Today, I had a chat with a new co-worker who revealed that she has been foreclosed on. And she survived. She said, “There is light at the end of the tunnel.” It took her about three years to go through the process with her lender, who refused to accept any of the short sale offers presented, forcing her into foreclosure. It feels good to hear that someone I have met in the flesh has come through the same trials and tribulations and is in a good place now. That someone I actually know understands how I’m feeling. Isn’t it interesting how having a personal connection with someone going through the same experience changes your perception of the experience?
On a side note, I had a get together with one of my college roommates last week, and we discovered that we had lived through a mutual childhood trauma – our parents refused to buy us Cabbage Patch dolls when everyone else we knew had them. The horror! But I think we turned out okay despite that. But it’s nice to know I didn’t suffer alone.
Almost everything I’ve written about to date has involved my UD (Unlawful Detainer aka eviction). I haven’t really written much about the civil lawsuit, which is actually lawsuits now. But I’ll just start with the first one.
In my civil suit, my attorney named defendants that included everyone involved in the process once I decided to buy a house – the mortgage agent, the broker, the lender, the reconveyance company, and MERS.
Everyone has heard of either MERS (Mortgage Electronic Registration Systems) or LPS (Lender Processing Services) these days. Prior to lenders creating mortgage-backed securities, the varying county and state laws regarding the recording of the purchases made it difficult to create a unified, streamlined process nationally. When mortgage bankers decided to securitize our mortgage loans, they created these two entities – MERS and LPS.
One function they serve is to record and track mortgage transfers in a national database. By making themselves the record keeper, they have, in essence, replaced the individual County Recorders. According to them, this reduces costs for both lenders and consumers by reducing assignment fees. In this way, they took on the responsibility of ensuring the correct paperwork was recorded and fees paid.
Their secondary, and most controversial, function is to stand in on your loan as the “owner of record” or “nominee” to protect the financial interests of the lenders, investors, and loan servicers. This setup has attracted controversy as the process of foreclosing is, on paper, initiated by MERS or LPS. Because your payments don’t go to MERS or LPS, foreclosed homeowners have initiated lawsuits questioning whether they have legal standing to do so. It has taken many years and lawsuits to get to the decisions we have now – which upholds their right to do so.
A large part of the controversy stems from how the system came into being, and how they have failed in their basic mission. MERS, in particular, has registered two-thirds of the country’s mortgages, so they draw the most fire. It was created after the need for such an agency was pinpointed and the Mortgage Bankers Association (MBA) brought it into existence in 1993.
Because the MBA birthed this corporation, one has to question how MERS can act independently of the influence of their creators, who, unarguably, have a vested interest in ensuring that MERS acts upon their guidance. So, here’s how it could work: You accept MERS to act as nominee when you sign your Deed of Trust. The mortgage company has decided to foreclose on you. MERS therefore initiates the foreclosure. They file all the required paperwork with the County Recorder and pay the fees to have the titles on your property changed to the new owner. This all happens like a well-greased wheel, before you can say “alakazam”.
So, what millions of people are complaining about now is that MERS has failed on the simplest level. In reaching their goal of driving the mortgage industry to a paperless system, the papers that people hold don’t match up with the papers MERS holds.
Either MERS has lost track of the assignments, or the paperwork in their possession has been altered. Typically, the signature page of a financial mortgage document has part of the agreement, or some sort of disclaimer, plus it has something on it to identify the document the signatures belong to. Millions of mortgages out there now have a “signature page” attached with simply the signature of the borrower and the signature of the “authorized” signer for the lender. Without identifying what document the signatures are attached to, how can anyone know what the agreement was? This happened with my paperwork. Some people are finding their own signatures have either been forged or photoshopped into a document that differs from the one they hold!
Another part of the current scandal is the issue of “robosigning”. This is a huge, huge issue. Due to the financial meltdown, thousands of documents have been crossing the bankers’ desks every day. You know how when you write bulk thank you cards, your wrist starts to hurt after a while? Well, they just didn’t have time to read through each document and sign it. Or even just to sign it. So they gave other people permission to sign their names for them. This resulted in documents with the same authorized signer having several different signatures. In one case, there were 25 different variations on the same person’s signature!
Why is this such a big issue? Because the people who were responsible for authorizing foreclosures to go forward weren’t even reviewing them. So, that creates insecurity in the system. Who really did authorize the foreclosure? How can you hold the person responsible for initiating a wrongful foreclosure when you don’t know who really signed the documents authorizing it? These are legal documents. If you were to have your mother sign an agreement, saying she was you, the agreement would be considered null and void due to that misrepresentation. The same rules should apply in reverse.
In my opinion, the most basic problem with this setup is this: There is no “check and balance”. In my career, working across varied industries and job functions, there is always some sort of check and balance built in, whether it be your boss reviewing your paperwork before submitting it to other departments, having two people make the bank deposit together, and so on. This situation is like the NFL hiring the referees to be independent and then telling them which plays to call. (Some games it seems like they do that already!) There is no one to make sure the mortgage company has all the correct paperwork. There is no one to make sure the correct procedures have been followed. There is no one to make sure the property is being sold to a bona fide purchaser. There is no one looking at both sides of the financial transaction. Worst of all, there is no accountability.
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If your home was foreclosed on between January 1, 2009 and December 31, 2010 you may be eligible for an independent review of your foreclosure. Forms were mailed out in December 2011, and you have until July 31, 2012 to respond. Forms and additional information, including which lenders are participating in the process, can also be found here. Though I’m a bit jaded on the government actually doing anything, it can’t hurt to try. Also, my attorney advised me to submit enough supporting documentation that supported my claims without overwhelming them with paper. They didn’t fit in the letter-sized envelope sent to me, so since it was a “Postage Paid by Addressee” envelope, I taped it to a larger envelope and mailed out my package with a Certificate of Mailing (so I can prove I responded). Be sure to keep copies of what you submit!