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MERS Case Filed With Supreme Court

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Before readers get worried by virtue of the headline that the Supreme Court will use its magic legal wand to make the dubious MERS mortgage registry system viable, consider the following:

1. The Supreme Court hears only a very small portion of the cases filed with it, and is less likely to take one with these demographics (filed by a private party, and an appeal out of a state court system, as opposed to Federal court). This case, Gomes v. Countywide, was decided against the plaintiff in lower and appellate court and the California state supreme court declined to hear it

2. If MERS or the various servicers who have had foreclosures overturned based on challenges to MERS thought they’d get a sympathetic hearing at the Supreme Court, they probably would have filed some time ago. MERS have apparently been settling cases rather than pursue ones where it though the judge would issue an unfavorable precedent

3. The case in question, from what the experts I consulted with and I can tell, is not the sort the Supreme Court would intervene in based on the issue raised, which is due process (14th Amendment). But none of us have seen the underlying lower and appellate court cases, and the summaries we’ve seen are unusually unclear as to what the legal argument is

So this filing looks like a probable non-starter. Housing Wire provided an overview of Gomes v. Countrywide:

A controversial case challenging the ability of Mortgage Electronic Registration Systems to foreclose on a California man was filed with the Supreme Court Monday, making it the first major MERS case to reach the nation’s highest court.

Get that: no foreclosure has taken place. The plaintiff is disputing the use of MERS in a foreclosure. But his counsel’s statements make it sound as if he is challenging the validity of non-judicail foreclosures generally:

“Ultimately, what this case is saying is if you are going to be taking someone’s home away from them, do you have the proof or the right to do so?” Gersten said. “If the Supreme Court starts to question MERS, and its business structure, it is going to have an effect on every MERS case in the country.”…..

Gersten argues his client “was entitled to proof that the loan servicer, trustee or an entity such as MERS, either named in the deed of trust or acting through assignments of interest, had legal authority on behalf of the promissory note’s current holder to foreclose.”

I welcome input on this one, but as I read it, to satisfy the standard articulated by the plaintiff, that of proof, would require judicial action on every foreclosure, which means there could be no such thing as a non-judical foreclosure state. A writeup in Roger Berhnhardt’s blog failed to clear up matters for me.

The issue of the validity of the actions of parties engaging in foreclosures in non-judicial foreclosure states has come in various contexts. For instance, in Oregon, a number of judges have found that the use of MERS is in violation of the state’s registration requirements, and one judge’s ruling suggested that MERS foreclosures would have to be judicial foreclosures, which would be a huge procedural change. In Washington, the state attorney general has filed suit against the Bank of America foreclosure trustee Recon. The trustee is required by law to act in a neutral manner, but the AG’s office has found numerous instances of pro-bank bias which Recon has allegedly refused to remedy (as well as failing to have an office in state as required by law). That’s a long-winded way of saying procedural challenges are not unheard of, but this one seems to be awfully broad, in addition to having other warts (such as raising a new argument at this late date). This case is thus almost certain to be a non-starter from the Supreme Court’s vantage.

Given that the Supreme Court has ruled for over 100 years that “dirt law”, meaning real estate law, is a state matter, we’ve deemed it unlikely that the Supreme Court would intercede in the foreclosure mess.

Given that the number of legal battles over mortgage securitizations are escalating rapidly, and securitization law is a cutting edge area, one can expect other filings of this sort. While the Roberts Court has shown itself to be political and creative in the worst sense of both words, I’m not certain it will yield to the fond wishes of the banks, that of reversing itself on jurisdiction over real estate. It would not be that this Court has out of nowhere developed a sense of propriety, but that the Republican party has grown fractious, with the Tea Party being both firmly anti bank and anti Federal intervention. In other words, for a politically sensitive court, the tide of conservative sentiment may be changing in a way that makes it much more difficult to give the banks “get out of liability free” cards.

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37 comments

    1. aet

      I still cannot believe that somebody dusted off that hoary old “peak-coal”bullshit from the 1930sm, dressed it up and sold it as an explanation for why less oil is being pumped, while completely ignoring the war in Iraq, the endless agitation in the Middle East, and the sanctions on Iran:

      http://warnewstoday.blogspot.com/

      These peak oil guys sure are confident in their ability to tell the future. Why?

      I think they are full of s***, and only seek to talk up the price of oil”; and to indulge their selfish and delusional conceit, that they themselves are members of some “last generation” predicted by yet others who also “knew” what the future would bring, and that it is their ‘duty” to “tell the world” so.

      But hard stats ? That’s not their “forté”….

      Oil was 11$/bbl when GW Bush entered Office.

      1. F. Beard

        There once was a banker Bernanke,
        well versed in all Fed hanky-panky.
        He tried many things rotten
        with linen and cotton
        but ended up with nary a “Thank ye”

  1. Patriot

    The problem is that as a result of Gomes, some courts are refusing to hear declaratory judgment causes of action.

    This effectively means if someone shows up with a deed of trust and claims assignment, they can foreclose on your house –and you may have no recourse.

    This is wrong.

      1. Binky the Bear

        Not true. Multiple persons have come forward with cases where they have never had mortgages-paid cash for a house-and had servicers foreclose on them with forged “robosigned” documents.
        Try and keep up with the news.

  2. bmeisen

    Wouldn’t the scale of the problem also influence the Court’s willingness to get involved?

    Assuming there are about 100 million mortgages, about 60 million are registered with MERS. 20% of all mortgages are underwater, and probabyl more than 12 million of those would be with MERS. If about 2% of the total are in foreclosure, and if most of those are with MERS (because they’re scam-based) then potentially 2 million MERS related foreclosures are being processed, the majority of which in non-judicial state regimes.

    How many of those are being seriously challenged? 10%. 200,000? 100,000 in judicial contexts? MERS and their handlers settle as many of those as possible quietly but a goodly number get appealed, let’s say 20,000?

    Ultimately the macro effect could determine if the Supreme court steps in.

    1. aet

      Oh, the ‘macro” effects are to determine the justice of the case?

      How are those “effects” to be determined? With what evidence, at the Supreme Court level? AFAIK, there’s no witness stand in that courtroom!

      What about letting the Law determine the result?
      Rather than going with “simply what the Justices desire”?

      1. Kyle

        What about letting the Law determine the result?
        Rather than going with “simply what the Justices desire”?

        Any chance of that went out when the Brezhnev-Repukes stacked the court with ideological party hacks. The Roberts court will always rule, in every sense of the word, for the corporatists.

    2. mickey redmon

      You speak as if the Supreme Court weren’t a bought and paid for arm of the fascist government. Have you forgotten “free speech” for corporations? Or the 2000 Florida voting fiasco?If there were any real law in this fukt up country the banks wouldn’t have been bailed out and people would be tearing up their “death notes” (mortgages) and using tehm to wipe their asses.

  3. Jim Haygood

    I hear the appeal brief was robosigned by Linda Green.

    Nine doddering old seniors will never notice! :>)

    1. aet

      I would not say that to their faces, if I were you.
      And I see what respect you have for the Law, too.

  4. Meanwhile, in Detroit

    “Fannie Mae has a lot of responsibility for our current foreclosure and mortgage crisis, although it has not been reported on much. That’s changing.” – Abigail Field (abigailcfield.com)

  5. The Scalia Technique

    Yes, let’s get this in front of John Roberts.
    ” In case after case, the five hard-core Republicans of the Roberts Court have been chopping furiously at the hard-earned legal rights of workers, consumers, voters, and others who dare to challenge the power of big business elites to reign over us, both politically and economically. “

    1. aet

      That’s what you get when people don’t pay attention to politics for three or four decades.

      The Republicans still refusing to green-light Obama’s appointments? Of course they are…but hey! Look over there instead!

      How many of Clinton’s Fed-level judicial appointments did the then Repub Congress green-light?

      None. Right? But nobody paid attention, as there were other “entertainments” provided.

      So now we have Republican Judges, deciding cases based on what their “gut” tells them to do. Rather than what the Law requires.

      In fact, it seems that the Supremes have given themselves veto powers over the Legislature….no universal state single-payer Federal medical insurance medicare for you!!

      Why? “It wouldn’t be just to reduce the options available to the wealthy”.

      1. required

        remind me again which republicrat was it that signed the final repeal of Glass-Steagall?

        which republicrat invaded libya?

        which republicrat extended the “patriot” act?

        $ave the Rich: Vote D or R!!

  6. Vengeance is best left to MERS

    “Justice ANTONIN SCALIA (U.S. Supreme Court): And I suppose it’s the same thing about so-called torture. Is it really so easy to determine that smacking someone in the face to find out where he has hidden the bomb that is about to blow up Los Angeles is prohibited by the Constitution because smacking someone in the face would violate the Eight Amendment? In a prison context, you can go around smacking people about. ” (NPR. 2008)”

    1. aet

      When reasoned argument does not convince, they start to slap people around to get them to “see” the “error” of their ways.

      As with “heretical” state-forbidden religions of old, so it is with drug-users today.
      In fact, some say that the extirpation of heresy – (…or is it “unauthorized” drug-use now? Yeah, that’s it) – is said to be the only legitimate function of the State and Law, as property can hire its own muscle for its protection.

      15 years minimum for unwitting drug possession in Florida, right?

      1. aet

        How many Protestants on the Supreme Court nowadays?

        Or is it now staffed entirely by people who themselves have had little or no problem following the absolutist moral diktats of their “religious elders” as they lived their lives? Diktats which are usually said to be, and treated as being, “incontestable” – if you are to maintain your membership in those faiths?

        ONLY Roman Catholics and Jews on the Supreme Court? To protect the liberties of the individual?

  7. brian

    The problem is, it is a viable due process issue when the accuser can’t appear because in may cases it doesn’t exist.

  8. brian

    they said the same thing about real estate law as they did about election law
    a matter for the states to each regulate as its applies to its own citizens
    then came 2000 and Bush v. Gore
    the court has shown itself more than willing to advance political agendas

  9. indio007

    I think this case might be taken up because California law provides no remedy whatsover for wrongful foreclosure by a party with no interest. MERS has effectively kept the true owners of mortgage notes secret. They have no duty to show ANY proof or even evidence of ownership to anyone… EVER… and the borrower has no recourse.

    This seems like a due process violation to me.

    The case is here.
    http://scholar.google.com/scholar_case?case=9058751108734324353

    I suspect there are many properties that have been stolen this way.
    California has firewalled any verification of ownership.

    I say Gomes should go foreclose on the California Supreme Court members and legislatures so they can see what it’s like to have to defend against a stranger to the transaction. It is excessively difficult even if your payments are current.

  10. bdw

    Hi Yves,

    Thanks for your efforts on this blog!

    California law requires an assignee to record their assignment prior to foreclosing. http://law.onecle.com/california/civil/2932.5.html

    If MERS obscures many of the mortgage assignments and now “as a business practice” has the final assignment from MERS to the foreclosing entity recorded in the county recorder’s office, hasn’t MERS circumvented the non-judicial process by obscuring HOW the foreclosing entity attained standing. Put another way, what is the difference between a foreclosure with MERS listed as a nominal beneficiary in the chain of title and Scalia standing on the corner demanding your house with a piece a paper he printed? In California, there is none.

  11. LMS

    I am not a fan of the Gomes case, which has made it more difficult to challenge wrongful foreclosures here in California. But I do not think it will be taken up by the U.S. Supreme Court. If you read the opinion carefully, it states that Gomes did not allege any specific facts demonstrating that the party initiating the foreclosure was not the proper party. Now, if another case comes up on appeal where such allegations were made and still the borrower is denied an opportunity to litigate – then you may have a due process issue. How specific do the allegations need to be to survive demurrer? That is the front line of the battle right now, although it may take a while for the right case to go up on appeal and make law clarifying the scope of the Gomes opinion.

    In response to bdw, Civil Code 2932.5 by its express language applies to mortgages, not deeds of trust. They are not the same thing. Case law is divided on this issue but most opinions I have rejected attempts by borrowers to invoke Section 2932.5 in foreclosures involving deeds of trust.

  12. indio007

    Let’s stop playing games here. We know the purpose of this obfuscation over ownership is to backfill the securitized trusts ex post facto. I mean c’mon, spreadsheets as evidence of what’s in the MBS????

    There is a section in Corpus Juris on Bills and Notes that says a transfer made solely for the purpose of defeating defenses of the maker is not a good faith transfer. This is all that MERS really is. It’s a shell game behind a curtain.

    Sorry you lose again. I swear you didn’t pick the shell with the ball under it … No you can’t see it…

  13. M.

    My understanding is that first the Supreme Court formally agrees to hear a case. Is this the stage you’re referring to — the *request* that they hear a case? Not their agreement to hear the case?

    Assuming that is the stage the matter’s at, yes, the odds are way against the Court hearing it.

    But if they do, as you note, this is state issue they’d be unlikely to mess with. However, this Court is a highly political one — well, the majority’s a bunch of party-liners without much respect for the law. If there’s a states rights issue requiring a finding against MERS, it’ll happen. Otherwise, this Court is highly unlikely to hold against Big Finance.

    Sadly, my expertise gives out before I can place any odds….

  14. Herman Sniffles

    The other day I said I hadn’t seen any instances of title problems gumming up real estate escrows in my admittedly small sample (a one retired-man real estate office in Podunk Nowhere, CA). What I am seeing are many, many properties that are hung up endlessly in the foreclosure process, and properties that are in complete limbo: the owner has stopped making payments for months or years, but the bank has not initiated foreclosure. In one instance a man I sold a house to called B of A and tried to force them to take it back from him. They refused. They told him they’d take it back in their own sweet time, and that it was his responsiblity to keep an eye on it until they did so. He hasn’t made a pament in over three years, and the house is now full of meth users and thieves who are screwing up the neighborhood. I wonder if, in California, the banksters have the policy of just not foreclosing rather than foreclosing and ending up with a title mess in escrow??

  15. Nathanael

    California is, obscurely, a “deed of trust” state. This means that California law *really* doesn’t generalize to other states (title theory and lien theory states).

  16. Just Me

    Shanikka on Daily Kos covered the Gomes case in February 2011 when it lost on appeal in California:

    http://www.dailykos.com/story/2011/02/21/947501/-The-Show-Me-the-Note,-MERS-DefenseA-Cautionary-Tale

    But, more ominously, the court also held that if all someone challenging a foreclosure has is the belief that their loan might not have been transferred properly as part of the securitization process, that homeowner has nothing at all and cannot come into court to challenge the sale of their residence. Effectively, this decision sharply reduces the ability of California homeowners, who normally don’t have access to the internal files of their lenders, to get the foothold they need to actually prove they are right — the foothold called “discovery.” This part of the ruling not only affects non-judicial foreclosure, it is likely to bleed over into judicial foreclosures as well.

    This means that at least for now, the show the note defense is now likely dead here in California.

    more at the link

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