Post by CB
By Greg Robb, MarketWatch
WASHINGTON (MarketWatch) ? The U.S. government ran a budget deficit of
about $58 billion in May, down more than 50% from a year ago, mostly due
to lower estimates for the cost of the bank-bailout plan, data showed
A bank-bailout plan that was enacted during the Bush administration.
Caused by Democrats giving unqualified blacks homes they couldn't afford.
The usual racist garbage.
You Libs Progressively use the race card to intimidate people into
sitting down. It's what Barney Fwank used to get banks to loan money
to under qualified people which lead to Goldman Sachs bundling high
risk mortgages into securities and sold on Wall Street. It was a
ponzi scheme in which Barney Frank, Chris Dodd, Jamie Gorelick,
Maxine Waters, Franklin Raines, Chuck Shumer, Gregory Meeks and The
Congressional Black Caucus all participated in.
DemocRATs blocked all attempts at regulating and auditing Fanny and
Bill Clinton admits Dims fought against finding the RATs in Fanny and
Freddy 5:50 into the clip.
They'd give them selves $500K bonuses on a $500K salary!
No one went to jail in Congress, at Freddy or Fannie, not in Goldman
Sachs. Dims think the tax payers are suckers to leech off of.
When 47% of America pay no taxes you can count on them not paying
attention to what Barney Fwank is up to...no good.
MERS, a creation of the free market to circumvent law, to defraud,
cheat on taxes, maybe the un-dueing of wall street:)the housing bubble
was solely a private sector affair to defraud, engage in criminal
activity, and racketeering
Homeowners' Rebellion: Recent Rulings Could Shield 62 Million Homes
Thursday 19 August 2010
by: Ellen Brown, t r u t h o u t | News Analysis
Over 62 million mortgages are now held in the name of MERS, an
electronic recording system devised by and for the convenience of the
mortgage industry. A California bankruptcy court, following landmark
cases in other jurisdictions, recently held that this electronic
shortcut breaks the chain of title, voiding foreclosure. The logical
result could be 62 million homes that are foreclosure proof.
In a Newsweek article a year ago called "Too Big to Jail: Why
Prosecutors Won't Hit Wall Street Hard in the Subprime Scandal,"
Michael Hirsch wrote that we were unlikely to see trials and
convictions like those in the savings and loan scandals of the 1980s,
because fraud and blame have been so widespread that there is no one
to single out and jail. Said Hirsch:
"The sad irony is that in pleading collective guilt, most of Wall
Street will escape whipping for a scheme that makes Bernie Madoff's
shenanigans look like pickpocketing. At the crest of the real-estate
bubble, fraud was systemic and Wall Street had essentially gone into
the loan-sharking business."
"Unfortunately," he added, "prosecution of fraud is the only way
you're going to get reform on Wall Street."
Sure enough, a year later we got a banking reform bill that was so
watered down that Wall Street got nearly everything it wanted. The too-
big-to-fails, rather than being whittled down to size, have grown even
bigger, circumventing antitrust laws; and they are being allowed to
carry on pretty much as before. The Federal Reserve, rather than being
called on the carpet, has been given even more power; and the Consumer
Protection Agency - the main part of the bill with teeth - has been
put under the Fed's watchful eye. Congress and the Justice Department
seem to have bowed out, leaving no one to hold the finance industry to
But the best laid plans even of Wall Street can sometimes go awry. In
an ironic twist, the industry may wind up tripping over its own
Achilles heel, the Mortgage Electronic Registration Systems or MERS.
An online computer software program for tracking mortgage ownership
and rights, MERS is, according to its web site, "an innovative process
that simplifies the way mortgage ownership and servicing rights are
originated, sold and tracked. Created by the real estate finance
industry, MERS eliminates the need to prepare and record assignments
when trading residential and commercial mortgage loans." Or as Karl
Denninger puts it, "MERS own website claims that it exists for the
purpose of circumventing assignments and documenting ownership!"
MERS was developed in the early 1990s by a number of financial
entities, including Bank of America, Countrywide, Fannie Mae, and
Freddie Mac, allegedly to allow consumers to pay less for mortgage
loans. That did not actually happen, but what MERS did allow was the
securitization and shuffling around of mortgages behind a veil of
anonymity. The result was not only to cheat local governments out of
their recording fees, but to defeat the purpose of the recording laws,
which was to guarantee purchasers clean title. Worse, MERS facilitated
an explosion of predatory lending in which lenders could not be held
to account because they could not be identified, either by the preyed-
upon borrowers or by the investors seduced into buying bundles of
worthless mortgages. As alleged in a Nevada class action called Lopez
v. Executive Trustee Services, et al.:
"Before MERS, it would not have been possible for mortgages with no
market value ... to be sold at a profit or collateralized and sold as
mortgage-backed securities. Before MERS, it would not have been
possible for the Defendant banks and AIG to conceal from government
regulators the extent of risk of financial losses those entities faced
from the predatory origination of residential loans and the fraudulent
re-sale and securitization of those otherwise non-marketable loans.
Before MERS, the actual beneficiary of every Deed of Trust on every
parcel in the United States and the State of Nevada could be readily
ascertained by merely reviewing the public records at the local
recorder's office where documents reflecting any ownership interest in
real property are kept.…
"After MERS, ... the servicing rights were transferred after the
origination of the loan to an entity so large that communication with
the servicer became difficult if not impossible... . The servicer was
interested in only one thing - making a profit from the foreclosure of
the borrower's residence - so that the entire predatory cycle of
fraudulent origination, resale and securitization of yet another
predatory loan could occur again. This is the legacy of MERS and the
entire scheme was predicated upon the fraudulent designation of MERS
as the 'beneficiary' under millions of deeds of trust in Nevada and
MERS now holds over 62 million mortgages in its name, including over
half of all new US residential mortgage loans. But courts are
increasingly ruling that MERS is merely a nominee, without standing to
foreclose on the collateral that makes up a major portion of the
portfolios of some very large banks. It seems the banks claiming to be
the real parties in interest may have short circuited themselves out
of the chain of title entitling them to the collateral.
Technicality or Fatal Flaw?
To foreclose on real property, the plaintiff must be able to produce a
promissory note or assignment establishing title. Early cases focused
on MERS' inability to produce such a note, but most courts continued
to consider the note a mere technicality and ignored it. Landmark
newer opinions, however, stress that this defect is not just a
procedural. but a substantive failure, one that is fatal to the
The latest of these decisions came down in California on May 20, 2010,
in a bankruptcy case called In re Walker, Case no. 10-21656-E-11. The
court held that MERS could not foreclose because it was a mere nominee
and that as a result plaintiff Citibank could not collect on its
claim. The judge opined:
"Since no evidence of MERS' ownership of the underlying note has been
offered and other courts have concluded that MERS does not own the
underlying notes, this court is convinced that MERS had no interest it
could transfer to Citibank. Since MERS did not own the underlying
note, it could not transfer the beneficial interest of the Deed of
Trust to another. Any attempt to transfer the beneficial interest of a
trust deed without ownership of the underlying note is void under
In support, the judge cited In re Vargas (California Bankruptcy
Court), Landmark v. Kesler (Kansas Supreme Court), LaSalle Bank v.
Lamy (a New York case) and In re Foreclosure Cases (the "Boyko"
decision from Ohio Federal Court). (For more on these earlier cases,
see here, here and here.) The court concluded:
"Since the claimant, Citibank, has not established that it is the
owner of the promissory note secured by the trust deed, Citibank is
unable to assert a claim for payment in this case."
The broad impact the case could have on California foreclosures is
suggested by attorney Jeff Barnes, who writes:
"This opinion ... serves as a legal basis to challenge any foreclosure
in California based on a MERS assignment; to seek to void any MERS
assignment of the Deed of Trust or the note to a third party for
purposes of foreclosure; and should be sufficient for a borrower to
not only obtain a TRO [temporary restraining order] against a
Trustee's Sale, but also a Preliminary Injunction barring any sale
pending any litigation filed by the borrower challenging a foreclosure
based on a MERS assignment."
While not binding on courts in other jurisdictions, the ruling could
serve as persuasive precedent there as well, because the court cited
nonbankruptcy cases related to the lack of authority of MERS, and
because the opinion is consistent with prior rulings in Idaho and
Nevada Bankruptcy courts on the same issue.
RICO and Fraud Charges
Other suits go beyond merely challenging title to alleging criminal
activity. On July 26, 2010, a class action was filed in Florida
seeking relief against MERS and an associated legal firm for
racketeering and mail fraud. It alleges that the defendants used "the
artifice of MERS to sabotage the judicial process to the detriment of
borrowers"; that "to perpetuate the scheme, MERS was and is used in a
way so that the average consumer, or even legal professional, can
never determine who or what was or is ultimately receiving the
benefits of any mortgage payments"; that the scheme depended on "the
MERS artifice and the ability to generate any necessary 'assignment'
which flowed from it"; and that "by engaging in a pattern of
racketeering activity, specifically 'mail or wire fraud,' the
Defendants ... participated in a criminal enterprise affecting
Local governments deprived of filing fees may also be getting into the
act, at least through representatives suing on their behalf. Qui tam
actions allow for a private party or "whistle blower" to bring suit on
behalf of the government for a past or present fraud on it. In State
of California ex rel. Barrett R. Bates, filed May 10, 2010, the
plaintiff qui tam sued on behalf of a long list of local governments
in California against MERS and a number of lenders, including Bank of
America, JPMorgan Chase and Wells Fargo, for "wrongfully bypass[ing]
the counties' recording requirements; divest[ing] the borrowers of the
right to know who owned the promissory note ...; and record[ing] false
documents to initiate and pursue non-judicial foreclosures and to
otherwise decrease or avoid payment of fees to the Counties and the
Cities where the real estate is located." The complaint notes that
"MERS claims to have 'saved' at least $2.4 billion dollars in
recording costs," meaning it has helped avoid billions of dollars in
fees otherwise accruing to local governments. The plaintiff sues for
treble damages for all recording fees not paid during the past ten
years and for civil penalties of between $5,000 and $10,000 for each
unpaid or underpaid recording fee and each false document recorded
during that period, potentially a hefty sum. Similar suits have been
filed by the same plaintiff qui tam in Nevada and Tennessee.
Axing the Bankers' Money Tree
Most courts continue to look the other way on MERS' lack of standing
to sue, but the argument has picked up enough steam to consider the
rather stunning implications. If MERS is not the title holder of
properties held in its name, the chain of title has been broken and no
one may have standing to sue. In MERS v. Nebraska Department of
Banking and Finance, MERS insisted that it had no actionable interest
in title, and the court agreed.
An August 2010 article in Mother Jones titled "Fannie and Freddie's
Foreclosure Barons" exposes a widespread practice of "foreclosure
mills" in backdating assignments after foreclosures have been filed.
Not only is this perjury, a prosecutable offense, but if MERS was
never the title holder, there is nothing to assign. The defaulting
homeowners could wind up with free and clear title.
In Florida, Jacksonville Area Legal Aid attorney April Charney has
been using the missing-note argument ever since she first identified
that weakness in the lenders' case in 2004. Five years later, she
says, some of those homeowners are still in their homes. According to
a Huffington Post article titled "'Produce the Note' Movement Helps
"Because of the missing ownership documentation, Charney is now
starting to file quiet title actions, hoping to get her homeowner
clients full title to their homes (a quiet title action 'quiets' all
other claims). Charney says she's helped thousands of homeowners delay
or prevent foreclosure and trained thousands of lawyers across the
country on how to protect homeowners and battle in court."
If courts overwhelmed with foreclosures decide to take up the cause,
the result could be millions of struggling homeowners with the banks
off their backs and millions of homes no longer on the books of some
too-big-to-fail banks. Without those assets, the banks could again be
looking at bankruptcy, as was pointed out in a San Francisco Chronicle
article by attorney Sean Olender following the October 2007 Boyko
"The ticking time bomb in the US banking system is not resetting
subprime mortgage rates. The real problem is the contractual ability
of investors in mortgage bonds to require banks to buy back the loans
at face value if there was fraud in the origination process.
"... The loans at issue dwarf the capital available at the largest US
banks combined and investor lawsuits would raise stunning liability
sufficient to cause even the largest US banks to fail...."
Nationalization of these giant banks might be the next logical step -
a step that some commentators said should have been taken in the first
place. When the banking system of Sweden collapsed following a housing
bubble in the 1990s, nationalization of the banks worked out very well
for that country.
The Swedish banks were largely privatized again when they got back on
their feet, but it might be a good idea to keep some banks as publicly-
owned entities, on the model of the Commonwealth Bank of Australia.
For most of the 20th century, it served as a "people's bank," making
low interest loans to consumers and businesses through branches all
over the country.
With the strengthened position of Wall Street following the 2008
bailout and the tepid 2010 banking reform bill, the US is far from
nationalizing its mega-banks now. But a committed homeowner movement
to tear off the predatory mask called MERS could yet turn the tide.
While courts are not likely to let 62 million homeowners off scot-
free, the defect in title created by MERS could give them significant
new leverage at the bargaining table.