Nobody’s Home
It’s like a page out of Kafka, so let’s borrow one of his characters– the persecuted protagonist from The Trial.
Josef K. could have qualified for a good, low cost fixed-rate mortgage on his new house, but he was steered by a mortgage broker into a no-doc variable rate subprime loan on which both the broker and the bank made huge fees.
Then the mortgage was bundled up with others and forwarded to an investment bank, where it became part of a securitized package of loans in five tranches, most of them rated triple-A and sold on to unnamed investors in four different countries.
Now the property has declined in value and Josef can’t keep up with the exorbitant payments, so his house has gone into foreclosure.
Question: Who owns the house?
And who owns the loan? Exactly who is doing the foreclosing?
Answer: Nobody knows.
Like 60 million other mortgages, Josef’s was funneled into MERS, which stands for Mortgage Electronic Registration Systems – a company that tracks mortgages and their change of ownership electronically. And it’s MERS that filed for foreclosure.
But when Josef and then his Advocate went to the bank and then to MERS to negotiate new terms, no owner was to be found. The mortgage was in MERS’s name, and you can’t negotiate with an acronym or an algorithm.
Yes, it’s Kafkaesque creepy, unfathomable, arbitrary outrage — but let’s try changing the ending.
A year ago, a heroic U.S. District Court judge in Cleveland, Christopher Boyko, looked at 14 foreclosure proceedings like Josef’s and said no. In that case it was Deutsche Bank that was trying to foreclose, and the judge said the bankers would have to prove that they in fact owned the homes and the titles or the note and the right to foreclose – and they couldn’t, because ownership had been sliced and diced in the securitization process until they had lost track – and left it to MERS.
Other judges across the country began to follow Judge Boyko’s example – at least those who didn’t belong to the same country clubs as their local bankers.
Now the Kansas Supreme Court has taken the next step – and it’s a big one.
The court ruled that MERS has no standing to bring an action for foreclosure. And it gets better – neither does the bank that made the loan.
The legal reasons get technical – titles, trustees, deeds of trust — but the fact is that when the subprime mortgages were bundled and turned into securities, the original bank was paid in full for the loan – so that bank certainly has no claim.
And neither MERS nor the faceless investors for whom it’s been tracking the mortgages can show a written contract signed by Josef K and promising to pay their claim. Only the bank had that, and the bank’s been paid.
It’s all so delicious, one has to assume it will eventually be reversed by the five lock-step right wingers on the Supreme Court or by the bank industry lobbyists who own Congress.
But in the meantime, 60 million homeowners and their lawyers have just been handed a bludgeon to use on the heads of the rapacious bankers and Wall Street manipulators who have been treating Josef K like a criminal while stealing his money.
So dig up Orson Welles.
Tell him that last scene in his film (and Kafka’s novel) will have to be rewritten. Instead of being executed for unspecified allegations by nameless accusers, now Anthony Perkins as Josef K marries Romy Schneider and they move to a 12-bedroom house in Naples, Florida.
——-
Note: the original legal reporting on this story was done (brilliantly) by Ellen Brown for OpEd News