Daniel Pennell: Mortgage Shenanigans in Virginia (The Wall Street – Washington – Richmond Axes)

By Daniel Pennell, a systems expert who has testified before the Virginia House of Representatives on MERS

This week demonstrated how financial special interests have created an obscene and incestuous relationship with the leadership in the state legislature and the Governor’s office in Virginia. This cabal managed to kill off a bill (HB-1506) proposed by Delegate Bob Marshall, a bill designed to protect the integrity of the county property records and preserve the integrity of home owner’s title to their property. Simultaneously they attempted to alter the Uniform Commercial Code (UCC) with HB-1718, such that any “record” (the previous version said document) signed or unsigned by a person they claim owed a debt would be good enough for the banks to win a legal judgment against a person. In other words a spreadsheet from a bank would be good enough to take someone’s home or report someone to a credit bureau. This was in direct response to a Supreme Judicial Court decision in Massachusetts, Ibanez, where the court said that a bank had to have proof it owned a mortgage before it could foreclose.

The problem that HB-1506 addresses originated in 1995 when Wall Street banks took upon themselves the authority to replace the existing public land title recordation system with its 300+ years of successful history, with a member’s only private system. This system called the Mortgage Electronic Registration System (MERS) gutted the public property records and left millions of homes with questionable titles. This was done without any government approval and against the recommendations of the title industry and the county recorders. MERS has been found by 10 state supreme courts to be acting illegally and is currently being sued by CA, NV, TN and 14 other states. The Federal Reserve, Office of the Comptroller of the Currency (OCC), regulator of the national banks and the FDIC are investigating MERS for questionable business practices and for the systemic risk it poses to the nation’s financial system. The CEO resigned last week. Speculation in Washington has the OCC taking over MERS and nationalizing our land records, a clear violation of states’ rights.

Delegate Merricks submitted HB-1718. Bills to change the UCC are rare because the implications of unintended consequences are usually substantial and unforeseeable. The bill summary on the Legislative Information System (LIS) says the bill is intended to address recent court decisions and changes in technology. There is no question that the bill was targeted at both protecting MERS and avoiding a court decision in VA similar to that in MA. Delegate Merricks, member of a bank board and a former vice president of a bank, seems to suggest that take the home first and then figure out who actually is entitled to do so later. Never mind the risk to title that a future buyer of a foreclosed home faces or that we have situations in VA where multiple banks are foreclosing at the same time on the same person. In that fight the winner gets the house and the loser the right to sue the borrower for the loan amount.

The banks wanted HB-1506 killed and HB-1718 passed to protect MERS and, I believe, to avoid providing proof to mortgage investors that they were defrauded. The requirement to record would have provided evidence to investors in mortgage backed securities (MBS) that what they bought was empty; the mortgages were never legally transferred to the MBS. In my humble opinion if you sell someone a security that you claim is backed by collateral when it is not then that would be securities fraud. Among these investors are Fannie Mae and Freddie Mac whose losses are being paid for with tax dollars to the tune of billion of dollars. Other investors include state and private pension funds. The total exposure to the banks exceeds $1.5 trillion. You can see why they would fight so to avoid a $21 fee and the right to use their own “records”.

HB-1506 was killed by the Speaker of the house (Delegate Howell), the Chairman of the Courts Committee (Delegate Albo), the Chairman of the Civil Subcommittee (Delegate Athey) and the governor’s office.

Delegate Howell, the Speaker, sits on the board of Virginia Heartland Bank.

Courts Chairman Albo received 13% of his campaign funds from the VA Bankers Association and more from two major bank servicers.

The lobbyist representing the bankers, Matt Bruning, at the hearing of the Civil Subcommittee was a former aide to the chairman of the subcommittee, Delegate Athey, and an aid to the governor.

A reason given by Delegate Athey for not passing HB-1506 on was that the governor’s office in the person of Terri Suit, head of the governor’s foreclosure task force sent a letter asking the subcommittee to hold off and let the task force work on it. The Virginia Public Access Project reports that Terri Suit, ,chair of the Foreclosure Task Force, was a paid lobbyist for the Mortgage Lenders Association and the “private” members of the Task Force largely comprise representatives of the mortgage industry.

HB-1718 was pulled from the floor when Delegate Marshall threatened to attach an amendment excluding mortgages from the language. Had the speaker left it on the floor, the members would have had to record a vote on the amendment and with the amendment there no longer was reason to pass it. Delegate Merricks sits on the board of Virginia Bank & Trust and has 25 years in the banking industry.

The relationships are so inappropriate as to cause any reasonable citizen to question the integrity of the process.

A survey released today in the Financial Times shows that Americans trust of all large institutions is at an all time low with only 25% of American saying that they trust financial institutions.

A survey published last week ranked Virginia as the country’s second most corrupt state only after Tennessee.

The citizens of Virginia appear to be making an accurate assessment based on the shenanigans going on in Richmond this week.

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  1. psychohistorian

    It certainly sounds like Virginia has the best government anti-social money can buy. As a victim of local corruption in Portland, Oregon, I can tell you Virginia is not alone.

    There needs to be house cleaning top to bottom, stem to stern. But before that can happen there needs to be a crisis that jolts the masses out of their lethargy enough to bring down the current “system” and eliminate the existing social control structure (i.e. the rich, for whom corruption is a feature, not a bug).

  2. attempter

    Speculation in Washington has the OCC taking over MERS and nationalizing our land records, a clear violation of states’ rights.

    When I attacked proposals like Kaptur’s to federalize land records I used the rhetoric that “they want a nationalized MERS which the banksters will still run”.

    This sounds like I was more precisely correct than I realized.

    Any federal bill would be unconstitutional on several grounds. The Virginia bill is also unconstitutional according to the 5th amendment.

    When are we going to get our own 5th amendment “takings” movement going against the banksters?

    The slogan could be something like:

    The Bank Can’t Take Until it Produces the Note.

    1. Stan

      I agree with your sentiment but have to study my con law again. Their solutions are really sloppy and arguably unconstitutional which demonstrates what a serious pickle their greed and laziness has put them in. I have my doubts that this isn’t part of an uncoordinated strategy. What I have no doubt is that the mortgage/securitization industry is cooking up some serious back door bailout action. I have to read that 3rd way democratic think tank proposal Yves published last week. This is going to get seriously weird and I hope the public has been sensitized enough to bailouts to smell-out the sell-out this time. We will see.

    2. Yves Smith Post author

      I did take Pennell’s post as written, but none of my DC sources (who are very plugged in) have heard of any such effort. So this may be deliberate misdirection they are running in Virginia to justify killing the MERS bill.

  3. sherpa

    Is there any issue with forwarding this post or placing it on the Free Lance Star and Richmond Examiner’s web site?

    One of the ironies about this is that McConnell, Howell, and Cuccinelli are all big advocates of States’ Rights versus the Federal Government and want a Constitutional Amendment where a vote by 2/3rds of state legislatures can repeal any Federal law.

    1. Stan


      Those who clamor for states’ rights are very often veiling frustration that the fed is inhibiting their ability to follow their own local monied interests. The States’ rights pose is often just an argument of convenience and this story demonstrates that again.

    2. Daniel Pennell

      I have no issue with people sharing or publishing anything I write. This is not my profession it is something I do from a sense of indignation.

      Rarely do I agree with Speaker Bohner…but I agree with his sentiment that I do not recognize my country anymore.

      If you can convince the local papers to run the Oped in the districts where the speaker and the courts commitee are then God bless you.

      1. f247

        Many thanks for your insight in this post.

        Given your understanding of the state politics, do you have any thoughts on the endgame here? or where things head from here?

        Is it now up to the FC Task Force to provide a recommendation?

        Thanks again.

        1. Daniel Pennell

          I really have no idea.

          I guess that they could take it up again if enough people complain.

          I took it to the US Attorney in Alexandria and to the FBI but they indicated that this was probably just politics as usual. Unseemly but not illegal in all probability.

          It really is up to people to call and write and complain.

  4. India

    McConnell is behaving like a “place holder”; Howell is apparently owned by the banks and bank lobby and Cuccinelli has his “hobby horse” which is his big fight against Obama’s Health Care muck-up. In other words, they’re not in the least concerned about their citizens/resident’s property rights.

    I wrote to Cuccinelli two months ago regarding the 14 day rule for foreclosure, forced sale, and emphasized the fact the MERS is a Virginia resident-business; in Reston, Va. I expected, at the least, a form letter from the state house computer thanking me for my interest. Apparently his office sees no need to even pretend to care about anything other than “his issues”.

    As for the local papers…..maybe Northern Virginia Daily would entertain the idea of an article. Contact Alex Bridges or Monty Tayloe. Loudoun Times may do it as well. Winchester Star, unlikely. Mr. Byrd, the publisher, is not all that open to any concept that “annoys” TPTB and he controls all of the editorial positions and letters that are published.

    As for those who are big advocates of State’s Rights, it’s essentially their concerns they intend to promote if they manage it. The “great unwashed” are not on their agenda.

  5. Daniel Pennell

    BTW…Guess who just became a Co-Patron of HB-1506?

    The Cliff Athey, chairman of the same subcommittee that killed the bill.

    Kinda late on that.

    I would like to believe that it was a change in his conviction but it cost him nothing to do it as the bill is dead. So he placates the Speaker and Courts Committee Chair and then can claim he is a patron of the bill.

    You want to impress me Mr. Athey…Bring the bill back to the committee. THAT would take guts and be an action worthy of admiration.

    1. India

      I’m sending a letter, certified, to Athey to request that he do precisely that. I concur that this likely a “kabuki move” and signifies nothing of import.

      However, he may not know that his name is being published on blogs or that some of us plan to write letters to the editor of local papers indicating his complicity in the bill’s demise.

      Again, perhaps too little too late but finger-pointing, en masse, occasionally has its merits. I suggest anyone and everyone who wants to keep this alive do the same. Write to Athey, Albo, Howell, Cuccinelli and send copies to Marshall, the actual author and patron of H.B. 1506. Also to the one holdout in the voice vote, can’t recall her name. Need to find the article

  6. jpe

    MERS has been found by 10 state supreme courts to be acting illegally

    That’s an inaccurate characterization. They weren’t “found illegal,” they weren’t able to protect the rights of mortgagees as MERS expected. People can continue to use MERS in those states (it’s not illegal), but they’ll lose certain rights to notification.

    is currently being sued by CA, NV, TN and 14 other states.

    I did some searching and found exactly zero evidence of that claim.

    The banks wanted HB-1506 killed and HB-1718 passed to protect MERS and, I believe, to avoid providing proof to mortgage investors that they were defrauded.

    The law is effective as of July 2011, so its applicability to existing structures isn’t clear.

    1. ScottS

      MERS attempted to foreclose in it’s own name and was told to pound sand. It attempted to foreclose on property it didn’t own. MERS “delegates” made up fraudulent affidavits and forged paperwork.

      You don’t call that illegal? Fine. Then they can quit wasting my tax money by backing up the court system and just go home. Bunch of amateurs.

      1. skippy

        Can’t help myself here, your tax monies cannot be wasted as they are only collected to give what little credence your banking cartel…cough…government backed fiat dollar mark to myth amusement park token…some token…*reality*. Too whit…most of what we think of as currency is just electrons racing around the planet, why do you think they build such elaborate black boxes…eh…one good solar flare, one big power surge, long disruption of electrical supply and *POOF* its all gone. These electrons and the information they represent are more important to the present system than humanity it self…millions nay 10s of millions would be allowed reduction if not death before their corruption (electrons) would occur…getting the big picture now…electrons are more important than humanity it self…save the monetary priests themselves.

        History is chocker block with examples, save one distinction, it is now a global and not localized risk of failure.

        Skippy…once you leave the amusement park for a bit…those pieces of writ promise…serve little more than fire starter.

        PS. concur MERS is a sham from conception, it was designed to off set risk aka loot with legalistic remoteness.

    2. Daniel Pennell

      Try Google and a little time.

      Here is a sample.





      1. jpe

        You’re misreading the articles (which, to be fair, are terribly written and misleading). Here’s a snippet:

        MERS is “an admitted fee-avoidance scheme,” says Robert Hager, the Nevada lawyer who, along with his partner Treva Hearne, is filing the suits against MERS and its bank owners, including the government-backed mortgage finance companies Fannie Mae and Freddie Mac. Fannie and Freddie provide a flow of funding to the nation’s mortgage markets by buying mortgages from lenders, packaging them into securities and selling them to investors.

        These are suits by *private parties,* not by the states.

      2. jpe

        The second comment on the board you link to nails it:

        It is not CA that brought on this suit, but rather Barrett Bates, a realtor from NV acting in qui tam. He has filed similar suits in other states as well. No idea if any of them have been heard yet or what the statuses are. Now, if this was a suit filed by the CA AG, that would be something, but this, at least for me anyway, is old news. No offense to you of course

        IOW, the states are not suing. You should be a little more critical and a little less trusting when you read news stories.

  7. mannfm11

    The use of the word technology makes them sound smarter than the system. Bullshit can’t be improved on. There is absolutely nothing to do with technology, but instead to move this paper as fast as they can before it goes sour.

    There isn’t a requirement anything be recorded. There is a requirement that title be passed through contracts, in this case assignments. There has to be something that is recordable. There isn’t anything at MERS that is recordable. You would think they would be able to afford to sit down and sign 1000 documents in a $200 million deal wouldn’t you (1000 times $200,000). The problem is the patient (mortgage) might die on the way to the hospital (trust) or they might have to actually move the paperwork. Of course, no one seems to know where the paperwork is that would reveal the rags that they put in the files.

    When I read stuff like this I really get mad. Banks extend credit on our property, not theirs. Now they are trying to steal the records of our property. The government officials that are helping them should be charged with treason, tried and hung in a public place. When I use a credit card, the bank creates money on the goods the merchant sells me. When they loan on a house, they create credit on the equity that belongs to the person that owned the house. They don’t lend a damn thing and it appears they don’t do anything but stuff money in their pockets and bill the government when their scams fail.

    Many of our founding fathers talked of bankers as if they were rat and other vermin. Stuff like this must have happened before. These people are thieves. The Bear Stearns story in the Ambac suit yesterday was astounding. To think this has been out there for 2 years and this guy is still walking around, handling business in one of America’s banks is absurd. Why don’t they dig up Dillenger or Clyde Barrow, pump some life into them and give them the key to the door and the combination to the vault, along with a nice bag to carry out the cash. To vote something like proposed in VA or to let MERS take over the land title records would be at least as bad.

  8. Tuan Helfgott

    Poor credit mortgage lenders, often referred to as sub-prime lenders, are lenders that offer loans to individuals with less than perfect credit numbers. Due to recent record low rates, a lot of borrowers are making the decision to purchase their first house or renew the financing of their current loan to obtain a better interest rate.

  9. Joe K

    “A survey published last week ranked Virginia as the country’s second most corrupt state only after Tennessee.”

    This is shocking…..what is the source for this?


      1. Joe K

        OK…that’s a start. If you’re talking about the Loudoun Times Mirror, what issue? I periodically read the Times and don’t remember seeing that article.

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