A bank. But which bank? Recently, every week has to have it's own crisis. And this week is no different. However, this one thirteen years in the making, may take years to sort out and settle. Trillions of dollars in home loans and ownership rights are now at risk.
In the rush to relax home lending standards years ago and to push our country toward the American Dream that "everyone must own a home", a new infection was introduced that would make Big Bank pooled mortgages act like the living dead, and Wall Streeters look like Zombies. "Mr. Home Loan, meet MERS". The Mortgage Electronic Registry System (MERS) was created to electronically register, transfer and track home mortgages. Big Banks and mortgage sweatshops made, packaged, and sold mortgages by the thousands weekly. Countless investors from Wall Street hedge funds to insurance companies to foreign governments, hot cash in hand and looking for big profits gobbled them up. Pass the cash, and here is your list of home loan serial numbers you now own. That's it. No paper, no documents changed hands.
MERS went about its merry way, adding electronic tracking to this home and that one, marveling at its efficiency. There was only one problem; one flaw. MERS is an electronic registry not a real paper filing cabinet full of countless real loan papers. It was never an intention of the MERS creators to file and handle the original loan documents. No one thought anyone would ever ask about the real paper. Enter one Borrower in bankruptcy court, asking one question: "Mr. Big Bank mortgage investor, prove that you own my home loan by furnishing my original loan documents to the court." Big Banks and their thousands of investors cannot. Community banks who have always kept their mortgages, at least their servicing rights, can. Community folks loaning money in their community. Real people handle the registry, not MERS. Now, where did all those Big Bank original mortgage documents go?
You see, the law as I understand it is you have to prove the chain of title, no matter how many times a loan is re-sold. If you can't prove ownership of title or of the loan, then you don't have real legal standing to foreclose. Wow! 4 million people just got a breather. Add another 6 months to a year to the ride. Will all those people get to keep their houses with no more payments? Of course not. It's a systemic delay that will slow our recovery in housing and the recovery of our overall economy. Probably, by two more years.
There are 62 million home loans with a MERS tracking number assigned to each. It's like a social security number for a home loan. Some say, if your home was securitized by a big bank or mortgage company into one of the thousands of loan pools and sold, you may not get full clear, clean title until this is all settled. It may take years. People buying discounted and foreclosed homes may have the same risk of someone knocking at their door some day and saying, "I have an active loan on this property...".
Here's the bottom line. If you don't pay, you will eventually lose your home. Putting off the pain until another day doesn't change that. I personally have talked to people that have played the system and not made a house payment for 18 months on a Big Bank mortgage.
"What's your outcome, long term?", I ask. The answer is always the same.
"I am just waiting for them to come throw me out. I know it's inevitable, but its a numbers game for them".
Now, courtesy of MERS, the numbers just reset from 4 million homes in various stages of foreclosure back to zero. The system known as our economy shudders once again.
D
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