How MERS Enables Banks to Foreclose

You may never have heard of the Mortgage Electronic Registration Systems (MERS), but it's the culprit that enabled many of the "robo-signers" to perpetuate their foreclosure fraud. L. Randall Wray provides an excellent overview of the fraud in a three part series for the Huffington Post.

Banks not only created MERS, but depended on this electronic record keeping to deny homeowner's even a chance to modify their mortgages. Servicers, which are primarily the big banks, knew they had the cards stacked against homeowners so they didn't have to play ball with Obama's home modification program.

MERS was created by the banks because they did not want to go through all the paperwork of recording a mortgage at a county office each time the mortgage was bought and sold. Only the original sale was recorded at the county office. All subsequent sales and purchases of mortgages were only recorded electronically by MERS. MERS did not even require banks to actually record transactions.

"The record keeping is so sloppy that banks have no idea who owns what and who owes whom what," Wray writes in his series. There are no public records for homeowners to search to find out who owns their mortgage. The record is "whatever the servicer says it is. Judges are only very slowly realizing that what the servicers claim is pure bunk," Wray explains.

What does this mean for a homeowner? Wray found in his study that:

--Checks are being sent to the wrong servicers;
--Servicers credit the wrong accounts;
--Servicers claim delinquencies on homeowners who never missed a payment;
--Servicers piled late fees and delinquencies on the wrong borrowers;
--Sheriffs were sent to break down the doors of the wrong addresses;
--Belongings were thrown out on the street in front of homes where there was no mortgage at all.

Homeowners are not the only ones hurt by MERS. Investors who bought securities also feel the pain of this fraud as
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they lose money on these securities that were originally rated AAA by the credit rating agencies. Investors thought these risky structured mortgage products were as safe as treasuries, only to find out later they were junk that no one can understand.

Wray said that MERS told servicers not to endorse notes over to its trustees. In many instances these original notes were destroyed. Instead MERS shows paperwork is lost and the courts are allowing foreclosures on properties without the original note. Servicers can't demonstrate clear title without the note, instead they depend on this electronic recording keeping to prove the notes were lost. Judges are finally catching on to the fraud and refusing to foreclose on properties without the paperwork to prove who owns the title.

Banks could have avoided this entire mess with the courts if they had just worked out modifications with homeowners who wanted to stay in their homes. But they were emboldened by the power they thought they had created with MERS.

If you search your property online and can't find out who currently holds your mortgage, you're likely a victim of this MERS fraud. Check with an attorney to see if you can save your home by questioning whether or not the bank or attorney trying to foreclose on your home actually has the paperwork to prove they have the title to your home.

Lita Epstein has written more than 25 books including The Complete Idiot's Guide to Personal Bankruptcy and The 250 Questions You Should Ask to Avoid Foreclosure.

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