A report from CNBC yesterday, November. 2010, announced that the Obama Administration and Congress are working on, and ‘may consider’ a bill for the Lame Duck session to ratify MERS as a legally credible entity and limit its liability in major parts of the foreclosure fraud debacle.

The Mortgage Electronic Registry, Inc. is a private organization set up by the big banks to electronically track mortgages from the original holder through the system for resale, often in the opaque bundles of securities at the root of the financial crisis.

 There has been increasing evidence that the forty (total) MERS employees ‘handled’ millions of mortgages shoddily at best, fraudulently at worst.  This is my understanding of two key issues:

One is that the titles to many properties have been ‘sliced, diced, and tranched’ (in the popular vernacular) so thoroughly that clear titles are now impossible, and will be far into the future if they can indeed ever be legally clear.  MERS and crap judges should not be able to pretend that their falsified, but notarized, documents are valid; this practice has led to foreclosures recently when no one actually holds clear, unambiguous title to a property.  There have even been cases reported in which multiple claims have been presented against the same homeowner in foreclosure notices. 

Imagine buying a house next year, making your payments for ten years, then being presented with news that an individual, a bank, or a mortgage company claims to have a clearer title to the place than you do!

The second issue concerns states and counties and the registration of property sales.  Apparently the MERS system avoided the local state and county government regulations of ‘wet ink’ document filings, partially to avoid the required filing fees.  While there have been objections, most jurisdictions didn’t have the resources to fight the banks on MRS issues, and the few that took it to court were told by judges that they didn’t have the legal standing to enforce their local filing laws or collect their fees.

AP reports on the potential impact this has had on counties and states:

“Assuming each mortgage it tracks had been resold, and re-recorded, just once, MERS would have saved the industry $2.4 billion in recording costs, R.K. Arnold, the firm’s chief executive officer, testified in 2009. It’s not unusual for a mortgage to be resold a dozen times or more.

The California suit alone could cost MERS $60 billion to $120 billion in damages and penalties from unpaid recording fees.

The liabilities are astronomical because, according to laws in California and many other states, penalties between $5,000 and $10,000 can be imposed each time a recording fee went unpaid. Because the suits are filed as false claims, the law stipulates that the penalties can then be tripled.

Perhaps even more devastatingly, some critics say that sloppiness at MERS—which has just 40 full-time employees—may have botched chain of title for many mortgages. They say that MERS lacks standing to bring foreclosure actions, and the botched chain of title may cast doubts on whether anyone has clear enough ownership of some mortgages to foreclose on a defaulting borrower.”

Mortgage Consumer advocate Neil Garfield says insiders have leaked the plans; his take is dramatic:

"After years of negative judicial decisions about the use of a straw-man on mortgages, MERS was about to lose its existence as well as its credibility. But now all of that is set to change as Wall Street money is pouring into the coffers of those who are receptive (i.e., almost everyone in Congress). The legislation is already being drafted under the interstate commerce clause to ratify MERS and everything it did retroactively. It appears that the Obama administration is ready to pardon all the securitization deviants by signing this bill into law. This information is corroborated by several people who are in sensitive positions — persons who would be the first to know such proposals. Fortunately, there are some people in Washington who have a conscience and do not want to see this happen."

(Sorry; I can't get the Bold out of the following text):

We know what rewards the banks can offer to Congresspeople to pass laws like this; we know the excuses which they use to justify voting for things like this.  Ack!  The costs to the banking system would be catastrophic!  If we don’t paper over these frauds, or we let the penalties for the end-runs around state law mortgage filings occur, it will cause further meltdown!

Watchers warn that the bill will likely sound benign, and simply assert some federal ascendancy over state law, if I get the drift.  Many who understand the foreclosure fraud best have indicated that contract law and property rights are dead as we knew them, and that for college graduates for years to come, The Law will be the most lucrative field to pursue.

This subject is obviously outside my wheelhouse, so I welcome your takes and opinions.  But it seems that if this effort is already in the works, it tells us that Bank Balance Sheets are more important to our government that People are, and that not once of will be exempt from the disasters this will cause, even to our individual property taxes.

Surely there is someone in the federal government who will champion the Rule of Law, the states, the counties, and the People.  All I can think is that we search online for more information, and contact every member we can and make clear our objections to this rumored perfidy—and soon.  Lame Duck starts on Nov. 15.

Emptywheel has more.  The most recent comments have suggested search terms for internet digging.  One commenter makes this great point:

"Retroactive protection, like retroactive punishment, is expressly forbidden in Article One, Section 9, Sentence 3 of the US Constitution, written 2 years before the Bill of Rights (1787) and passed 2 years before it (1789): “No Bill of Attainder or ex post facto Law shall be passed.” It doesn’t say “maybe” and it doesn’t say “sometimes;” it says “No.” Ex post facto is Latin for “after the fact.” That’s Article One. Any politician who claims this is legal should be disbarred and removed from office for malpractice. No journalist should let ex post facto laws or Bills of Attainder pass.”

(AlthoughSheila Bair of the FDIC recently sent up a trial balloon to offer cutting underwater mortgages by 25% in trade for indemnifying the Banks…) Oy.