4/11/12 Update - Jesse is holding a Webinar today at
11 AM est (due to tech difficulties it is scheduled for 1 PM est, now) - you can register at this site for it. He will discuss the FRAUD in mortgage papers.
https://www4.gotomeeting.com/register/559767031
Jesse Scott from
USmortgageauditors.com
has put together information about how MERS began and the fraud behind the Foreclosures that are happening. This information is immense. Please inform yourself and send this information along to everyone you know who may be in trouble with their mortgage.
FYI - I have made an arrangement with Jesse, for people to get a Free preliminary audit - to FIGHT a Fraudulent Foreclosure. Call Jesse at 1-866-358-2738 and reference this blog *sherriequestioningall* for it.
Jesse, has put this article together with many more articles about MERS for this blog. Jesse is a mortgage auditor and has stopped many foreclosures from happening. He has proven fraud in the court rooms of the U.S. and has been helping homeowners by auditing their mortgages.
This article may seem overwhelming, but please read it, understand the FRAUD of Wall Street.
No agreement between the banks and the AGs of the states can stop people from suing the banks from Fraudulent Foreclosure.
He has audited my mortgage. Also, it does not matter if you are in trouble with your mortgage or not.
You should know what Fraud is in your mortgage!
Here is the first of many articles that Jesse has put together for this blog.
In the late 1990’s and early 2000’s the dream to own a home was paramount to many Americans, particularly it was the agenda for the administration at the time to see to it that Americans of lower incomes achieve the American dream. That American dream has catapulted us into one of the worst nightmares that anyone with childhood ideology of the American dream would consider its worst nightmare.
The American Dream
So, the American dream, let’s talk about that…in the old days typically you borrowed money from a bank, but the bank understood the risk it took for someone to get that mortgage. Back then the mortgage could only be 25% - 30% of your income. That was the standard, and if you defaulted you would get a banker knocking on your door to find out what happened. That was our banking system, it was safe it was secure and it made sense. So you have it in the early 2000’s there were laws that were passed that allowed credit default swaps to be used in the open market, which is sort of a gaming system that allows you to bet on certain instruments. Keep in mind that this is nothing new, but something like a credit default swap is something that should have been governed and approved by the gaming commission. However the powers that be pushed it through under the ideas of the American dream and deregulation.
Deregulation and Credit Default Swaps
What did deregulation do? It allowed credit default swaps to bet against mortgage-backed securities What is a credit default swap, and how does that relate to mortgage backed securities? Wikipedia’s definition for credit default swap is an agreement that the seller of the CDS will compensate the buyer in the event of a loan default or other credit event. The buyer of the CDS makes a series of payments, the CDS fee (the spread to the seller) and a payoff if the loan defaults. Credit default swaps have existed since the 1990’s and increased by the end of the 2003. By the end of 2007 the outstanding CDS amount was 62.2 trillion falling to 26.3 trillion by midyear 2010, but reportedly 25.5 trillion in early 2012. These entities include sovereigns like Greece, corporate financial institutions and banks. If you look at this number in the early 1990’s to early 2003, there was a huge betting scheme against the system. Just to note this gives you an idea what is happening in Greece right now.
Securitization
To recap credit default swaps were used to bet against mortgage-backed securities. Mortgage-backed securities is where the securitization process took place. Mortgage-backed securities is an asset backed security that represents a claim on the cash flow from mortgaged loans through a process known as securitization. The process of securitization can be complicated, it is highly dependent on the jurisdiction where the process is conducted. #1 Mortgage loans (and notes) are purchased from banks and other lenders and assigned to a trust #2 the trust assembles these loans into collections or pools. #3, the trust securitizes the pools by using mortgage backed securities. These securitization trusts include government-sponsored enterprises and private entities, which may offer credit enhancement features to mitigate the risk of prepayment and default associated with these mortgage. The most common securitization trusts are fannie mae and freddy mac government sponsored enterprises, ginnie mae a us government sponsored enterprise backed by the full faith and credit of the US government. Guarantees its investors receive timely payments, but buys limited numbers of mortgage notes. Some private institutions such as investment banks or real estate mortgage investment conduits (REMIC) and the real estate investment trusts also securitized mortgages known as private label mortgage securities. Issuances of private-label mortgage-back securities increased dramatically from 2001 to 2007, and then ended abruptly in 2008 when real estate markets began to falter.
Ginnie Mae guaranteed the first passthrough security of an approved lender in 1968. In 1971 Freddie Mack issured its first mortgage passthrough called participation certificate, composed primarily of private mortgages. In 1981 Fannie Mae issued its first mortgage passthrough called mortgage-backed security. In 1983 Freddie Mack issued the first collateralized mortgage obligation. In 1960 the government enacted the Real Estate Investment Trust Act of 1960 to allow the creationof the real estate investment trust ( REIT). In 1977 Bank of America issued the first private lable passthrough, and in 1984 the government passed through and in 1984 the government passed the Secondary Mortgage Market Enhancement Act (SMMEA to improve the marketability of such securities) .
The tax Reform act of 1986 allowed the creation of the tax-free Real Estate Mortgage Investment Conduit (REMIC) special purpose vehicle for the express purpose of issuing passthroughs . The tax Reform Act significantly contributed the to savings and loan crises of the 1980s and 1990s that resulted in the Financial Insitutions Reform, Recovery and Enforcement Act of 1989 ( FIRREA), which dramatically changed the savings and loan industry and its federal regulation, encouraging loan origination.
So now that you have the history lets open the door to HELL. So how did this all play out?
INSTITUTIONAL FRAUD
I am sure you heard the phrase , it take money to make money right? Your right? So how can you lend as much money as you can to meet the demand . Lets pretend open up a bank and lets pretend I lend out a certain percentage of what my depositors money. Well lets assume I have 100 depositors who deposited $1,000. And lets say that I have had 100 people borrow $500.00 so the bank has lent out $50,000 from depositors money and of course its FDIC insured . Now lets say everyone in town found out that your bank lending standards are lenient to borrows who have less than perfect credit. Now that bank lends out another $50,000 of their depositors money. So now what? You know have put the bank at risk a huge risk, however you have more and more people wanting to borrow money. So what do you do? This is where the bank starts marketing investors to take on their risk in exchange for their receivables, in the form of a bond . Each investor takes on certain risk, depending on there risk tolerance. So now the bank can continue lending money freely minimizing their risk. This is the risk that pension funds, corporations took due to the credit rating that was given by a credit agency. Keep in mind pension funds could only invest in triple A rating investments. This is where credit default swaps played a major role for the risky borrower. This process has happen over and over again, putting our country and financial system at a huge risk. This is why you would see companies like AIG get bailed out from the government due to the weight of the defaults was more surmountable than viewed before insuring. Investors and insurers are suing those who have put these instruments in place. And they are winning.
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS
It has been widely reported that MERS1 has broken or severely diluted2 the chain of title
for real property records, but what does this mean? To understand the importance of the chain of
title to a property and the complexities of land boundaries we need to look no further than the
advice given to practicing attorneys.
“To properly evaluate a case, counsel and survey experts often must examine chains of
title for all properties subject to the dispute. In the case of a boundary dispute, it may be
necessary to search the chain of title back to a patent to determine paramount title or to
locate true boundaries.” 3
As is readily apparent, a broken chain of title will have adverse effects on adjoining
properties and in many instances the boundaries of properties within an entire neighborhood.
Attorneys are advised to “seriously consider not taking the case or withdrawing from it.” If
attorneys are advised to “seriously consider” withdrawing, how will the common victim of
MERS (by proxy) get relief?
The complexity of the problem is obvious. As lenders and title insurers pass
responsibility back and forth, property owners who purchased a foreclosed property that had
been in the MERS system (and now have broken chains of title) and their neighbors will be
forced into expensive and complex litigation in order to determine their boundaries.
W ho will be financially responsible for the litigation to quiet title?
1 When referencing MERS in this report, the author refers to MERSCORP, Inc. and its 5000 plus members and the
Mortgage Electronic Registration Systems, Inc. (a subsidiary of MERSCORP, Inc.).
2 The terms broken and diluted are used interchangeably in this White Paper. Chains of title are “diluted” when the
historical indexing systems and proper public recordings are not utilized (along with back dating and forging of legal
documents , ie. robo-signing) making a chain of title impractical to recreate.
3
Continuing Education of the Bar (CEB), California Easements and Boundaries, Law and Litigation (July 2010) §§
10,11, 10.32, pgs. 471-472, 489-490. According to the Checklist: Dos and Don’ts in Boundary Location Dispute
contained in this treatise, attorneys are advised to:
Ø Remind clients that boundary location disputes are usually expensive to litigate (a client will
sometimes fight to the last dollar).
Ø Do not enter an appearance in any boundary litigation unless counsel is confident about handling
both the emotional and legal issues.
Ø If there is continued doubt about the boundary location, research, read, and review again; usually
the answer is buried somewhere [in the chain of title].
Ø If enormous doubt persists on location or validity of the boundary, seriously consider not taking
the case or withdrawing from it.
Thanks to the Mortgage Electronic Registry System’s (“MERS”) failure to accurately
complete and/or publically record property conveyances in the frenzy of banks securitizing home
loans and in subsequent foreclosure actions,1 neighbors to a foreclosed property (with a
sequential conveyance) as well as the foreclosed property itself will have unclear boundaries and
clouded/unmarketable titles making it difficult, if not impossible, for these homeowners to sell
their properties and for subsequent purchasers to obtain title insurance on that property.2 MERS
now keeps electronic records on about half of the home mortgages in the United States.3
Many problems with MERS and the home loan securitization process have been reported
in print media (countless articles), in movies (the Inside Job) and on television (most recently on
the April 3, 2011 edition of 60 Minutes). Academic professors such as Christopher L. Peterson
of the University of Utah, S.J. Quincy College of Law, have written extensively on what is
wrong with MERS.4 Courts have ruled against MERS’ standing to foreclose and have criticized
the MERS model as being flawed, wholly inaccurate and not allowing homeowners to fight
foreclosures because it shields the true owner of a mortgage in public records.5 States Attorneys’
General and federal bank regulators6 are investigating MERS practices including fraudulently
robo-signing and back dating missing documents. A few County Registrars of Deeds are
claiming that they are owed millions of dollars in lost revenue from mortgage assignment
1 “For banks, the local government recorders weren’t speedy enough especially as the mortgage industry moved into
the business of securitization, or bundling and selling mortgages.” Marian Wang, Backgrounder: A Closer Look at
MERS, the Industry’s Controversial Mortgage Clearinghouse, ProPublica (March 7, 2011).
2 As a preliminary matter, an understanding of the terms attached hereto in E xhibit J are essential understanding
this White Paper.
3 Marian Wang, Backgrounder: A Closer Look at MERS, the Industry’s Controversial Mortgage Clearinghouse,
ProPublica (March 7, 2011).
4
System, University of Cincinnati Law Review (Summer 2010) Vol. 78, No. 4. See also Written Testimony of
Christopher L. Peterson, Foreclosed Justice: Cause and Effects of the Foreclosure Crisis, United States House of
Representatives Committee on the Judiciary (December 2, 2010).
5
As an example, see In re Agard (United States Bankruptcy Court, Eastern District of New York, February 10,
2011) Case No. 8-10-77338, Doc. 41 where the court held that MERS lacked the legal standing to transfer the
ownership of mortgages on behalf of banks. In his opinion Judge Robert E. Grossman stated “This court does not
accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country,
that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.”
6 Including the Office of the Comptroller of Currency, the Federal Reserve, the Federal Deposit Insurance
Corporation and the Federal Housing Finance Agency. Marian Wang, Backgrounder: A Closer Look at MERS, the
Industry’s Controversial Mortgage Clearinghouse, ProPublica (March 7, 2011). See also Nick Timiraos, Critical
Signs in Foreclosure Talks, The Wall Street Journal (April 12, 2011) (giving status of settlement with states’
attorneys’ general and federal regulators and lenders).
transfers that were not recorded because MERS was listed as the mortgagee in public landrecords. 7
What none of the “experts,” reporters, or courts are analyzing (in specific terms) is the
destructive effect that the MERS system will have on 400 years of recorded property rights in the
United States. Most articles mention the lost chain of title but stop short of explaining what this
means, or how it will affect people that may not have a mortgage, much less a mortgage in the
MERS system. These problems deal with ramifications “on the ground” for determining (1)
property boundaries (senior and junior property rights) and (2) proof of ownership in order to
obtain title insurance. As shown below, these MERS created problems will affect both
foreclosed properties and all of their neighboring properties amounting to much larger and more
costly problems than have been previously addressed by the media, lawmakers, courts or any
settlements with MERS.
Because MERS is utilized for transferring title and these transfers are not publicly
recorded, MERS does not comply with race/notice8 statutes and senior and junior property rights
cannot be determined when there is a discrepancy in property boundaries. In fact, MERS has
undone hundreds of years of recorded property rights leaving property owners to litigate their
boundaries. This assertion sounds extreme; however, it is absolutely true. Consider these
questions:
1. What happens if the chain of title cannot be determined
because there are no accurate and publicly recorded deeds/title
documents showing chain of title to determine senior and
junior rights designations for boundary determinations between
neighbors?
2. What happens when you destroy the property rights and
records of homeowners who never defaulted on their
mortgages and are now forced to litigate boundary disputes and
property rights?
3. Why did the title insurance companies repeatedly refuse to
underwrite foreclosures if land title was stable?
7
See article by Austin Kilgore, Recorder Wants to Close Account at Bank of America to Protest MERS, National
Mortgage News (April 11, 2011) Section: NEWS, pg. 8, Vol. 35, No. 28 regarding Registrar of Deeds in South
Essex District of Massachusetts.
“MERS saved banks time and money by providing a private, electronic alternative to the public system used by
local government recorders. By using the MERS registry, they largely avoided the recording fees.” Marian Wang,
Backgrounder: A Closer Look at MERS, the Industry’s Controversial Mortgage Clearinghouse, ProPublica (March
7, 2011).
8
For the purposes of this article, we are not distinguishing the differences between race, notice and race/notice.
Race/notice is meant to encompass all designations.
These are the exact problems that MERS has created – the bigger problems that no onehas explained – the elephant in the room. In a rush to buy and sell mortgages as quickly as
possible, lenders have also destroyed and/or severely diluted over 400 years of land title records
dating back to the colonial United States (back to 1850 in California). This destruction/dilution
means that litigation is the only way to resolve boundary disputes. We will never be able to
determine senior (superior) and junior (inferior) property rights designations because no one will
know which parcels were conveyed first in time and to whom. We are already seeing these
problems with the MERS system dealing with widely publicized mortgage foreclosures and
lenders’ inability to show that they own title to property at the time of foreclosure.
The broken chain of title problem may have never been a problem if not for the millions
of foreclosed properties. Because mortgage lenders, via MERS, have not followed title statutes
specific to their respective states, they have also negated the rights created by race/notice
statutes. Because these race/notice statutes were violated, a property owner (who may not even
be in the MERS mortgage system) may have lost his property rights. Stated another way, if the
chain of title is lost for a given property, any property that shares a common property boundary
line, may have lost its superior rights and that owner will be required to litigate if the property’s
boundary is questioned. In essence, “Zombie Loans” are created by MERS. These Zombie
Loans never die (they keep coming back to life), they mutate and they multiply.
Furthermore, with clouded titles, subsequent purchasers of these properties will not be
able to obtain title insurance without providing indemnification via a warranty deed or
comparable document, and, without title insurance, these purchasers will not be able to obtain
financing on the properties.
T wo E xamples
1. A neighbor’s property sale (with disclosure issues) created
duress for an 83 year old widower trying to settle his estate. There
was confusion as to the property line location in the magnitude of
9’ feet. It also cost him approximately $10,000 (even at a
discounted rate) and 18 months of time. In this case, the chain of
title was broken in 1968 in connection with (1) a foreclosure; (2) a
subsequent bankruptcy; and (3) a transfer to a now defunct savings
and loan. The title insurance company recognized the lost chain of
title problem when it issued a title insurance policy and wrote an
exception to coverage for that problem.9 The self-employed
architect owner (neighbor) chose not to sue for title insurance
coverage due to his costs in attorneys’ fees in a downturned
economy. See E xhibit A, detailed description of this case.
9 Title insurance companies only paid claims equivalent to 5% of premiums collected in loss and loss adjustments in
2005. This 5% payout is contrasted to a 73% payout of premiums collected toward property/casualty claims during
this same timeframe. United States Government Accountability Office, GAO-07-401 (April 2007), pg. 9.
2. A land surveyor, presumably trained in title work, chose
not to examine a chain of title in the course of a survey. This
litigation resulted in a 2010 settlement of approximately $500,000
(plus an additional several hundred thousand dollars in attorneys’
fees) wherein Mr. Woolley served as an expert witness. This
litigation resulted from not properly examining rights established
by reviewing available chain of title documents. A broken chain of
title removes the option of determining the rights and this case
demonstrates costs and ramifications.
The MERS system has created an environment in which tens of thousands of titles have
been lost or diluted in a sea of other MERS transactions and may take a hundred years to fix,
while forcing innocent homeowners to litigate in order to reclaim their property rights. This
article will:
1. Briefly discuss the robo-signer scandal, the problem with the MERS
system and recent court cases involving MERS;
2. Summarize the history of how land was surveyed and divided in the
Western United States;
3. Explain how junior and senior property rights are determined in the face of
a boundary dispute;
4. Describe exactly how MERS has destroyed or severely diluted chains of
title for boundary disputes between foreclosed properties’ subsequent
owners and all of their neighbors;
5. Analyze the resulting difficulty these subsequent homeowners and their
neighbors will experience when attempting to sell their properties (with
clouded titles) when purchasers will not be able to obtain title insurance
(without seller indemnity) and financing.
I have another article Jesse put together on the Robosigning Fraud, which I will put on tomorrow. This way there is time to digest the above information.
Jesse is doing a Webinar - to help people understand the FRAUD of the Banks: Contact him for the link to it.
MORTGAGE FRAUD INVESTIGATORS FOR WRONGFUL AND ILLEGAL FORECLOSURES
The purpose of this webinar is to educate Home Owners who need answers. There is a lot of talk out there, and we want to start the conversation here to help. And its FREE.
USMORTGAGEAUDITORS.COM (MORTGAG FRAUD INVESTIGATORS )
Wed, Apr 25, 2012 11:00 AM - 12:00 PM EDT
Once registered you will receive an email confirming your registration
with information you need to join the Webinar.
System Requirements
PC-based attendees
Required: Windows® 7, Vista, XP or 2003 Server
Macintosh®-based attendees
Required: Mac OS® X 10.5 or newer
