Humpty Dumpty sat on the wall.
Humpty Dumpty had a great fall.
All the king’s horses and all the king’s men.
Couldn’t put Humpty Dumpty back together again.
Most Americans, including some lawyers and even judges don’t understand what happened. Yes, it is complex and confusing. But at the end it’s real simple.
In the old days, a bank would lend a homeowner money to buy a house. The homeowner would sign a promissory note promising to pay the money back to the bank. The homeowner also signed a mortgage, giving the bank the right to foreclose and take the house back if the homeowner did not pay back the money.
Mortgage Follows the Note
Lawyers and judges grew up with the legal doctrine that the “mortgage follows the Note.” Simply put, if the note was transferred from one bank to another the mortgage would follow the transfer.
But that was then, this is now.
At some point, the folks who brought you this mess (i.e. overly ambitious bankers on Wall Street) had the “great idea” of slicing and dicing the interest of the Note and literally severing it from the Mortgage. Why this was done was actually for a matter of convenience, expediency, and, arguably, greed. Such motivations for now are secondary to the crisis we are experiencing.
Humpty Dumpty = Mortgage and the Note
But this is clear: If you think of Humpty Dumpty as the Mortgage and Note, and you break it apart (as what occurred on Wall Street), when the Notes were broken into pieces and the mortgages were assigned to Mortgage Electronic Recording System (MERS), the fact is that it may well be nearly impossible to bring the mortgages and their corresponding Notes all back together again. Plain and simple!