Humpty Dumpty has had his great fall, thanks to an outstanding bankruptcy judge who has all but dismantled the Mortgage Electronic Registration System (MERS) thanks to his recent ruling.
Last week New York Judge Robert Grossman ruled that all of MERS’ business practices are illegal.
It’s a staggering blow to the banks and their endless efforts to circumvent due process. It has the potential to once again slow down the foreclosure process.
The foreclosure registry was set up by the banks with one purpose in mind, to make securitizing mortgages easier for them.
And homeowners, as is usually the case with matters relating to bundled mortgages, were getting screwed.
Here’s the short explanation. MERS allowed the banks to bypass public record keeping, all in an effort to streamline the records that banks were using to foreclose.
Local record keeping regulations might have been cumbersome for the banks to keep up with, but it protected the homeowners and provided transparency.
By allowing the banks to essentially hijack an important part of the record keeping process, namely the recording of each time a mortgage was sold to a different investor, banks had much greater control then than they ever should have been allowed to.
Banks can talk about streamlining the process as the reason behind MERS all they want, but the effect was that it was much more difficult for homeowners to see who currently owned their mortgage, and it just allowed the banks to be sloppy with their records, and they were.
MERS was separating the notes from the mortgages, again so they could be securitized, yet in the case that was brought before Grossman, their lawyers argued they could still foreclose because in theory, the mortgage follows the note.
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