We probably should have known that there was something wrong, when our mortgage payments went to MERS.
MERS stands for Mortgage Electronic Recording Systems. (Others include ASC American Servicing Company, Litton, etc.). These aren’t banks. These are the companies that service the loans: (bill for the payments; pay the insurance and taxes, etc.). They are also the parties that send the files to the lawyers and are sometimes plaintiffs in foreclosures. But they don’t own the mortgage.
Once upon a time, we worked hard, we deposited our money in our local “Banks”, and when it came time to buy a house, our bank gave us the mortgage. Northfield Bank is still like that, but Richmond County no longer gives residential loans. Others that still make mortgages, but have very strict guide lines are Emigrant, Astoria, and Ridgewood. Locally we have the United Brethrens. These institutions tend to loan their own money (depositors' money) and are very careful and generally don’t run into any problems (although they have an occasional foreclosure because bad things do happen to good people!).
These days, most people wind up going to a mortgage broker, or one of the big lenders (Countrywide, Wells Fargo, etc.). People get mortgages based upon: Credit scores; percent of money put down, (Loan to Value- LTV); and income to Debt Ratio (DTI). Mortgage Brokers and bankers fit their customers into neat little packages based upon the available programs at the time. SONYME, FHA, Fannie & Freddie set criteria from which they lend. But not all borrowers can qualify or “conform” to the guidelines.
For those borrowers, Wall Street developed various products. Since we were in a real estate boom and people tend to respect their home as an asset, Wall Street seized upon the opportunity and got into the mortgage business. Lehman Brothers used their own companies, Aurora and FNBA, to make loans that did not meet the stricter criteria of Fanny and Freddie, and FHA, etc.
Once bundled into a large enough block of mortgages, Wall Street sold these MBS’s, (Mortgage Backed Securities) to AIG, Merrill Lynch, Mutual Funds, and Pension Funds. The United States has the most stable government and economy in the world, so foreigners like to invest here because it is safe: foreigners like The People's Republic of China and the newly rich entrepreneurs in India. So that’s who owns the MBS’s, (although pretty soon it is going to be the US Treasury and the US Tax Payer!). But you do not see any foreclosures where the plaintiff is any of these names.
When mortgage loans are sold, they are “assigned”; and the assignments have to be recorded to be enforceable. Public Records (County Clerk’s Office) may list MERS or one of the other servicers as the record Mortgagee, although they are not the owner of the mortgage.
Many foreclosures are commenced while the real owner of the mortgage, the Plaintiff in the foreclosure, is not the record owner. A Federal Judge in one state decided that if the Plaintiff is not the actual mortgagee, the foreclosure could not continue. Another Judge in another state found that the real owner has to sign the foreclosure papers for them to be enforceable. Of course the problem often is that not even the servicing company knows who the real owner is.
Most of the Staten Island’s judges allow the “servicing companies” and/or Mortgagees that are not of record to maintain foreclosures ; and allow foreclosures to proceed although the real owner of the mortgage isn’t the plaintiff in the action, or the assignments weren't recorded at the commencement of the action, (or not even prepared or signed).
While selling blocks of mortgages is nothing new, they used to be sold in groups where the majority were conforming loans (75-80% LTV), although there were always banks that specialized in less than stellar loans and bad credit. BANKS. It used to be that the Banks made money either by loaning the money and making the interest, or by servicing the loans (making a percentage of the amount collected). Used to be, but that’s not what happened here. More on whom the banks loaned money to in a future email.
So Wall Street told their investors that these MBS’s were just like municipal bonds, only not tax-free. The Port Authority is going to sell bonds to build a new Goethals Bridge. If there is a default, will the bond holders have the right to foreclose the mortgage on the Bridge? I think not. Is this not the same thing?
A customer of mine called me the other day and asked me about a property that was boarded up and had a Marshall’s notice on the door. I went to the County Clerk’s office and reviewed the foreclosure file. The referee’s deed put title into: “Deutche Bank National Trust Company, as trustee for Fremont Home Loan Trust 2006-1”. The house has since been listed on the MLS, and the name of the owner is listed as Premier Asset Services (PAS).
So who owns the Real estate?
………………..to be continued