Monday, October 24, 2011

Psst! Mortgagers have no idea who owns what...

Houston - Tomorrow morning the Harris County Attorney will go into Commissioners' Court and ask for the authority to hire a law firm to sue the title holder for 60 million real property loans in the U.S.

County officials have not taken up the cudgel in favor of homwowners and tax payers.

Their intention is to recoup millions of dollars in recording fees that mortgage packagers have avoided paying.

The controversy is at the heart of lawsuits nationwide in which property owners fighting foreclosure claim the bankers have no standing to foreclose because they have no clear idea, or at least cannot prove, who really and truly owns the properties.

According to Robert Soard, executive assistant to the Harris County Attorney, estimates show there were more than a quarter million deeds of trust recorded in Harris County during the years 2002-2011, listing a Virginia-based mortgage tracking company named Mortgage Electronic Registration Systems, Inc.

A creature of the big banks, MERS is the owner of record, it says, no matter how many times the loan has been sold and re-sold. Too big to fail banks own the majority of shares in the corporation, which they formed in 1995 in order to “streamline” the mortgage banking process. Shareholders include Bank of America, Chase, CitiMortgage Inc., Wells Fargo Bank, Fannie Mae and Freddie Mac.

Harris County has a different opinion. Each time an assignment of a deed of trust is recorded, the County Clerk's office charges $16 for the first page and $4 for each additional page of the document.

If the Dallas law firm of Malouf & Nockels LLP is able to obtain and enforce a judgment against MERS, Harris County could recoup as much as $10 million, assuming each deed of trust has two or more assignments. With penalties, the figure could go as high as $100 million, Mr. Soard told Houston newsmen.

By packaging as many as 10,000 such assignments of deeds of trust and selling them to investors who in turn re-sell them again and again, the banks are able to avoid paying the recording fees to counties.

Nationwide, the MERS system has saved its shareholders an estimated $2.4 billion in recording fees, according to a former CEO who stated the figure in a 2009 court deposition. According to the corporation's website, MERS is “inoculated against future assignments” having to be recorded because it is the lender of record in any case.

Harris County is not alone in its efforts to recoup the filing fees. Malouf & Nockels has filed suit on behalf of Dallas County. Mr. Malouf has filed court papers seeking to “pierce the corporate veil” and discover the true ownership of MERS. If a judge orders it, banks which are part owners in MERS will be ordered to share in payment of the filing fees.

Bexar County is looking at filing a similar suit, according to the District Attorney, who wishes to see that the filing system “comports” with a method that guarantees “the protection of purchasers and sellers of property.”

A similar suit is pending in Hidalgo County where a Mesquite lawyer named Theodore Lyon, Jr., is preparing to file a federal lawsuit alleging violations of the Racketeer Influenced and Corrupt Organizations Act.

“By recording with MERS as opposed to recording with the counties, they've defrauded the counties of hundreds of millions of dollars,” Mr. Lyon said.

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