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A recent ruling by Judge Robert E. Grossman in the United States Bankruptcy Court, Eastern District of New York in the chapter 7 case, In Re: Ferrel L. Agard sets forth a ruling based on very common sense, simple logic that the MERS business model is illegal, absurd and may have made every MERS mortgage unenforceable!

Here are some of the key quotes from the ruling:

“Aside from the inappropriate reliance upon the statutory definition of “mortgagee,” MERS’s position that it can be both the mortgagee and an agent of the mortgagee is absurd, at best. Adding to this absurdity, it is notable in this case that the Assignment of Mortgage was by MERS, as nominee for First Franklin, the original lender. By the Movant’s and MERS’s own admission, at the time the assignment was effectuated, First Franklin no longer held any

Rarely do I actually blog anymore. My seven day work week with very often 12+ hour days is best spent fighting for clients while squeezing in the time it takes to read all the latest developments in case law, proposed legislation, and various other news stories affecting the foreclosure crisis. Typically forwarding links to all the articles I read via twitter and Facebook to help keep others informed is the best I can do.

However, last night, I read an article about an audit that was prepared by county officials in San Francisco of approximately 400 cases in which people had lost their home in foreclosure between January 2009 and November 2011. The results are simply mind blowing. “84 percent of the files contained what appear to be clear violations of law” and “in 45 percent of the foreclosures, properties were sold at auction to entities improperly claiming to be the beneficiary of the deeds of trust.” Put another way, in 45 percent of the cases the county reviewed, a “stranger” was allowed to take someone else’s property without any showing of a legal right to do so.

In 6 percent of the cases the same mortgage, or “deed of trust” as it’s called in California and various other states, was assigned to two or more different entities, which raises serious doubts about who actually had the right to foreclose. The article goes on to state that, “many of the foreclosures that were scrutinized showed gaps in the chain of title, the report said, indicating that written transfers from the original owner to the entity currently claiming to own the deed of trust have disappeared.”

According to a recent study done at University of North Carolina at Chapel Hill, roughly 42.2 million Americans took out a mortgage between 2004 and 2007. As of February of 2011, 2.7 million or only 6.4% of those loans were lost to foreclosure. The study conservatively estimates that another 8.3% or 3.6 million households are at "immediate, serious risk" of losing their homes. This would add up to mean only @ 14.7% of all loans entered into during the last few years of the real estate bubble are going to end up in foreclosure. By their own study, that would mean we still have more than half way to go.

However, in my humble opinion, these numbers are extremely conservative. If approximately 1 out of every 2 mortgages in Florida are for more money than the property is worth and approximately, 1 out of every 8 mortgages, are in default, why would only 14.7% be lost to foreclosure. No one has a crystal ball, but I would propose that the number of people in default and in foreclosure is higher for those who took out loans at the peak, than those who took out mortgages before it. No matter how you slice it, even under conservative estimates, we have at least as much to go as we’ve been and so far it’s been over three years. Add on the problems of robo-signing, numerous lawsuits, class actions, the beginning of criminal prosecutions, and an understaffed judiciary, and that number swells even more. Even the researches of the study admit that their estimate is "probably low balling the problem."

On a side note, the spokeswoman for the study noted, "It’s industry which has painted this picture of ‘oh, it’s the borrower’s fault,’ that the homeowner is behind on mortgage payments," "But they do that to deflect attention from the unbelievably irresponsible lending they were doing."

Some very interesting spin in this one from MERS spokesperson Janis Smith.

Her statement…

“The MERS System is not a legal system of record or a replacement for public land records. No interests are transferred on the system—they are only tracked,” Smith, Merscorp vice president of corporate communications, wrote in a response to emailed questions. “MERS does not have or maintain any document recording system, public or private, and does not do anything to compete with or supplant the public records for land located in the County records.”

“For two years, they’ve (the treasury department) known how abysmal servicers were performing, and decided to do nothing,” said Neil Barofsky, the former special inspector general for the Troubled Asset Relief Program, better known as TARP or the bank bailout, which provided the money for HAMP.

“It demonstrates that if you have a set of rules for which compliance is completely voluntary and no meaningful consequences for those who violate them, having all the audits and reviews in the world are not going to make a bit of difference,” he continued. “It’s why the program has been a colossal failure.”

see the rest of the article here:

I can hardly believe an economist said this:

"Right now you’re prolonging the agony. Do you want to take the Band-Aid off your arm slowly so you can feel each hair being pulled out by the root, or do you want to do it quickly and get it over with?" said Sean Snaith, an economist at the University of Central Florida. "For the state’s economy as a whole, it’s a positive development."

This is about so much more than just getting it over with; it’s about this still being the United States of America and in this country, our citizens are entitled to due process, an opportunity to be heard and a fair day in court. If someone is not paying their mortgage, not living up to their obligations to pay then under the terms of their agreement, they will lose their property but only to the party who can very simply prove they are entitled to it. In our country no one should be allowed to take your property unless they have the right to do so via agreement, assignment or in any other legal way! Certainly, our country does not stand for the idea that some bank or lender can take your property and obtain a judgment against you based on fraudulent documents and affidavits founded on lies!

Here’s the full quote: "You’re not talking about improperly stapling together two documents; you’re talking about systematic fraud in the system," said Neil Barofsky, the former special inspector general for the U.S. Treasury’s Troubled Asset Relief Program. "What this shows is that before the financial crisis, the banks were essentially lying to the purchasers of the mortgages about the quality."

The full article is here:

http://www.tampabay.com/news/business/banking/mortgage-foreclosure-crisis-cost-five-lenders-65-billion/1192022

From a recent Florida newspaper article:

"But at some point those foreclosure filings will make it to the market, said Jack McCabe, a Deerfield Beach real estate consultant.

"They are definitely going to hit this fall, and we will also see an increase in short sales in those cases where lenders are unable to get their paperwork in order," McCabe predicted.

Here are the highlights of the article linked below:”The Federal Housing Finance Agency suits, which are expected to be filed in the coming days in federal court, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, according to three individuals briefed on the matter.”

“The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.”

“Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers.”

FICO, the leading provider of consumer credit scores conducted a study and found:

All in all, we saw:

• The magnitude of FICO® Score impact is highly dependent on the starting score.