Homeowners at risk

By Bob Marshall

No one would expect a convenience store clerk to pay off a $5 lottery ticket without the patron producing the lottery stub. But big Wall Street banks operating in Virginia want to walk away with multimillion dollar homes without having to present proof they own or are the assignee of the mortgages that would entitle them to foreclose.

This is not simply a problem that affects upside-down mortgages, out of work Virginians or "dead beats." The lack of proof of legal title to a home potentially affects up to 65 million mortgage holders in the U.S., even if they never defaulted on mortgage payments - in short, nearly everyone who purchased a home since 1997 whose mortgage was part of a mortgage-backed security investment.

This problem originated in 1995 when the big Wall Street banks decided they could ignore the land title recordation system, which dates back to 1624 in Virginia, a mere five years after the establishment of the first General Assembly.

With no legislative or judicial authority, the Big Banks created the Mortgage Electronic Registration System, or MERS, as its own system of land records, bypassing the clerks of the courts. This helped the banks avoid recording fees, and in some cases recordation taxes, which in Virginia are 25 cents per $100 on the mortgage. When the initial sale or refinance of a home was recorded with county clerks, MERS was recorded as the beneficiary of the note or nominee.

As individual mortgages within a larger mortgage-backed security are sold multiple times, no one at MERS thought it necessary to record subsequent sales with county clerks because MERS claimed it had legal title for the mortgage notes registered in its database.

MERS Corporation is headquartered in Northern Virginia. It was formed by all the major Wall Street banks, Mortgage Bankers Association, Fannie Mae, Freddie Mac, etc. MERS claims its legal counsel said everything it was doing was on the up and up. Right now 50 state attorneys general question that.

On Oct. 21, I was contacted by a constituent who was having difficulty learning to whom he had to pay his mortgage. As a result of my inquiry into the operation of MERS, I learned disturbing facts. Shortly thereafter I wrote to Attorney General Ken Cuccinelli for his opinion on several questions.

I contacted MERS Nov. 16 and asked it to provide me with copies of the state attorney general's opinions affirming that what it was doing was legal. I also asked why it supported a change in Minnesota law to allow MERS to foreclose there if what it had been doing had been legal all along.

Karmela Lejarde of MERS wrote me the next day, "We will respond as soon as possible." I am still waiting for an answer.

So far, seven state Supreme Courts or Courts of Appeals have ruled that MERS lacks legal authority to proceed in a foreclosure.

On Jan. 7, the Supreme Court of Massachusetts threw out Wells Fargo's and US Bancorp's efforts to foreclose on homes because the banks could not produce the necessary documents showing they held the mortgages. Massachusetts is similar to Virginia in that foreclosures do not need courtroom approval. Both states are non-judicial foreclosure states.

Judge Robert J. Cordy of Massachusetts summarized the crippled state of America's housing market: "What is surprising about these cases is not the statement of principles articulated by the court regarding title law and the law of foreclosure... but rather the utter carelessness with which the plaintiff banks documented the titles to their assets."

"The plaintiff banks... failed to prove that the underlying assignments of the mortgages that they allege (and would have) entitled them to foreclose ever existed in any legally cognizable form before they exercised the power of sale that accompanies those assignments."

The MERS private banking system of recording mortgages with no public oversight or accountability is a failure. It now threatens tens of millions of American families who pay their bills on time with loss of legal title to their homes.

Wall Street bankers have shown little concern for homeowners or taxpayers. A Northern Virginia attorney was confronted with three banks within 30 days, each claiming to be the mortgage holder of the same home during a foreclosure.

In order to secure proof of title for Virginia homeowners, I drafted HB 1506, the Home Ownership and Title Protection Act, for the current General Assembly.

My bill requires that all assignments of new mortgage holders shall be filed with county clerks so homeowners can be assured of clear title to sell a home or pass it on to children. It provides penalties for perjury and allows foreclosures to proceed after 45 days notice, not the present 15.

Bob Marshall, a Republican from Prince William County, serves in the Virginia House of Delegates.