MERS Mortgage Transfers Deemed Illegal by Federal Judge
By Michael Kraus on February 15, 2011
A new ruling from the United States Bankruptcy Court for the Eastern District of New York, In re: Ferrel L. Agard could have a massive impact on the housing finance system moving forward. As detailed on Bloomberg yesterday, Judge Robert E. Grossman ruled that the controversial Mortgage Electronic Registration System (MERS) does not have the right to transfer mortgages.
“The court recognizes that an adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States. However the court must resolve the instant matter by applying the laws as they exist today. It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This Court does not accept the argument that because MERS may be involved with 50% 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.”
MERS was created in large part to allow mortgage originators to more easily securitize mortgages and bundle them into mortgage backed securities, while avoiding many of the transfer fees imposed by various county or state offices. It has been at the center of the robo-signing foreclosure crisis, and many have questioned whether mortgages and titles transferred through MERS are valid, and whether MERS has standing to foreclose on properties.
Here's another one I like even better:
United States Bankruptcy Judge Robert Grossman has ruled that MERS's business practices are unlawful. He explicitly acknowledged that this ruling sets a precedent that has far-reaching implications for half of the mortgages in this country. MERS is dead. The banks are in big trouble. And all foreclosures should be stopped immediately while the legislative branch comes up with a solution.