minute legislation on behalf of the Democratic leadership on the final day before the Senate adjourned for recess, moved the bill from the Judiciary committee for a vote. Sen. Jeff Sessions (R-TX) helped gather Republican support for the bill.[32] The Senate then passed the bill by unanimous consent without debate. Aderholt said that he and supporters “were surprised that it came through at the eleventh hour there” in the Senate. President Obama vetoed the bill on Oct. 8, following outcry from homeowner advocates and increased scrutiny from the press.

Ohio’s Secretary of State, Democrat Jennifer Brunner, emerged as one of the earliest critics of the bill, calling the timing of its passage “suspicious.”[32] Brunner organized opposition to the bill, urging citizens to call and email the President and tell him not to sign the act.[33] CNBC senior editor John Carney called the bill “mysterious” and wrote that the bill “might bail out banks such as GMAC, JP Morgan Chase and Bank of America from their foreclosure gate troubles.”[34]

Aderholt defended his bill in a statement: “There is absolutely no connection whatsoever between the Interstate Recognition of Notarizations Act of 2010 and the recent foreclosure documentation problems… The bill expressly requires lawful notarizations, and in no way validates improper notarizations. Enforcement of legal notarizations is a state responsibility and I fully support each state attorney general vigorously prosecuting all notarization fraud.”[35]

Voluntary suspension of foreclosures by lenders

On October 6, 2010 Attorney General of Ohio Richard Cordray filed suit against Ally Financial Inc seeking $25,000 in penalties for each instance of fraud, in addition to undisclosed amount of consumer restitution. The action could potentially mean hundreds or thousands of individual penalties for each instance of robo-signing that occurred in the state of Ohio.[13] State Attorney Generals from various other states have also started to react to the controversy. It has been reported that legal authorities in California, Connecticut, Illinois, Iowa, Maryland, Massachusetts, North Carolina and Texas have contacted lenders and mortgage services demanding answers.[13] As of October 14, 2010, all 50 states have entered a joint investigation into the mortgage industry. The joint investigation aims to determine the veracity of allegations that banks have not reviewed foreclosure documents properly or have falsified documents in order to evict homeowners.[5]

See also

References

  1. ^ "Will Bankers go to Jail for Foreclosure-gate?". October 19, 2010. Retrieved October 21, 2010.
  2. ^ "Administration Shifts Focus on Foreclosure-Gate". October 20, 2010. Retrieved October 21, 2010.
  3. ^ Segal, David (October 17, 2010). "White house urges calm on foreclosures". New York Times. Retrieved October 18, 2010.
  4. ^ LaCapra, Lauren (October 18, 2010). "Foreclosure crisis: home equity loan time bomb". The Street. Retrieved October 18, 2010.
  5. ^ a b "Investor fears grow over foreclosure mess". October 14, 2010. Retrieved October 18, 2010.
  6. ^ a b c Tauke, Joseph (October 14, 2010). "One nation, under fraud". The daily caller. Retrieved October 18, 2010.
  7. ^ http://online.wsj.com/article/SB10001424052748704657304575540340176254622.html?mod=googlenews_wsj
  8. ^ http://www.fool.com/investing/general/2010/10/08/bank-of-america-to-halt-foreclosures.aspx
  9. ^ http://www.scribd.com/doc/13625416/AAMA-Report
  10. ^ http://online.wsj.com/article/SB10001424052702304410504575560072576527604.html
  11. ^ Cha, Ariana Eunjung (October 21, 2010). "Fla. Activists Fight Against Shoddy Foreclosures". CBS News. Washington Post. Retrieved October 31, 2010.
  12. ^ Jeffrey Stephan
  13. ^ a b c Whelan, Robie (October 7, 2010). "Robo-signer debate: Was it fraud?". The Wall-Street Journal. Retrieved October 18, 2010.
  14. ^ Prior, Jon (October 8, 2010). "Robo-signer effect on housing market reaching critical mass". Housing Wire. Retrieved October 18, 2010.
  15. ^ http://www.scribd.com/doc/3683593/Predbear
  16. ^ http://www.scribd.com/doc/13625416/AAMA-Report
  17. ^ http://www.scribd.com/doc/20955838/PMI-Ocwen-Anderson-Report-Sue-First-Ask-Questions-Later
  18. ^ http://www.palmbeachpost.com/money/real-estate/state-details-foreclosure-chaos-1164504.html?printArticle=y
  19. ^ http://www.mersinc.org/forum/viewreplies.aspx?id=13&tid=93
  20. ^ "Mortgage Electronic Registration System, Streamline Assignments of Mortgages". Retrieved 2009-04-30.
  21. ^ a b c "Factbox: The role of MERS in foreclosure furor". October 13, 2010. Retrieved October 18, 2010.
  22. ^ a b Brown, Ellen (October 15, 2010). "Foreclosuregate: Time to Break Up the Too-Big-to-Fail Banks?". YES! Magazine. Retrieved October 19, 2010.
  23. ^ "Obama to veto foreclosure documents bill". NPR. October 7, 2010. Retrieved October 18, 2010.
  24. ^ "Obama Clarifies Pocket Veto Of Controversial Bill Related To Foreclosures". October 9, 2010. Retrieved October 21, 2010.
  25. ^ "H.R.3808 - Interstate Recognition of Notarizations Act of 2009".
  26. ^ "Obama Rejects Notary Bill Amid Foreclosure 'Caution'".
  27. ^ "How The Controversial Foreclosure Bill Made It Through Congress With No Public Debate". Huffington Post. 2010-10-08.
  28. ^ "Congressman Aderholt Introduces Notary Public Bill".
  29. ^ "S.2083 - Interstate Recognition of Notarizations Act of 2007".
  30. ^ "Obama Should Veto Bill That Makes It Harder For Foreclosure Victims To Challenge Banks".
  31. ^ "Obama Rejects Notary Bill Amid Foreclosure `Caution'".
  32. ^ a b "Stealth Bill May Shield Banks in Foreclosure Challenges".
  33. ^ "Secretary Brunner: Please tell President Obama NOT to sign the Interstate Recognition of Notarizations Act".
  34. ^ "Obama Rejects Foreclosure Gate Bailout Bill".
  35. ^ "Aderholt Statement On The President's Veto Of His Bill".
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