New York filed a lawsuit against various units of JP Morgan, Bank of America, Wells, MERSCORP and MERS over their use of MERS in foreclosures. This civil suit alleges that the use of MERS has “resulted in a wide range of deceptive and illegal practices,” most importantly, over 13,000 foreclosures in MERS name where MERS “often” lacked standing to foreclose. The suit claims that an undetermined number of foreclosures that were not made in the name of MERS were also deceptive by virtue of MERS “certifying officers” making improper assignments prior to the foreclosure. The suit includes the use of robosigners who failed to review the review the underlying records as required, and served to disguise gaps in the chain of title.
The section of the filing with background on MERS will be familiar to most NC readers, but it does include the juicy factoid that MERS members have saved over $2 billion in recording fees.
NYS MERS Final Summons and Complaint 2/3/12
The suit states that 1800 foreclosures were filed in New York in MERS’ name since 2006, of which 95 were made by Bank of America, 85 by Chase, and 110 by Wells. Given the numerous reports of MERS sloppiness and dubious corporate governance (cited in this case) it is quite probable that these foreclosures were defective. However, these are not large numbers by themselves. New York does not have a statue like that of Alabama which multiplies the actual damages (the loss of the home) in the event of wrongful foreclosure. If you take 100 homes and multiply that by $250,000, you get $25 million. Now the suit would presumably enlarge the number of foreclosures by identifying other homes on which the use of MERS had resulted in wrongful foreclosures, but query how the attorney general would do that efficiently (as in the facts of particular foreclosures are so varied as to make this a labor-intensive exercise). The attorney general might be able to establish defective pattern and practice by deposing servicer employees or records, which would make for an easier way to establish that a much larger number of foreclosures were defective, but how threatening a suit this is in some measure depends on how easy it would be to establish bad practices at the servicers (note these suits will be settled; the question is whether the AG begins meaningful discovery to enable him to include more homes as being candidates for damages). The suit does discuss a number of defective practices, such as MERS falsely claiming to be the holder or even the owner of the note in court filings (MERS never owns the note), creating improper affidavits and notarizations, assigning mortgages when it lacked authority to do so, and failing to disclose the identity of the true owner of the note. It finally alleges that the MERS database is not accurate, current, or reliable.
The causes of action are:
Repeated and persistent fraud and illegal acts
Deceptive acts or practices
I wonder if any New York lawyers among our readers are familiar with the case law regarding these causes of action.
The juice in this suit seems to be in the assertion of $5,000 per violation, which is arguably every wrongfully filed document that somehow relied on MERS. How many in a typical case? This could get you to big numbers pretty pronto, but I’d imagine the banks will try to shift the liability onto their foreclosure mills.
While the filing of this case would seem to suggest that Schneiderman does not plan to abandon his efforts to pursue mortgage abuses in New York by virtue of joining the Federal foreclosure task force. It would also seem to point up the peculiarity of the mortgage settlement. One reader had said earlier in comments, quite vociferously, that his employer would not sign on to a settlement if MERS-related claims were not included. The Schneiderman suit seems to show that there is a backdoor way for AGs to have their cake (sign the settlement) and still file robosigning-related suits as long as use MERS as the hook. (I’m going on the assumption that Schneiderman might sign the settlement; he has suddenly gotten coy on that subject).
Or is this an attempt to blow up the settlement having gotten the Feds to sign up to an investigation by demonstrating (if the press leaks are accurate) that leaving MERS claims out of the release still leaves them on the hook for robosigning abuses via MERS? If I were a major bank, I’d be freaked out by this suit, since it would seem to offer an easy roadmap for other states and may expose the fact that, from the banks’ perspective, the release provided in the settlement is not broad enough.
At a minimum, this lawsuit would seem to make it far less likely that the settlement will be signed Monday, as is now scheduled; I’d take a delay as a sign that the banks were blindsided by this suit and have gone back to the table.
By contrast, if the banks still go ahead, I’d take it as a sign that they don’t consider this sort of suit to be a major threat (as in the damages associated with it would not be that large and they can treat it as yet another cost of doing business). In other words, the filing of this suit would be a way of Schneiderman later justifying his signing up for the Federal task force, even if it gets slow walked (“see, this is the best I could do. This is a serious abuse, but it’s actually a hard slog for an AG to get meaningful damages for this sort of thing”).
We’ll know much more about what this suit likely means when we see if it has impacted the signing of the settlement. Stay tuned.
Update: Per Dave Dayen’s report, this Schneiderman filing is a carve-out from the settlement and hence does NOT represent a precedent as far as the other state AGs are concerned. It thus may not have broader ramifications as far as the settlement talks are concerned, save maybe making some of the AGs that were thinking of not signing on worry that they look bad by joining the deal.
In addition, the long section on What MERS Did That is Bad has first a discussion of foreclosures in the name of MERS, then a discussion of bad practices that took place in foreclosures that used MERS but did not have MERS as the plaintiff in the foreclosure (out of time assignments, MERS certifying officers making assignments when they did not have authority, robosigining, etc).
While this is all heinous, the big concern I have here is how you prove how many bad actions a particular bank engaged in. The case asserts $5,000 damages per violation to New York State (see the Relief section at the very end) and $2,000 in cost per consumer per violation under another statue.
The problem is…there seems to be a clean case against the banks for the foreclosures done in the name of MERS. On the other ones, how do you prove how many violations took place in a particular foreclosure? How do you identify MERS v. non MERS foreclosures? If MERS name is not in the filing (as a plaintiff) is it that easy to find MERS footprints in particular foreclosures? And even if you do that, the banks will still try to shift liability to the foreclosure mills they used.
In other words, pinning MERS liability on particular banks (who have the deep pockets, MERS is an itty bitty company with no meaningful assets) may require quite a lot of discovery. That is a big hurdle to the Schneiderman getting as juicy a settlement as this case might seem to deserve. Remember, he has complained of being resource constrained; that was his reason for joining the Federal investigation.
I’d like to be proven wrong, since the banks may be eager to get this out of the way quickly and will pay up to dispose of a continuing embarrassment. But Schneiderman has told them in public he doesn’t have a lot of manpower to throw at this, and this does seem to be a labor intensive suit.
Thus this suit is not likely to lead to banks reconsidering their posture in the settlement. But by filing it before the settlement was due to be inked, he may be trying to encourage other dissenting AGs to ask for similar carve-outs, which would send everyone back to the negotiating table. So again, stay tuned, albeit for different reasons than I first thought.
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does this include criminal charges as in the NV AG, Masto? wasn’t somebody actually murdered out there?
Tracy Lawrence — who “committed suicide” right before her sentencing which would have revealed that she rolled over on some LPS employees in California:
http://www.reuters.com/article/2011/11/30/us-usa-foreclosures-lps-death-idUSTRE7AT2Z420111130
Is anyone still not convinced that we live in a third-world country?
She was murdered.
If one reads the AG’s complaint the AG is describing a massive criminal conspiracy.
These are the AG’s own alleged facts. He alleges criminal actions but for some reason (ha) he isn’t charging the crimes.
Simply check out NY law on forgery. I tried to link to this yesterday but my post disappeared. But it’s easy to check.
Someone please explain to me how the AG’s own facts don’t allege a massive conspiracy to commit felony forgery under NY law–among other potential crimes.
I wonder if the NY AG uses the same standards when choosing to charge a poor black man with drug crimes.
Jeez, I’m sure he tells himself, half the country has smoked dope, including the last 3 presidents, most people don’t see anything wrong with it, and yet it’s a crime. Even if a poor black guy is caught openly breaking this law I’m sure the NY AG will not charge the guy with a crime because everyone did it and it would be a waste of resources to put this poor black kid in prison.
Oh, wait. We live in the largest police state in the world and our prisons are filled with poor minorities?
If you’re poor or black then the AG will slam you.
If you’re a rich banker the AG will help you abscond with the loot and then pretend to look for the criminals (which way did they go?).
Intent?
I presume the banksters’ defense in a criminal case would be to claim that they never intended to commit forgery, they just did it by accident. :rolls eyes:
Yeah, I don’t think a jury would buy that either, but perhaps the civil suit will create enough discovery to prove intent.
The recording fees might make this thing interesting, as the complaint identifies title defects broadly (meaning not limited to foreclosures). So that apparently means fees for all transactions of title, not just the foreclosures, and local governments are cash-starved.
I’m not a lawyer, so I could be mis-interpreting this.
I’m not certain he is actually going after that. While I see a demand that the defendants disgorge all fees, direct and indirect, this suit is targeting the SERVICERS and MERS.
Servicers did not benefit from saving recording fees. The parties to the original securitization did (many of whom are now dead) and they’s argue borrowers benefitted through lower fees. So while they can probably go after MERS on recording fees, MERS has pretty much nada in the way of assets, and getting to anyone ex MERS would seem to be a challenge.
Every servicer benefitted by saving recording fees. Securitization of mortgages into MBS require at least three transfers that would usually be recorded. MERS was created to avoid payment of such fees and destroy public land records in favor of a confidential national registry owned by the very same servicers.
Sy,
With all due respect, you apparently don’t know what a servicer is.
The servicer had NOTHING to do with putting the deal together. Even when the servicer was part of the same company (for instance, Countrywide would service Countrywide-originated loans) it was a different legal entity in the bank.
For instance, the suit targets Bank of America NA, which I believe is the North American depositary, and BAC Home Loans, which is the servicing unit at Bank of America. Neither had zip to do with putting together the Countrywide securitizations.
And even if the suit were amended to include the parties to the originations (many of whom are dead; Countrywide serviced loans for other originators too), you really can’t prove who benefitted from saving the recording fees, besides MERS, which clearly has that as its raison d’etre. Was it the parties to the deal? The borrower, who benefitted from lower rates? The investors? The various participants in the origination, who all were able to rip out more fees?
Cut the crap Yves. Read the AG’s complaint. I know redleg did.
First, you do understand that there is difference between a bank mortgage servicer and a third-party service provider?
Second, I am sorry that you cannot comprehend that bank mortgage servicers and third-party service providers profited through the use of MERS as a proxy.
Third, just read the complaint with an open mind. Or just read paragraphs 10 (defining Defendant Servicers), 32-37 (describing MERS) and 43 (“According to MERS, once MERS Inc. is designated as mortgagee of record with respect to any given mortgage, subsequent transfers between MERS members of the beneficial interest in the mortgage loan or servicing rights need not be separately recorded …. Through this device, MERS members, including Defendant Servicers, have avoided publicly recording mortgage assignments between each other …”).
BTW, MERS did not save money for itself. It saved money for its shareholders and members that used the service. Get familiar with the MERS membership agreement, and the company’s claimed business model.
There is a problem with the MERS thing that seems to be absent in the discussion. MERS was created to circumvent recoding fees. Absent recordation you create a clouded title. When the holder of the note activates the mortgage/deed of trust and captures the proper, how does that holder render a warranty deed?
Now curing the clouded title is doable but, what about the home owner who sells his home, pays off his loan can he render a warranty deed?
Yves,
Every mortgage used by the MERS system is identified in the actually mortgage with MERS as mortgagee. Hence, identifying loans in the MERS system is not difficult. Unlike many scandals, the special servicers were actually the parties that oversaw the foreclosures like LPS that actually did the work. LPS simply claims that it was a database, but it actually interacted with the local foreclosure mill, prepared affidavits, assignments, endorsments, indorsments,proofs of claim in bankruptcy, and acted as MERS certifying officers on behalf of the trust — not the servicer under the PSA (bank). However, the servicer is directly responsible for the actions its agent.
The servicer saved money in the transfer of the assignment out of the MERS system and procurment of fabricated documents for foreclosure (instead of rebuilding the actual proper chain of title before instituting a foreclosure action–which in many instances it could not).
Further, they saved money because the servicer was directly responsible for advancing money to the trust while the foreclosure continued. Even where they had third party insurance, the servicer made money between based on the spread for the special servicing fee and the normal servicing fee. Remember, LPS was a “free” service to the Servicer (banks). It was “free” because LPS added their fee to the foreclosure mill’s fee and charged it to the trust. So the bank got the full spread between the normal servicing fee and the special servicing fee.
MERS facilitated the entire transaction and member agreements. See the Memorandum of Decision by US Bankruptcy Court Judge Margaret Wagner regarding the role of robosigning and the use of certifying officers.
http://www.scribd.com/doc/80478326
Yves,
The Bank of America NA, is designation for “National Association”, indicating incorporating under Federal Law using the National Banking Act. NA incorporation is allows a bank to operate across the USA, without State banking licenses and in many instances, preempts the states and the state AGs from much regulatory oversite, investigations, prosecutions and the like. Move from a state license to a Federal National Banking Act NA designation, has been carried by many a bank over the years. In particular, it was a requirement to get TARP money. See the legal name of The Goldman Sachs Trust Company, N.A. or Morgan Stanley Trust NA. There has been a long standing battle of cultures of state chartered vs NBA Federal Charters.
From the history of the NBA:
“The National Banking System
Through the National Bank Act, Congress sought to achieve both short- and long-term goals. One crucial objective was to generate cash desperately needed to finance and fight the Civil War. After prospective national bank organizers submitted a business plan and had it approved by the OCC, they were required to purchase interest-bearing U.S. government bonds in an amount equal to one-third of their paid-in capital. Millions of much-needed dollars flowed into the Treasury in this manner.
But the national banking system was also designed to achieve longer term economic goals. Under the new system, the purchased bonds were to be deposited with the Treasury, where they were held as security for a new kind of paper money: national currency. Bearing the name of the issuing national bank and the signatures of its officers, these notes were otherwise identical in design, size, and coloration. Anyone holding a national bank note could present it for redemption in, gold or silver coin, at the issuing bank or at reserve banks around the country. If, for whatever reason, the issuing bank was unable to meet the demand for cash redemption, the system was set up so that the government could sell the bank’s bonds and pay off the noteholders directly.
Once accepting and holding national currency became essentially risk-free, it gained in public confidence and circulated throughout the nation. This represented a marked improvement over the pre-Civil War money supply, which had involved thousands of different varieties of paper money issued by local banks, rampant counterfeiting, chronic uncertainty about the value of paper money, and, as a result, difficulty conducting private business. Through the more orderly national money and banking system, Congress sought to promote economic growth and prosperity and a stronger sense of American nationalism.
Shortly after the turn of the 20th century, the country adopted a new currency system based on Federal Reserve notes, which were obligations of the government rather than individual banks. With that change, national currency faded in importance, and the OCC’s mission focused increasingly on the safety and soundness of national banks.”
http://www.occ.gov/about/what-we-do/history/history.html
Sy,
You are out of line. Do you have the foggiest idea of how legal liability works? Or how MERS works? You certainly don’t know how securitizations work. You established that by saying that the servicers benefitted from saving recording fees. They didn’t. The parties to the original securitization did, and the servicer’s role begins AFTER THE DEAL HAS CLOSED. The servicer gets only servicing fees, expressed as basis points on the principal balance of loans serviced, and certain other fees that operate in the case of delinquencies and defaults. All expenses (like legal fees) are paid by the INVESTORS. If there were any recording fees to be paid (say for assignments of mortgages that weren’t in MERS) they would be charged to the investors.
The assignments were often done by foreclosure mill personnel, often under the direction of LPS staffers. We’ve gone over that at length. The banks have multiple liability shields in here.
The banks can claim that they weren’t closely supervising the mills, and that as attorneys they thought they knew what they were doing. Schneiderman will have to prove otherwise.
This is a far bigger hurdle to surmount than you think. Yes, I read the filing and you are bloody presumptuous to cop a ‘tude that I didn’t.
FT,
You are still missing the point. The issue is not finding loans in the MERS system, it is, as I said in the post, showing how “the use of MERS had resulted in wrongful foreclosures, but query how the attorney general would do that efficiently.” You won’t find that from the MERS system. You have to look at specific cases to see how the filings made in court were defective, and specify what the deficiencies were.
In addition, to reiterate, and sorry for sounding annoyed, but you are wrong as to who saved money. All expenses related to foreclosures are charged to the INVESTORS. The servicers did NOT benefit from saving recording fees. The servicers get a servicing fee and certain fees that are supposed to represent compensation for extra effort, such as late fees. All expenses, such as foreclosure law firm charges, broker price opinions, and recording fees (when there are recording fees) are charged to the investors (the investors have taken to various scams to pad or get kickbacks from those expenses, but that is not at issue in this suit).
Paul,
Thanks for trying to help, but your long answer did not tell me what I did not take the time to investigate, which is what BUSINESSES are located in that entity. That is what is germane, not its charter.
But if servicers and MERS took part in the fraud then they committed an intentional tort even if they were acting as the agent of another. They would be jointly and severally liable for all the damages they caused. There may be a fight between the banks and MERS over who has to ultimately pay (and it’s significant the AG did not charge the banks themselves–after all, they designed this whole scheme–maybe the statute of limitations caused problems).
I haven’t studied the all the causes of action and I’m sure one of the remedies is disgorgement of profit but I bet another remedy is for ALL the damage caused–even if went beyond the dollar amount of the profit. This should be an available remedy for a basic common law civil fraud cause of action.
I see that the banks were indeed named, but as Yves states it appears that the main targets are the subsidiaries, divisions or separate companies that serviced the loans.
I commented about this the other day. There is a potential the government would have a lien in the amount of the lost recording fees that runs with the property. The analogous situation would be if a property owner fails to pay property tax–there is a lien that runs with the land. That means that the lien has to be satisfied before the property could be sold.
So why wouldn’t this be a potential remedy? The complaint doesn’t specifically request it but it does ask for whatever relief is warranted and I don’t see why this wouldn’t be appropriate relief under the circumstances.
I don’t know how this would effect the legal situation though. If MERS really has no assets then the owners may take it on the chin. I suppose the title insurance people would be the ones that took it on the chin. Maybe could try to pierce the veil of MERS to go after the banks that are behind MERS?
Please, Yves, parse this explosive stuff for us lay-readers. How does it impact civil/criminal scenarios? Or Schneiderman being promoted?
I sometimes suffer from bouts of optimism, but I’d say that Schneiderman signed on to this The Survivor-style reality show that is The Agreement and, knowing it was a white-wash, traded his endorsement for the authority to investigate and promises of a cushy second-term Obama federal appointment.
Geithner, used to dealing with self-similar miscreants, takes this to mean Schneiderman is in the big club now (or at least pledging) and Schneiderman is going to walk back his investigation.
Then POW! Schneiderman pulls the trigger on the state investigation and now has the administration on the hook for federal investigations, with positive synergies flowing back and forth. Ken Lewis and Vikram Pandit share a room and a toothbrush. Puppies and unicorns live happily ever after.
Let a thousand blossoms bloom!
Optimizing can be dangerous. Look what it’s done for AG Holder.
This is precisely how I viewed his actions. Totally undermined Obama’s attempt to co-opt Schneiderman. Totally good political move on Schneiderman’s part. BAM, M***er F***ers, BAM!
If this guy Schneiderman is interested in the future of anyone but Schneiderman he will be the first such state AG (or federal prosecutor either) I have seen since I first started observing public interest litigation fandangos in 1967.
My guess is the banks will pay modest fines advanced by the Fed as an addition to the tab now required to support all the bonuses; they will sign consent decrees agreeing not to do any more things which they stopped doing four or five years ago. A handful of unworthy speculators will get windfall modifications on jumbo mortgages. Ordinary homeowners will get screwed by foreclosures sanctified by a phony settlement. Schneiderman will declare victory and run for governor or mayor of new york. He will wear a NYFD hat to Yankee games. In five or six years he will run a security consulting company for clients like Mexico. He will be a full time publicity hound and a clown and rolling in dough. But of course I could be wrong this time.
The future of politicians who hold the AG job in NY is determined *entirely* by how many powerful people they put in prison (more == better). This has been the way the politicking has worked for quite a while.
Therefore Schneiderman can be entirely in it for himself *and* want to imprison the banksters.
Agree. Pure PR play to get press.
The judge hung LSP, the loan services, out to dry. It was a more convenient political target than the lawyer who actually botched the case.
If the judge really wanted to affect behavior, getting the lawyer to write personal checks for damages and referrals for bar license suspensions would do it.
By showing a repeated criminal activity, the stage is opened to charge the banks with RICO violations. RICO is the statute used to get at organized crime. The fines then jump to $25k and 20 years in prison for each offence.
“Under RICO, a person who is a member of an enterprise that has committed any two of 35 crimes within a 10-year period can be charged with racketeering.”
http://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corrupt_Organizations_Act
Bankrupcty fraud, securities fraud and obstruction of justice are 3 of the 35 listed crimes.
Under RICO, the corporate veil can be pierced as well, i.e. management held personally liable for damages. Unfortunately, RICO is also a tricky case to successfully pull off. He may not want to take the gamble.
Why a civil fraud when there is ample evidence of documents falsification? Isn’t this a criminal offense…or is it just criminal when it is done by the “little people”?
I don’t know the laws of NY, but our WA AG cannot bring criminal charges, only civil. Could be the same for NY?
How much money did they save their members in INCOME TAX via hiding the sale of promissory notes?
The sales to convey the note from the originator to the trust were quick flips. The intermediaries got fees which I am sure they reported. They didn’t make a profit on a less than a day holding period.
I find it hard to believe that some of these notes, especially the ones in default were not sold at discount. This would make it subject to OID I believe but I’m not a tax expert.
If the note isn’t sold at par it’s must be subject to income tax of some sort.
The notes in question are in securitizations. The ONLY way a note is removed from a securitization at this date is via a putback or liquidation (satisfaction of the loan via sale of the house, whether a regular sale, short sale, or out of a FC).
These notes aren’t being sold except when a bank owns the loan outright.
Point taken.
With a caveat of course. :)
There sure are a lot of foreclosures out there in which the note has endorsements from parties other than the originator.
Then there is this that has boggled my mind.
Most PSA characterize the Depositor exchanging the mortgages for certificates. Those certificates are then sold. Question. Was there a profit or was it par?
Is the exchange a true sale?
How is this transfer characterized? It certainly isn’t a gift to the trust.
Tried to post a comment just as your site went down. Here’s my thoughts. I am a tad queasy when my views echo those of Mitt Romney – let the foreclosure avalanche proceed without government intervention wherever the action is legal. My rationale is simple, as currently proposed, the primary beneficiaries of government involvement in this mess are the banks, not homeowners. Indeed, government involvement reduces the incentive for banks to offer meaningful principal writedowns. What I see happening is this. Banks as servicers are undermining the trusts by paying all CDO holders, regardless of the tranche. Thus, senior noteholders are seeing the collateral backing their investments degrade, insuring future losses, while the banks pay themselves. If a MERS mess blows up the trusts, the senior noteholders (pension funds and the like) would immediately recognize injury and sue the trustee/servicer/originator. If the government continues to intervene, protecting the banks from their follies, we will see this happen again and again. God bless Eric Schneiderman.
Mitt was just repeating something he heard somebody else say. And will no doubt walk it back if he hasn’t already.
You know what you are talking about. It all has to find a mark. Cummulatively too far gone to recover.
GEEZ! It’s getting hard to tell the double agents from the triple agents in this drama. Kim Philby would rank a mere piker in this game.
Everything depends on the future and how this plays out. But — this is a good day.
I’d thought it was quite likely that Wall Street and Washington would get away with keeping the MERS scam undercover. Not so. Even if Schneiderman suddenly dies in a car crash or child porn mysteriously turns up on his computer or whatever, it’s out there in the open now.
Let’s proceed to what we’ll be blogging about post-election:
Randolph Schneiderman: Pay up, Banks. I’ve won the bet.
Mortimer Banks: Here, one dollar.
This is simply an exercise of the endless charade of creeping incrementalism that is heralded by pro Obama forces as being tough on the big banks. This document is an excellent primer on the defects of MERS.. If this AG would now issue an indictment of one or more excecutives of one or more of the named defendants and linked them and their subordinates to this fraudulent system to a discrete and enumerated ACTUAL FINANCIAL TRANSACTIONS EXCECUTED BY ACTUAL EXECUTIVES IN ACTUAL COMPANIES then that would be taking the force of law to the heart of this corrupt industry. I would challenge Bill Black to write a mock indictment that if we ever see it then it would mean that real business is being done by the AG’s of this country on behalf of the people of this country.
Is anyone in jail yet?
No? Why not?
I’m confused, which Linda Green is going to jail?
Which one?
Dumb question: if the NY AG gets a declaration that MERS ‘transfers’ violate property laws, wouldn’t that mean that many mortgage-backed securities were sold without the issuing trust actually having title to the underlying properties? Wouldn’t this expose the trusts to investor put backs?
The Wall Street Journal had the story no later than 1:15 PM, plenty of time for the stock market to respond if so inclined.
But: BankAmerica + 5.23% on the day; JPM + 1.9%, WFC + 2.44%. All handily beat the DJI’s strong + 1.23%.
Although JPM and WFC underperformed the BKX index in which they are embedded – BKX was + 3.28%.
If this is indeed real and significant, equity investors by and large seem to not yet know or care.
When a news item is released mid-day Friday, it is timed so that it has the rest of the work day to percolate, and the weekend to spread around.
When they want something buried, it is released around 5:00 PM EST, or on Saturday.
This was a smart and strategic move on the part of AG Schneiderman and his staff.
And given how the markets are so completely rigged today, I wouldn’t pay any attention to the short prices.
Think long-range……
The answer to your question is quantitative easing. Recall that the Fed has stated that rather than burning the money it is getting from the sales of MBS it purchased to protect AIG, it is going to purchase other, hard to value MBS. Hence, the Fed is in the business of trading dreck, for dreckier, to be followed by a massive purchases of the dreckiest. Its Bernanke’s party and the bankster noses are covered in snow. The fact that we consider this insane does not mean that it isn’t lucrative – for the banksters.
MERS mightbe itty bitty, but only it has the database and the infrastructure (where’s Anonymous when you need them). Zap MERS, and the entire mortgage infrastructure is zapped. In Bankruptcy, where does it go.
Like a fraudulent toxic waste disposal company, yes you can put it out of business, but the toxic waste still remains
problem is — that database is in India, oh and maybe Ken Lewis’ basement
If they are in India they will be easier for you (vs. feds/bank-ops) to get them than if they are in the USA.
I believe the database management was outsourced to one of the big boys like EDS. There are fewer than 50 employees at MERS.
EDS, but that doesn’t mean that EDS didn’t outsource it to India.
Not outsource, offshore. EDS IS an outsourcing company, they’d lose all cred if they then outsourced their operations (my brother used to work for EDS, I know more about this business than I like to admit. Suffice it to say we avoid this topic at family gatherings).
Just a quick paranoid thought: Since Taibbi, Abigail Fields and some others have come out so uncharacteristically in favor of going with the direction of Schneiderman’s action, I am leery. This diretion is pointing into the future of mortgage modification and principal writedown, but it is not interested in fraudulent activities by the banks et al. I feel like the banks dodged the big bullet. That bullet is fraudulent securitization, or securitization “fail”. If sec-fail were the subject of Schneiderman’s actlion in behalf of homeowners of NY state this suit would be more interesting. But legally, most judges conclude homeowners are not the party of interest in securitization fail. The investors are and they are too disorganized to file suit.
That’s two.
Matt Taibbi has said nothing since he swallowed hook line and sinker on the 28th and then tried to make the hook look like a question mark. Is he holding his breath? Offering his mouthpeice to the fish? Anyway, this development doesn’t appear to change the sellout substantially.
The HuffPost article by Berlin and Levine posit that a flaw in the settlement involves the lower credit given to bank when they modify principle on more severely under water mortgages:
“Under this proposal, the banks would collectively pledge to provide roughly $25 billion toward helping troubled homeowners.
But the banks would receive greater credit toward satisfying the terms of the deal when they help borrowers who owe less than 175 percent of the value of their homes.
Helping borrowers who owe more than 175 percent would qualify for less credit, according to the draft of the proposed settlement.”
But it is a feature, from Yves point of view, since it tries to prevent the situation where all of the funds are used up in compensating just a small number of large mortgages, “nudging” instead toward compensating a larger number of mortgages and those mortgagees who need it more.
It seems that which has been discussed here (that the settlement would not be good for the economy since the mortgagee compensation is spread too thinly) as sign certain that the settlement signifies bed-time-for-O-Banzo-and-Banco has been addressed, and as if to address that very discussion.
Or … is it intended as yet another bone … thrown now to the Taibbi’s, Fields’, and Smiths’ of the incresingly notorious bloggosphere.
According to the complaint document, courtesy copies of pre-litigation notices were emailed to the Defendents on January 20. Obama announced the investigation unit Schneiderman is to chair in his SOTU on January 25. Also, forgot that Schneiderman was kicked off the state AG executive committee back in August.
“In other words, pinning MERS liability on particular banks (who have the deep pockets, MERS is an itty bitty company with no meaningful assets) may require quite a lot of discovery”.
The ongoing OCC led “independent investigation” is supposed to be tracking assignments within the MERS system. The question is, are they tracking assignments all the way back to the securitization trustees? That may be the discovery short cut and hence “resources” that Schniderman needed access to?
You are right that MERS typically does not do an assignment except to foreclose, so that could be a way to go at that. But for the bank OCC reviews, and I’d assume for MERS, the miscreants are hiring the consultants to do the reviews! And given how many mortgages MERS has, I’m not certain whether the review was ever planned to go beyond sampling, and that would be national, rather than focused on New York.
The assignments and whatnot are signed documents, which means even if they were available electronically, you are dealing with images, not text which can be scanned. So that would not seem to be such a great way to go about it.
Now NY CAN search for rulings which discuss assignments, but as the filing points out, many foreclosures were uncontested.
“images, not text which can be scanned.” That’s a data conversion issue and there are a lot of solutions, especially for an investigation with a budget. Select a statistically valid sampling and triple key the material for search.
A carve-out??? So, BOA, what they did on that side of the GW bridge, they get prosecuted for? And, on this side, it’s all OK?
FUGETABOUTIT!
There is the hopeful possibility that Schneiderman is shrewder than O’s team. O needs a ‘deal’ at nearly any price going into election season, even if there is no substance to the deal. Schneiderman could help O close this empty deal, by allowing O to appear to co-opt him, which seems to be the consensus conclusion. An empty FED deal would take the issue out of the headlines and buy O time to capitalize on the potential successes of Schneiderman, Mastro, Coakley and others that are already in motion, without appearing to harm his bankster backers. An empty deal would also do no harm to the true victims. The apparent co-option also leaves the impression that O is in control.
It’s possible that Schneiderman’s price for participating was freedom to persue his (and the renegade AGs) efforts. Today’s filings seem to indicate he did negotiate this freedom on his , and their, behalf. If that calculation is right, Schneiderman emerges as the big swinging AG, displacing Iowas’s Tom Miller. If I were a young, ambitious, and serious AG, that is exactly where I’d like to be. If I were an incumbent pres aware this crisis was going to dominate his second term, I’d give Schneiderman et al whatever he wanted to make that second term productive.
Schneiderman’s competitive advantage over Miller, coupled with O’s dependence on the AG victor for his re-election campaign should be considered before we write Schneiderman off as a sellout.
This may be magical thinking, but my skeptic self won’t let me accept that Scheneiderman is so craven. My cynical self says its possible, but I kind of hate that pure cynicist,’cause he’s often wrong.
“Most favored nation.” Friday night Bloomberg. (Suggesting they don’t believe it, perhaps? Who knows.)
Foreclosure Deal Said to Ensure Same Terms for All 50 States
http://www.bloomberg.com/news/2012-02-04/foreclosure-deal-said-to-ensure-same-terms-for-all-50-states.html
“State attorneys general and lenders including Bank of America Corp. and JPMorgan Chase & Co. agreed to ensure that states signing a nationwide accord on foreclosures will be entitled to improved terms won later by states that opt out, two people familiar with the matter said.”
“1800 foreclosures were filed in New York in MERS’ name since 2006, of which 95 were made by Bank of America, 85 by Chase, and 110 by Wells.”
That seems way light to me. BAC was in on roughly 5% to 5.6? Yeah, yeah, it was pre-Mozillo, but still. Who were the banks not named BAC or JPM or WFC that accounted for the other 84%?
I know 0 about banking, so maybe the above makes sense. But to crib a term I see here, the optics aren’t right.
Question: If the 50-state settlement is the remedy for the 20% of bank-held mortgages that are distressed, then the banks can actually negotiate a deal. They cannot negotiate a deal on anything in a trust. The MBS trusts make up the other 80% of the mortgages, which are going south. So somebody has to step in and address this 80%, otherwise nothing gets resolved. So is this where Schneiderman picks it up? Using MERs almost as a straw man to protect the banks from facing fraud charges because they failed to securitize. This transgression is being smoothed over by a mere failure to record. Nobody is using the word “securitization” these days. Why not?
Property rights meet grotesque complexity…
What was the purpose of securitization again ?
[Face meets palm…]
I guess I don’t understand. MERS and the banks actually conspired to defraud all the county recorders, en masse, from 1995 on. In California, where I am, specific, individual assignments MUST be recorded on each transfer (I don’t know about other states, but how can ownership of property and notes be tracked otherwise?). I know, because in my previous job, I signed thousands of them over the ten or so years I worked at that company. We were REQUIRED to record assignments of trust deeds (the instrument that ties the note to the property), and we were required to do that each time we were involved in a transfer. So when we made a loan, the borrower signed the note and trust deed, and we recorded that. Then when we sold and assigned the loan to an investor, we were required to record that assignment of trust deed (or, in some cases, partial assignment) in the county where the property was located.
A specific set of California statutes governs these recordings, and each county is required to maintain the recorded deeds in the county recorder’s office for that county. MERS’ argument for doing what they did seems to be threefold:
1. We serve big banks.
2. We do this a lot.
3. We figured a new way to “record documents,” so we don’t have to comply with those silly state laws.
So now we are faced with the spectre of a large corporation that serves large banks doing something outside of the requirements of the law, defending it because they have a “new method,” and the banks telling us that it’s really OK because they are “big,” and “have our best interests at heart,” and because the “efficiency of their business model requires it.”
And now the states’ attorneys general, knowing about this massive fraud against the counties, the taxpayers who live in them, and the ongoing conspiracy to prevent the law being applied, are “considering a settlement???”
Please!!!
Yes. Recording was major in CA. Our assessor’s records included anything recorded against the property. Because we do not use attorneys with residential transactions, the title insurance company is especially important. Mortgages going through the banks in CA are processed by employees licensed under the Department of Corporations. They do what the bank tells them to do. I work under my Broker’s license under the Department of Real Estate. I have a fiduciary obligation to my client. How do I step into what is a dual system with local mortgage brokers going to jail for “straw man” offers while the banks were happy to fund them and then sliced them with no records? We can not “let the foreclosures happen” as Romney suggests. We need to define the legal system for mortgages.
Yep. You nailed it.
And not only that there were 20,000 or so foot soldiers taht technically committed felonies. If you read the AG’s complaint there is no other interpretation than the banks conspired to create an illegal scheme to get around recording laws.
The criminals are working with the politicians and attorneys general to hide their crimes.
It appears that to an outsider to all this, USA has painted itself into an interesting corner which offers only two options:
a) collapse of the banking system if the rule of law is enforced
b) collapse of the rule of law if collapse of the banking system is to be avoided
in short, a choice between financial anarchy and legal anarchy.
I’ve been watching this story develop for three years, waiting to see what the choice will be. Sounds like we’re getting closer to the answer of this question.
Exactly.
Ah, but you’ve missed a crucial point: if the rule of law is abolished, the banking system will collapse anyway. Partly because it depends on the trust generated by the rule of law; partly because it is already so untrusted that it is probably going to collapse no matter what.
..and, mostly because the BigBanks are mostly INSOLVENT pond scum. ;-)
Love
I see no reason why this case wasn’t filed years ago.
It’s highly suspicious that this happens right when Obama and Schneiderman need to prove their “tough on banks” bona fides.
I’m not a NY lawyer but it could also be significant that the AG didn’t send his letter to the defendants in preparation for filing this case until just a few weeks ago. I would have thought this case would be the subject of negotiations for a while now.
After all, the statute of limitation has been running on these claims, right? They never signed a tolling agreement on these claims, right?
If I’m not mistaken, Schneiderman just took office in January after the position had been vacated by Cuomo. Cuomo was notoriously bank-friendly.
So as has been so ably pointed out (WaxOnWaxOff) the market is stuck between the horns of a dilemma –
Either the rule of law is dispensed with or the banking system is tottering on the edge.
Of course we could have both – for twice the fun.
But seriously folks is MERS still in business ?
And if so why ???
“MERS is an itty bitty company with no meaningful assets”
MERS is still in business? Putting MERS out of business is a good first step. Hence, will not happen?
Since i cannot seem to reply directly in response to certain particular commentors here, I just would like to suggest to read;
Paul Tioxon’s comment;
http://www.nakedcapitalism.com/2012/02/schneiderman-files-civil-fraud-lawsuit-against-three-major-banks-for-use-of-mers.html#comment-620543
which is way further upthread, but posted after there were already 60+ comments here already (..and most were good ones IMHO, and even enlightening). He posted on Feb 4th.
But the info in Paul’s post about the NBA, and the NA designation assigned to ‘BanksternName… NA’ conjures up, nay..smacks of Federalism to the N’th degree. Just think about that one particular, seemingly altruistic word; “preempt”.
That one particular word has been used for such lovely things as;
1) Preemptive Strike (War on Terror)
2) Eminent Domain (where the Feds steal your property regardless of State Laws).
3) NBA (and now this nonsense ..see a thread here anyone?)
We ought to repent for starters, ask for forgiveness for our sins, and think/act more as participatory citizens. After all; ‘Citizenship is not a spectator sport’ (to poorly quote someone).
I had previously, in particular, been thinking about responding similarly to what Walt Wit Man has been saying as it pertains to “Forgery”, and knowing it most certainly is deemed a Felony, in almost All Jurisdictions(?), in almost every case(?).
Then there’s the matter of Laws applied unEqually and unjustly amongst racial, and social class lines, so elegantly drawn/marked/boundaried and with incestious infighting promoted by the 0.1-.01% on us lower bums/subhumans.
Now i see that not only does our Representative Republic have many flaws based on federalism (gee thanks Alexander Hamilton, you f***tard)., but that a “Rule of Law” Nation, that many of us think of is what we live under, is really just another Class Tier (the Federal/State/County/City/Town/Village ones) ..one that so neatly coincides with that .01% tier’s agenda and parallels it so aptly.
Love
Oh ..and Paul; this whole notion of a Bank needing the designation of being an NA (National Banking Act) Bank in order to recieve TARP funds makes this whole convoluted nightmare just that much more hellish, wouldn’t you say?
It’s just so insane and bass ackwards to me, but i can see the pieces of the puzzle now falling into place now more easily.
Globalization on Steroids, the New World Order — dating back some 500 years, when European Nations started to “colonize” (isn’t that such a pretty term, eh?), and …
as a sidebar..
[..more recent early 20th Century history]
“To Bring Democracy to the Middle East”
http://video.google.com/videoplay?docid=-5267640865741878159
“Robert Newmans History of Oil 45:23 – 5 years ago
As shown on Ch4 and repeated several times on More4, available at IndyBay on the web and many other places, now on google video (not great video quality) Robert’s stand-up act examines the history of the last 100 years or so but putting oil center-stage. Brilliant!”
Love
We need to democratize mortgage Finance, there’s not much difference between two government sponsored behemoths running the show or four large too big to fail guys doing it.
Discovery of how many MERS-related, but not MERS-named actions might go as follows:
Obtain the MERS Identification Number, Block and Lot
information for the subject property, and state court index numbers for all loans in foreclosure in New York State. This is information in the possession of the servicers and is enough to scour, with efficiency, the three relevant databases: the MERS database, state court filing systems, and county property records. You would be able to link a servicer to each individual foreclosure filing related to MERS with this info.
The offensive MERS assignments of the type described in the Complaint are prepared and filed after the servicer refers the case out to the foreclosure firm network. Once the referral to the foreclosure firm happens, the firm and servicer prepare the bogus assignments (such as assignments where MERS transfers a loan as nominee for the originator) then record them in the county clerk’s records just before or immediately after the foreclosure action is commenced.
Basically, for every filing where MERS shows up in the chain of assignments in county clerk records related to a foreclosure, the AG should be able to ding the defendants.