Just when Americans thought things couldn’t get any worse, along comes the foreclosure mess, which could very well jeopardize the buds of recovery from the worse economy climate in decades.
Across the country, in 23 states, a moratorium on home foreclosures was implemented by financial institutions in response to allegations that sloppy and potentially fraudulent paperwork led to questions about the validity of many of those repossessions. Not all banks stopped all foreclosures, but enough did to open the entire process to question.
It has been reported that some servicers simply ran foreclosure affidavits through a computer-signed factory; some employees admit they never even read through most of the documents to ascertain whether a property should be seized.
That has created a flood of foreclosures on homes, some of which should not have been in that position. There are many stories of the horrors homeowners have faced during this debacle—not knowing their home was being foreclosed on or even being foreclosed on when they don’t have a mortgage.
What led to the current situation, in part, was a desire to decrease the cost of a loan to the consumer. That was done with a company called the Mortgage Electronic Registration Systems (MERS) that tracked servicing rights and ownership of mortgage loans. MERS says its process eliminates the need to file assignments in the county land records, which lowers costs by reducing recording revenues from real estate transfers.
The problem for Oregon homeowners with that scenario is that the party foreclosing does not always have the legal right to do so. Oregon is a non-judicial foreclosure state which means that a lender does not have to go before a court to proceed with seizure of a property—the agreement is between the lender and the buyer.
Mortgages titles were digitized into a private system and were not endorsed as required by state real estate law and IRS rules. More than 60 percent of American mortgages are recorded with MERS which declares it has the authority to foreclose on properties. Some homeowners have been broadsided by foreclosure proceedings initiated by MERS. But MERS is not the lender. Foreclosures involving MERS are now being scrutinized since they neither receive documents or copies of documents related to a loan. MERS disclaims that they hold any interest in their database. It appears to possess no authority to execute documents on behalf of MERS in connection with any loans in the MERS data base. Earlier this month a federal judge in Oregon issued an injunction blocking Bank of America from foreclosing on a borrower’s home. United States District Court Judge Garr M. King said that under Oregon law, the borrower was likely to prevail on the argument that the use of MERS had invalidated the mortgage.
Homeowners have been battered enough during this recession and they shouldn’t have to face foreclosure from a company that has no standing in seizing the property.
This issue needs to be addressed by the Oregon legislature when it convenes in January. It should clarify state statutes on who owns a mortgage and who has the authority to start any foreclosure proceedings. To leave the process in the hands of an unseen group working at the behest of bankers doesn’t do our national and state economy any good.
The lenders need to show that there is cause for foreclosure and provide all the documents as needed.