Loan Modification

Freddie to Servicers: "Don't Mention MERS"

By Implode-Explode Heavy Industries

``America is a crime scene. The government was not only complicit, it helped create MERS. Freddie Mac now wants to hide MERS involvement on foreclosure proceedings? ''

Ignoring the silly partisanship in this that one expects from Kos (huh? It was Republicans who created the monsters that are Fannie and Freddie? Want to maybe revise that statement?), he has a good find with Freddie's latest guidance. Obviously they are scrambling to "clean up" the foreclosure process.

Problem is, there may be no way to "win." Even if MERS is taken off the foreclosure action, the servicer may not be able to prove the note holder has a valid assignment, and/or that the servicer has a valid agency status to foreclose. As a few astute commentators have observed, the originate-to-securitize system opened up a pandora's box of legal conundrums, some of which are definitely unsolvable. MERS and "robosigning" are only symptomatic of that.

As we wrote in 2007, having been educated on the topic by April Charney (esq.):

As to the real ramification of the Ohio decision, aside from slowing the foreclosure trains, is that the fact that there were no ?original? assignments rendering the sales of the mortgages to the trusts, in violation of the true sale obligations imposed by securities law.

...

this time around, securitization was scaled-up to a greater extent than ever before, despite the fact that the fundamental issues of ownership were not settled. Echoing (and reinforcing) the pay-to-play ratings complex that emerged at the same time, the securitization complex chugged merrily along, while profits were high and defaults were low.

...

Previously, true sale challenges could be counted on to be rare and occur only in the occasional large-scale corporate bankruptcy?i.e., when a creditor or the bankrupt company itself wanted to ?raid? the assets of a securitization to satisfy obligations. Now, the challenges are threatening to proliferate right along with the exploding number of foreclosure cases across the country.

Full post as published by Mortgage Lender Implode-o-Meter on October 13, 2010 (boomark / email).