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Another mortgage crisis- robo-signing continues, loans missing, MERS under fire



Housing is on fire, is lending the accelerant?

Is another mortgage crisis among us or is it the same crisis that has supposedly been resolved and rectified? Are all of the pieces that crashed housing still lying around acting as accelerant to the fire that is housing? Possibly.

This week, Reuters’ Scott Paltrow did an extensive study on robo-signing, missing promissory notes and the status of MERS, all of which were supposedly no longer problematic in the American mortgage world.

Robo-signing debacle is far from over

Recently, we asked who was to blame for the economic crisis? Fingers pointed everywhere with a large group blaming the robo-signing scandal (where banks didn’t manually review documents before foreclosure leading to illegal foreclosures on wrong addresses, homes paid in full and various other mistakes), including state and federal agencies seeking damages.

“The robo-signing debacle is commonly pointed to as a major cause of the economic downturn, as companies like Lender Processing Services (LPS) and CoreLogic, both having recently been sued by the FDIC who says they provided automated inflated appraisals causing banks to make investments on loans they otherwise wouldn’t have, thus taking a major financial hit.”

At the end of 2010, banks nearly unanimously said they were halting robo-signings so that these wrongful (read: illegal) foreclosures would come to a stop. Today, Reuters’ investigation revealed that robo-signatures numbered in the thousands with “known robo-signers” still in action. How can this be?

The banks say it is a technicality, that all homes discovered with flawed paperwork were legitimately under foreclosure. Regardless, robo-signing isn’t over even though banks claimed they were and despite many lawsuits regarding robo-signatures and despite many believing robo-signing is the root of the entire economic collapse.

Flawed paperwork? What about missing paperwork?

In yet another report, Reuters unveiled a highly ignored yet highly flammable housing issue. “There are signs, however, that servicers resort to doubtful documents because they have no choice if they are determined to foreclose: To a great extent, originals simply don’t exist. It’s one of the overlooked legacies of the housing boom.”

In a “rush” to get loan packages sold to investors, many banks either destroyed or failed to turn over original promissory notes or mortgage documents, both of which are legally required in order to convey ownership. Many of these banks have since gone under.

“From 2004 through the end of the housing boom in 2006, more than half of all new mortgages were securitized and sold to such pools, known as mortgage-securitization trusts, according to the Securities Industry and Financial Markets Association.”

That is a substantial amount of paperwork eternally missing, how can many foreclosures be anything but contested if a bank now owning a mortgage can’t even prove they own the loan?

“The result is that trusts may be out many billions of dollars, says Matthew Weidner, a lawyer who specializes in mortgage litigation. If proper procedures are followed now, foreclosures could slow to a trickle. And a cloud would hang over title to millions of homes, potentially further depressing the housing market.”

Most revealing of the three failing pillars: MERS

Reuters’ expose on Mortgage Electronic Registration Systems (MERS) is where the cracks in the continuing mortgage crisis begin to show.

With only 50 full time employees, MERS “claims to own about half of all mortgages in the United States, roughly 60 million loans, and is involved in about 60 percent of new mortgages issued.”

MERS was established by Fannie Mae and Freddie Mac just over 15 years ago in conjunction with several major banks as a means to expedite the loan recording process as it used to be done through individual county clerk offices which was slow. “The founders went ahead even though no state laws authorized them to bypass the required filing with clerks,” according to Reuters.

Testimony was uncovered from 2009 where MERS employees noted they “did little but maintain the computer database” and that “For a $25 fee, employees of any of the 3,000 loan servicers that belonged to MERS could get themselves designated as a MERS “vice president” or “assistant secretary,” authorized to sign official documents on behalf of MERS.”

This spring, federal regulators included MERS along with 14 lenders as “engaged in unsafe or unsound practices” in transferring mortgages, requiring them to reform even though they still claim no wrongdoing.

Reuters said, “In practice, when servicers needed to create mortgage assignments to replace missing ones for foreclosure cases, their own employees, signing as MERS officials, printed out newminted documents and signed their names to them. MERS has served in effect as an instant teller machine for mortgage assignments. Servicers simply have their own employees sign the needed documents as MERS officials.”

Courts for years have upheld MERS assignments despite homeowners’ challenges of their documentation. Now, several states are noting that MERS doesn’t own the note, therefore, it has no power to transfer to servicers the right to foreclose.

Why this all equates to another mortgage crisis

Each of these alone would be enough to threaten housing, but together, there is a real danger looming. Banks have been ordered to reform and claim they have done so, yet robo-signing continues. Foreclosures are occurring at staggering rates and although it is not in dispute whether or not most of them are actual defaults, the fact that original promissory notes are gone forever leaves a huge question mark as to how a foreclosure can hold up in court without a bank being able to prove ownership of the loan? Furthermore, MERS claims to own half of all American loans and courts are beginning to rule that it was never legal for them to transfer the right to foreclose in the first place.

The silver lining is that discovery that the same issues are still at hand that caused much of the deterioration of the real estate sector could possibly lead to resolution of some sort. Without resolution, however, if these three factors remain, the majority of foreclosures) whether in legitimate default or not) will not hold up in court.

The American Genius is news, insights, tools, and inspiration for business owners and professionals. AG condenses information on technology, business, social media, startups, economics and more, so you don’t have to.

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  1. Joe Loomer

    July 19, 2011 at 6:37 am

    I wouldn't call this another "mortgage" crisis. This is more like an increase in the size of the basketball in the garden hose. Posturing and using the courts to slow the rate of foreclosures. If you don't think this will continue to be bumped and nudged through November of 2012 you're living on the moon.

    Navy Chief, Navy Pride

  2. Fort Collins Homes for sale

    July 19, 2011 at 8:27 am

    Crisis? I thought the economy of mortgage is gaining. But then, no one can really be sure of what would happen in the next days as the economic trend of real estate is very erratic, as a friend of mine from Fort Collins homes for sale would say.

  3. Texas payday loan

    August 25, 2012 at 1:23 am

    This is really interesting, You’re a very skilled blogger. I have joined your rss feed and look forward to seeking more of your fantastic post. Also, I have shared your web site in my social networks

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Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?



Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.



aging housing inventory

aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.



zillow move

zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub,, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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