After mortgage settlement, MERS left out in the cold

[ProSense]

Alison Frankel

After mortgage settlement, MERS left out in the cold

One of the last stumbling blocks to the $25 billion nationwide mortgage settlement formally announced Thursday was the suit New York Attorney General Eric Schneiderman filed last week against Bank of America, JPMorgan Chase, Wells Fargo, and the Mortgage Electronic Registration Systems. As my tireless Reuters colleagues Aruna Viswanatha, Karen Freifeld, and Rick Rothacker reported Wednesday night, the five banks in the nationwide deal -- three of which are defendants in Schneiderman's MERS suit -- pressured Schneiderman to drop his case, arguing that the national settlement resolves some of the allegations the AG's suit raises. Schneiderman refused.

Indeed, when the settlement was announced this morning, claims against MERS were explicitly carved out; state attorneys general can go ahead with suits against the mortgage registry...That's significant because of a potentially multi-billion-dollar theory posited in MERS suits by the Massachusetts and Delaware AGs, as well as in a class action Bernstein Leibhard filed on behalf of Ohio county governments.

<...>

But according to the Massachusetts, Delaware, and New York AGs (and the Ohio class-action plaintiffs), that wasn't the only benefit MERS members enjoyed. They also allegedly avoided paying mortgage-transfer and recording fees to local governments. According to Schneiderman's Feb. 3 complaint, MERS touts those savings in promotional materials, boasting that its 3,000 members avoid paying fees of at least $30 for every loan registered in the MERS system. Every year, according to the N.Y. AG, MERS members shortchange local governments by hundreds of millions of dollars; a former MERS president quoted in Schneiderman's complaint said in a 2009 deposition that the total saving for MERS members was at least $2 billion in mortgage recording fees.

<...>

What's really interesting, though, is who will have to pony up if Smith is wrong and MERS is found to owe recording fees to local governments. According to Smith, MERS is indemnified by its members. So if there's a judgment against the registry, mortgage lenders are on the hook. That includes, of course, the banks that negotiated the $25 billion settlement. By agreeing to a deal that carves out an exception for claims against MERS, they've left themselves potentially liable for those claims.

http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=39047&terms=%40ReutersTopicCodes+CONTAINS+'ANV'

About the Settlement

<...>

BANKS ARE STILL ACCOUNTABLE FOR OTHER CLAIMS NOT COVERED BY THIS SETTLEMENT

This agreement holds the banks accountable for their wrongdoing on robo-signing and mortgage servicing. This settlement does not seek to hold them responsible for all their wrongs over the years and the agreement and its release preserve legal options for others to pursue. Specifically, this settlement does not:

• Release any criminal liability or grant any criminal immunity.
  
• Release any private claims by individuals or any class action claims.
  
• Release claims related to the securitization of mortgage backed securities that were at the heart of the financial crisis.
  
• Release claims against Mortgage Electronic Registration Systems or MERSCORP.
  
• Release any claims by a state that chooses not to sign the settlement.
  
• End state attorneys general investigations of Wall Street related to financial fraud or the financial crisis.

The agreement settles only some aspects of the banks conduct related to the financial crisis (foreclosure practices, loan servicing, and origination of loans) in return for the second largest state attorneys general recovery in history and direct relief to distressed borrowers while they can still use it.

State cases against the rating agencies and bid-rigging in the municipal bond market, for example, continue. Claims and investigations against MERS and how Wall Street packaged mortgages into securities also continue

- more -

http://nationalmortgagesettlement.com/about

[tridim]

1. More important details for the professional naysayers to ignore.

[nanabugg]

3. How true. I think many just try to find something to be against this President...the left as well.

[DisgustipatedinCA]

13. Who here is being paid to be a naysayer?

.

[MrCoffee]

2. So Biden's (Delaware) suit gets to go forward.

Excellent.

[quakerboy]

4. If it leave so much out there for future liability

Why did the banks agree to it? What do they gain?

[ProSense]

5. Did

"If it leave so much out there for future liability

Why did the banks agree to it? What do they gain?"

...they have a choice? That question would have applied to any settlement. As the piece indicates, they fought to get Schneiderman to drop his suit.

[quakerboy]

10. Unless this was unilaterally placed by the AG's

Yes they had a choice.

What did the banks gain? Why did they feel it was better to sign on to this deal than to go to court, or whatever other enforcement action the AG's could have taken if the banks had not agreed to the deal?

[ProSense]

11. Yes

"Yes they had a choice. "

...they had a choice: accept the deal or not.

That is, unless you meant the question to be: Why would they ever accept any deal?

[quakerboy]

22. Why would they accept any deal that did not benefit them?

[MrCoffee]

7. The banks are pissing themselves with glee right now

They gain indemnity for fraudulent foreclosures due to robosigning ($2,000 a pop is now what it costs banks to commit fraud).

They get paid $20 billion dollars to do what they were going to do anyway (write-downs and refis), and they get to strengthen their current holdings in the process. This is the big con in the whole scam. We're (investors, taxpayers) going to get screwed on this, you can absolutely take that to the bank.

They get to self-report their compliance with the settlement terms. I'm totally sure they'll be completely up-front and honest about it, too.

The banks are loving this deal.

[ProSense]

8. You

"They gain indemnity for fraudulent foreclosures due to robosigning ($2,000 a pop is now what it costs banks to commit fraud). "

...know that is nonsense. First because it is:

Pressed on whether a settlement that could result in as little as $2000 per injured homeowner could really be called a victory, Schneiderman said the fact that banks had not obtained any immunity on pre-crash conduct would ultimately yield the fruits of a major victory for the left.

http://www.democraticunderground.com/1002290014

Second, this is only the beginning.

[MrCoffee]

9. Schniederman deflected the question, not me.

Personally, I don't think a check for $2,000 after you've been illegally foreclosed on and evicted is anything remotely resembling a victory, and to imply that it is simply cruel to those affected.

[tridim]

12. Very few of these people can afford the legal representation to win jack-squat from their servicer

It would cost a hell of a lot more than $2000 to even begin the discovery phase.

I, on the other hand was legally (technically) foreclosed upon in 2010, but the servicer also used fraudulent documentation and refused to acknowledge my three attempts at a HAMP modification. The $2000 payout I will likely receive is MUCH better than the $0 I would receive had this settlement not happened.

Speak for yourself, not the victims of mortgage fraud.

[ProSense]

14. The

"It would cost a hell of a lot more than $2000 to even begin the discovery phase."

...settlement could have been three times as much, and it would still be criticized because it still would have been a drop in the bucket.

Getting the parties to agree to move forward is significant. Criminal charges and other accountability measures are still on the table.

[brentspeak]

16. "Criminal charges and other accountability measures are still on the table."

Not on the Obama administration and Eric Holder's federal investigation table, though. That much we do know.

[ProSense]

17. That's

"Criminal charges and other accountability measures are still on the table."

Not on the Obama administration and Eric Holder's federal investigation table, though. That much we do know.

...what you believe you know.

Schneiderman: http://election.democraticunderground.com/1002290014

[brentspeak]

19. Show us Eric Holder's federal investigation into the banks' criminal wrongdoing

Oh, that's right -- you can't.

Uh, oh.

[ProSense]

21. OK

Show us Eric Holder's federal investigation into the banks' criminal wrongdoing

Oh, that's right -- you can't.

Attorney General Holder Speaks at the Announcement of the Financial Fraud Enforcement Task Force’s New Residential Mortgage-Backed Securities Working Group
http://www.justice.gov/iso/opa/ag/speeches/2012/ag-speech-120127.html

Uh, looks like I can!

[tridim]

18. They are where they belong, with state AG's.

Every state's laws regarding foreclosure are different.

[brentspeak]

15. To which the rest of us would say:

Speak for yourself, not the majority of mortgage fraud victims.

[sabrina 1]

23. Wrong, attorneys will take these cases, those where people can prove

they were wrongfully foreclosed on, on a contingency basis. They do not need to pay until the case is settled. My friend is one of those, and the immunity for robo-signing may have a very negative effect on her case. We do not know yet, but her foreclosure was handled by the now infamous Stephen Baum in NY, and Wells Fargo and was totally illegal. I can assure you she would not be happy with even a $20,000 settlement. They took her home, she got nothing for it, she was rail-roaded out of her home, could not even get anyone to talk to her.

But all of a sudden the same Bank that would not talk to her one and a half years ago, is now calling HER. She sent all of her paperwork to Schneiderman and he contacted the Bank. I guess they are hoping she will settle, for a couple of thousand dollars, as they are assuming people are desperate. She is not desperate although some people may be which is the tragedy, and they may take whatever is offered because of that. Which is wrong. I hope all of them receive advice to go to an attorney who will, if they have a good case, not ask for money up front.

But I find your comment a bit disturbing frankly. As you are assuming because people are desperate they have no options. They do, and that is why they rushed to get this settlement. Because the people are way more informed now than they were two years ago and they are demanding justice as the shock of losing their homes wears off.

But this immunity re the robo-signing may adversely affect people like her who were wrongfully foreclosed on. We will have to wait and see what her attorney says. I sure hope she and others like her, do not get scammed again.

[brentspeak]

24. Your post deserves to be its own thread

[customerserviceguy]

20. They saved a bundle in nuisance fees

And as long as the bubble kept getting pumped up, nobody cared. Not the mortgage lenders, not the real estate agents and brokers, not the title companies writing mortgagees policies, and not the local recording people who made big fees from all the other real estate activity being fostered by the simplicity that MERS promised.

Once the whole thing blows up, then people start looking for others to blame and possibly recover from.

[mmonk]

6. Interesting on MERS.

[JDPriestly]

25. I'm wondering whether transfers of titles to those borrowers

who paid off their loans and received the transfer of title from MERS to themselves will have problems getting title insurance in the future.

Also, shouldn't the title insurance companies have blown the whistle on MERS long ago? How were they checking titles when houses were refinanced or sold over the years in which MERS was active?

Thanks for your post. Very interesting.

[MrCoffee]

26. The chain of title problem is HUGE. Huge isn't a big enough word.

No one is talking about how this settlement does nothing at all to addressing the chain of title problem.

[ms.smiler]

27. JDPriestly, I saw the Title problems coming and filed suit.

My story is here: http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=439x2412603

Homeowners who have a MERS Satisfaction of Mortgage in their Title history have a clouded Title. Of course homeowners who purchased a property with MERS documents in the Title history, regardless of foreclosure, do not have a valid Deed and don’t own the property. They do though have unsecured debt.

The Title companies were a player in this scheme since inception but I don’t think they’ll be willing to take the hit for the banksters when it hits the fan. I believe homeowners will find themselves with Title defects and Title insurance that won’t pay on the claims.

I agree with MrCoffee and I’ve stated on DU that we don’t have a foreclosure crisis in this country; we have a mortgage/Title crisis. The banksters and MERS have absolutely trashed our land records.

When I first started researching mortgage and foreclosure fraud about 3 ½ years ago, it didn’t take long to understand how securitized mortgages, MERS, and securities fraud on Wall Street meant my own property had gaps and breaks in the chain of Title. It made no sense to me to pay a loan for decades when I would not receive a valid Deed and have clear Title upon completion of my payments.

So, I filed a Quiet Title action. It will be up to each homeowner, one by one to file suit, obtain damages and clear their Titles to clean up the mess in our land records. Thankfully, such suits aren't terribly expensive.

If anyone happens by that is following my suit there is a small update. Yesterday the court decided that my Amended Complaint was perfectly fine over the Objection of the Defendant. The court has not yet addressed their many other Objections. We’ll see if the Defendant finally files an Answer to the Complaint. Trial remains scheduled for May.