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You may want to keep an eye on a new wave of lawsuits arising out of the foreclosure crisis that is rocking the industry. When mortgages are bought and sold, the purchaser is supposed to register the purchase. A company by the name of Mortgage Electronic Registration Systems, or MERS, was created by the industry and specialized in electronic registration. The company was designed to save the time and inconvenience of making a trip to the courthouse and paying filing fees.
It's no small company. MERS keeps track of more than 64 million titles, and handles over 60% of the new mortgages created. However the USA TODAY highlighted a recurring problem involving foreclosures in a piece Monday profiling people like Randy Persten. Persten's morgage was forclosed in 2008, but according to the paperwork he received, the foreclosure action was being brought by MERS. Problem is, he had never heard of them and couldn't figure out why he would owe MERS money. His attorney successfully fought the foreclosure, only to see a second action brought by another company claiming to be the true owner of his mortgage.
Persten is not alone is his confusion. According to the article, thousands of lawsuits are being filed contesting the legal powers of MERS. Further, some lawsuits claim that MERS used illegal business practices, such as using flawed documents to establish that it has the right to foreclose on a house.
This comes as states and the federal government are questioning whether mortgage companies properly verified and notarized documents to obtain foreclosures. While it is certainly good to get to the bottom of the issue, it is likely to add even more uncertainty to the foreclosure crisis and drag it out even further. Bank of America has suspended foreclosures nationwide, while JPMorgan Chase and GMAC Mortgage have suspended foreclosures in 23 states.
So what will happen next?
"This will be resolved legally. Will it take years? I don't know," says Guy Cecala, of Inside Mortgage Finance, USA TODAY reports. "Like everything else, it's a mess."