By Mike Colpitts
Hundreds of lawsuits winding their way through courtrooms in the U.S. could ultimately determine the future of the housing market in America. A major case involving the attempted foreclosure of a home in Utah could produce a court precedent on which other cases could stand.
Courts are hearing cases over foreclosure challenges in the majority of the country, including appellate courts in New York, California and Florida. The cases revolve around Mortgage Electronic Registration Systems, which goes by the acronym MERS in the mortgage lending industry. The company started in the 1990’s, records mortgage titles through their sophisticated nationwide electronic system with county recorder offices across the country.
A New York appellate court dismissed a foreclosure action last week, ruling that MERS failed to assign the mortgage and didn’t hold the promissory note to enforce the foreclosure. The case is actually known as Bank of New York vs. Silverberg. Bank of New York represented Bank of America as the mortgage servicing company for defunct Countrywide Mortgage.
Legal scholars are awaiting the ruling of a case in Utah, which could act as a precedent for others to follow in the U.S. Leading California real estate attorney Philip Kramer, who represents dozens of clients in legal foreclosure challenges in the nation’s most populated state, is watching the case closely.
“If the court rules that MERS is not a legal beneficiary it strikes at the heart of many foreclosures,” said Kramer. “This may turn out to be a real turning point in the foreclosure crisis.” The case involves a Salt Lake homeowner and the nation’s largest U.S. lender, Bank of America and Recon Trust.
MERS has come under attack for its recording processes amid legal challenges in many states over the forged signings of documents to produce foreclosures against homeowners without legal proof of ownership.
Attorneys general in 26 states have been investigating the forgeries and are working with banks and mortgage servicing companies to reach an out-of-court agreement to satisfy homeowners who have been wrongfully foreclosed. The legal ownership of millions of MERS 65-million recorded home titles could also be in jeopardy.
Courts may eventually rule on whether at least hundreds of thousands of homes that have been illegally foreclosed are given to homeowners free and clear whose properties were illegally foreclosed.
The foreclosure pipeline has been slowed as a result of the legal wrangling. Foreclosure cases have also been halted in thousands of instances as a result of delays orchestrated by lender servicing companies, whose foreclosures procedures have come under scrutiny and legal attacks.
Some attorneys believe the cases being heard in appellate courts will eventually wind there way to the U.S. Supreme Court, which could rule on the cases, and set a landmark decision on foreclosures. Bank attorneys are concerned about the possibility since lenders’ have so much to lose in light of forgeries that have been admitted to by bank servicing employees.