MERS Is Dead: Can Be Sued For Fraud: WA Supreme Court
Countdown to banks forcing Congress to protect MERS in 3,2,1...
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State Court Ruling Deals Body Blow to MERS
Reprinted with permission.
(Reuters) - The highest court in the state of Washington recently ruled that a company that has foreclosed on millions of mortgages nationwide can be sued for fraud, a decision that could cause a new round of trouble for the nation's banks.
The ruling is one of the first to allow consumers to seek damages from Mortgage Electronic Registration Systems, a company set up by the nation's major banks, if they can prove they were harmed.
Legal experts said last month's decision from the Washington Supreme Court could become a precedent for courts in other states. The case also endorsed the view of other state courts that MERS does not have the legal authority to foreclose on a home.
"This is a body blow," said consumer law attorney Ira Rheingold. "Ultimately the MERS business model cannot work and should not work and needs to be changed."
Banks set up MERS in the 1990s to help speed the process of packaging loans into mortgage-backed bonds by easing the process of transferring mortgages from one party to another. But ever since the housing crash, MERS has been besieged by litigation from state attorneys general, local government officials and homeowners who have challenged the company's authority to pursue foreclosure actions.
A spokeswoman for MERS said the company is confident its role in the financial system will withstand legal challenges.
The Washington Supreme Court held that MERS' business practices had the "capacity to deceive" a substantial portion of the public because MERS claimed it was the beneficiary of the mortgage when it was not.
This finding means that in actions where a bank used MERS to foreclose, the consumer can sue it for fraud. If the foreclosure can be challenged, MERS' involvement would make repossession more complicated.
On top of that, virtually any foreclosed homeowner in the state in the past 15 years who feels they have been harmed in some way could file a consumer fraud suit.
"This may be the beginning of a trend," says Elizabeth Renuart, a professor at Albany Law School focusing on consumer credit law.
The company's history dates back to the 1990s, when banks began aggressively bundling home loans into mortgage-backed securities. The banks formed MERS to speed up the handling of all the paperwork associated with recording the filing of a deed and the subsequent inclusion of a mortgage in an entity that issues a mortgage-backed security.
MERS allowed the banks to save time and money because it permitted lenders to bypass the process of filing paperwork with the local recorder of deeds every time a mortgage was sold.
Instead, banks put MERS' name on the deed. And when they bought and sold mortgages, they just recorded the transfer of ownership of the note in the MERS system.
The MERS' database was supposed to keep track of where those loans went. The company's motto: "Process loans, not paperwork."
But the foreclosure crisis revealed major flaws with the MERS database.
The plaintiffs in the Washington case, homeowners Kristin Bain and Kevin Selkowitz, argued that the problems with the MERS database made it difficult, if not impossible, to determine who really owned their loan. It's an argument that has been raised in numerous other lawsuits challenging the ability of MERS to foreclose on a home.
"It's going to be very easy for consumers to say they were harmed because it's inherently misleading," says Geoff Walsh, an attorney with the National Consumer Law Center. If consumers can't identify who owns their loan, then they don't know whom to negotiate with, and can't even be certain of the legitimacy of the foreclosure.
In a statement, MERS spokeswoman Janis Smith noted that banks stopped using MERS' name to foreclose last year. She added that the opinion will "create confusion" for homeowners in the state of Washington while the trial courts consider its effect on pending cases.
Meanwhile, MERS is attempting to remake itself. The company has a new chief executive and a new branding campaign. In Washington D.C. federal lawmakers have recognized the need to create a national mortgage-recording database that would track all U.S. mortgages. MERS is lobbying to build it.
The case is Bain (Kristin), et al. v. Mortg. Elec. Registration Sys., et al., Washington Supreme Court, No. 86206-1.
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Sep 26, 2012 at 2:55 PM
Reader Comments (12)
http://www.scribd.com/doc/103205085/Kristin-Bain-v-Metropolitan-Mortgage-Group-Inc-Indymac-Bank-Mortgage-Electronics-Registration-Systems-et-al-8-16-2012
Has there been any analysis on this ruling that you can point me to?
this whole mortgage selling business never made any sense to me and seems like it is just trying to make money out of nothing.
but I guess that is the norm these days just print money make money for doing no work.
We are intelligent people that can read the fine print. Boycott banks and move your money to a credit union.
This is an apology to our neighbors, our neighborhood and our city. We apologize for how our home has deteriorated and how, it may seem that we have been neglectful of our home. We have lived in our home and in this beautiful city, for almost nineteen years; and for many years we were very involved in trying to better our community and in some ways are still involved today, although, as you will see, we have been busy in other avenues of bettering, hopefully, our country when this is all said and done.
In 2004, after a very destructive year in our lives (the death of our son-in-law and grandson, the loss of a job and a son serving his country in Iraq); we were forced to refinance our home and unfortunately for us, had dealt with a loan company that, within six months after our “closing”, would receive a Cease and Desist letter from the State of Michigan for illegal practices. We would learn this fact after the bank tried to illegally foreclose on our home in 2006. We discovered that the involved lender had blatantly forged my husband and my signatures to the mortgage document, notarized that document and recorded it as legal tender at the Lapeer County Register of Deeds.
We spent the next six years, fighting the bank, over a crime that, had we committed, would have sent us straight to jail, paying restitution and suffering the consequences that go along with that type of decision. We not only had to fight the bank; we had to fight the very court (bankruptcy) that we reported this crime to. The trustee hired an attorney that jumped on the bandwagon to win an avoidance of the forged mortgage, only for that same attorney to turn around, after we won (in July 2007), and attempt to sell the avoided mortgage back to the defendants for $30,000, without notifying us or our attorney; an action which would have allowed the guilty defendants to retain their interest in our property and continue with their illegal foreclosure. We were forced to pay the trustee’s attorney over $12,000 for his “services”.
This erroneous decision by the bankruptcy court, before determining whether the bank had a legal right to an equitable mortgage, caused us to appeal the resale of our voided mortgage to the US District Court. This courts determination was that the bankruptcy court had not determined whether the bank had a legal right to have an equitable mortgage, based on the forgery, and sent it back to the lower court for a determination. The bankruptcy court, upon the receipt of this remand, immediately determined that the defendants were eligible for the equitable mortgage and, again, we were forced to appeal to the US District Court. The final determination deemed that the bank did not have the legal right to have an equitable mortgage. This action caused the bank to file an appeal to the US 6th Circuit Court, where, finally, in January of 2012 the higher court denied the equitable mortgage.
Most would consider this a big win, however, if this was a big win, I wouldn’t be sitting here, almost seven years later, feeling compelled to write this letter of regret. The entire time that we were embroiled in this fight, we were continually told that we were not to make any repairs to the home (after all it might go back to the bank). The bank (six years after the avoidance of the mortgage and a year-and-a-half after the circuit court’s decision) still have their names on our deed and have placed forced insurance upon our home that has been billed to us on our ever growing “escrow” that we weren’t entitled to when we actually had a mortgage…and the coup de grâce, the bank is reporting that we are over 80-months delinquent on our non-existent “mortgage”.
We have had to hire another law firm to straighten out this mess and after speaking with our lawyer, this will be another long, drawn out affair. We have attempted to file a claim against the insurance, however, it is likely the bank will rescind the insurance based on a “mutual mistake of fact” (the original servicer, midway through the appeals process sold the non-existent mortgage to another servicer)…so, in other words, oops, sorry we didn’t tell you that the mortgage we sold you had no validity, no hard feelings.
We have contacted every agency that we can think of to try and get help with our situation, only to be told that because our credit is shot we, most likely, would not be able to get any help if there was any help available in the first place.
There is no quick fix for us. We decided to stand up against a crime that was committed against us and this is the consequences of an average American going toe to toe with the banks. They will chew you up and spit you out without any regard for the laws that govern us, the “average” Americans. So, therefore, I feel compelled to apologize to my neighbors and community and let you know that this is not what we want and every day we make strides to overcome what the last ten years has done to our lives. I will not apologize for fighting a crime or standing on principle, but I know that my decisions now have consequences for my neighbors and neighborhood. I hope that this will at least give our neighbors answers to the why “it is what it is”.
Sheryl L. Sutter
Lapeer MI 4846
http://mortgageforgery.wordpress.com
http://gogetfunding.com/project/please-help-us-save-our-condo-don-t-let-the-banks-win
Why the hell did you sign onto a loan at 11% in the first place?
http://gogetfunding.com/project/please-help-us-save-our-condo-don-t-let-the-banks-win
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