If local governments succeed in the fight against how banks have recorded the transfer of mortgage notes through the Mortgage Electronic Registration Systems, home loans could become as expensive as credit cards, K&L Gates Partner Laurence Platt said Wednesday.
Platt admitted there were issues with the system, but he warned that scoring short-term political points could be the end of affordable housing.
"They are making secured credit unenforceable," Platt said. "If you think you're going to get 4% mortgages on unsecured loans, you're wrong. You're going to get credit card rates. MERS was designed to make it easy to transfer assignments in modern economics."
That's a damned lie.
If the lender bothers to follow local law, then there is no problem.
If the lender actually transfers the notes and the lender can prove they have physical possession and an unbroken chain of assignment when they move to foreclose, there is no problem.
The problems are all because the lenders decided, by the own hand and with nobody else involved or making the decision, that they would lie, cheat and steal.
That is, they wouldn't document anything. They wouldn't conform with the requirements of their own PSAs, which they certified they had complied with. They wouldn't actually sign anything over. And that when challenged, they'd literally invent evidence by coming to court with perjured documents.
"MERS was designed to make it easy to transfer assignments in modern economics."
There is no transfer of an assignment in a securitized mortgage.
This is black letter law.
A REMIC, in order to receive pass-through tax treatment, must be a static pool of loans on the closing date.
Got that? Static. Unchanging. Fixed. Singular. Enumerated.
There is absolutely no reason why the Trustee should not have recorded their interest at the time of formation of that pool, assuming they were and are following the law on REMICs and that they actually have the notes.
We're talking about, on average, about $30 to record these things. On a pool of 1,000 mortgages - a $100 million pool, assuming an average $100,000 balance, this is $30,000 in one-time expense, or 0.03% of the loan balances. Too hard? Too expensive?
Doing so would have proved that the pool actually owns the note and has received it. It would also prevent selling the same note twice, or waiting until it defaults to "give" the bad debt to a "high risk" pool while keeping the "good" ones for "favored" people. That is, it would have documented compliance with both IRS REMIC regulations and the PSA governing the trusts, along with the UCC and State Property Law.
The Trusts would have got all that for just $30 for each mortgage.
So why didn't they?
There are all sorts of "reports" flying around that in fact there are shenanigans like this - illegal shenanigans - going on with these things. There are multiple reports of foreclosures being filed by a servicer or in the name of "MERS" when the trust allegedly holding the paper can't document that it does - including cases where the note isn't on the remittance reports. How the hell do you argue you own something when you don't show the actual loan you claim you own on the remittance report for your alleged "trust"?
The purpose of property recordation laws in the States is to prohibit this sort of crap and keep titles clean and defensible. To make sure that when one does a title search one can determine who owns the land and who has a valid security interest on it - not that someone does, but exactly who does.
That MERS has helped to enable firms and Trusts to evade these requirements doesn't make MERS - by itself - a criminal enterprise or somehow invalid standing alone. But it also doesn't mean that MERS should be able to eviscerate these protections that were put in place to keep people from getting screwed by paying someone who doesn't really own the paper, being unable to get an actual copy of the note they signed marked "PAID IN FULL" when they finish paying off their obligation, or being foreclosed upon by someone who isn't the actual proved-up holder of the debt with a valid and unbroken security interest.
The "Tanks in the Streets" argument is identical to saying that we had to bail out people who engaged in unsound and perhaps even fraudulent conduct lest "the financial system collapse."
That's a lie.
What we should do is force those who did unsound and/or fraudulent things to eat their own cooking. If this blows them to Mars, too damn bad. There are banks and financial institutions that have not committed these offenses, and they both can and will step in to fill the void.
Those who argue "Tanks in the Streets" must be charged with making terroristic threats against The United States and The States individually and imprisoned, not coddled and pandered to.
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