Journalism in the Public Interest

More on the Foreclosure Scandal and the Mortgage Machine


Photo by Taber Andrew Bain on Flickr.

There are more headlines every day about banks using shortcuts and questionable paperwork to push through foreclosures. A group of 40 state attorneys general is expected to announce an investigation this week into the mortgage servicing industry, while calls for a nationwide moratorium on foreclosures — an idea the White House opposes — have grown louder.

It’s not easy to follow, so we’ve dived in again to explain things.

If you’re just catching up on all this and are looking for more background, CNBC just published a helpful primer about the foreclosure documents crisis, why it’s complicated, and why the issue has recently grabbed public attention, even though homeowners have experienced some of the same problems for years. (And if you like charts, here’s another primer.)

You can also read our Q&A with attorney Geoff Walsh of the National Consumer Law Center, a legal advocacy group for consumers. He helps explain what the foreclosure process should have looked like, and why the problems with robo-signers — individuals signing off without verification on thousands of foreclosure documents that assert, among other things, a right to foreclose — are linked to the problems with the loan modification programs, which we’ve also covered extensively.

Walsh emphasized that the furor over the discovery of robo-signing is a piece of a larger problem that extends beyond sloppy paperwork. The way he sees it, it’s part of a larger pattern that shows banks and servicers have an “intent not to comply with laws.”  

CNBC’s primer also raises this possible explanation of why the sloppy paperwork and robo-signing could be just scratching the surface of a bigger problem:

Now, if the problem truly is just sloppy work on the part of robo-signers, banks can likely resume foreclosures before too long. But many suspect that the reason banks were falsifying their knowledge about the possession of loan documents is that the banks do not actually have the documents and don’t know where to find them. This could permanently impair their ability to foreclose on some properties. … The most damaging thing that could happen to banks would be the discovery that they simply cannot prove they hold a mortgage on a house.

News of this kind of trouble has been bouncing around since the housing market first hit trouble three years ago (reg.). Banks' selling off mortgages to Wall Street resulted not only in loosened lending standards, it also seems to have resulted in loosening bookkeeping practices. A key player in that part of the story has been the little-known Mortgage Electronic Registration Systems, or MERS.

The little-known company in the middle of major chaos

MERS is essentially a confidential directory created and owned by banks to keep track of mortgage paperwork. It has tracked (or failed to, depending on whom you ask) exactly who holds owns the mortgage and has the right to foreclose on millions of American homes, should the homeowners default.

For instance, check out this 2009 New York Times graphic, which shows why MERS — which was designed to “reduce paperwork” and provide “clarity, transparency and efficiency” to the housing finance system — in some cases had the opposite effect. More from the Times, which reported in 2009 that MERS has saved banks more than $1 billion in the last decade, while making life “maddeningly difficult for some troubled homeowners”:

If MERS began as a convenience, it has, in effect, become a corporate cloak: no matter how many times a mortgage is bundled, sliced up or resold, the public record often begins and ends with MERS. In the last few years, banks have initiated tens of thousands of foreclosures in the name of MERS — about 13,000 in the New York region alone since 2005 — confounding homeowners seeking relief directly from lenders and judges trying to help borrowers untangle loan ownership. What is more, the way MERS obscures loan ownership makes it difficult for communities to identify predatory lenders whose practices led to the high foreclosure rates that have blighted some neighborhoods.

Over the weekend, MERS defended its practices and its CEO, R.K. Arnold, said in a statement that “MERS helps the mortgage finance process work better.”

The company also noted that courts have ruled in favor of MERS “in many lawsuits, upholding MERS legal interest as the mortgagee and the right to foreclose.”

But that’s not always been the case, and the company is now, more than ever, likely to be challenged by homeowners on that front.

A draft report on MERS released earlier this month — before the furor over foreclosure documentation really took hold — raised some ongoing questions about the legality of MERS’ role in mortgage lending and foreclosures.

The report’s author, University of Utah law professor Christopher Lewis Peterson, noted that the common practice of using MERS as both a record-keeper and an entity having the right to foreclose on a property for the banks is legally incoherent. According to Peterson, it usurps a longstanding tradition of local governments' retaining records on property ownership. It also saves the banks money by allowing them to skirt recording fees that would otherwise go to these county and state governments.

Could you imagine what it would be like if Obama did not pocket veto HR3808 that the House passed on a voice vote and the Senate by unanimous consent!  I guarantee when the world leaked last Thursday that HR3808 was sitting on Obama’s desk the heat poured on.

to save the usa, you failed to mention WHY the President won’t sign it. It needs more work. The bill passed would cause more not less problems for homeowners in danger of losing their houses.

You seem to be as bad as the teabagging/gop, leaving out the complete facts.

Dominick Mastroserio

Oct. 12, 2010, 4:53 p.m.

We just don’t learn. 

We keep on trusting the least honorable and most corrupt among us…the rich.

And then are shocked that they conned and fleeced us.

Having money can never imply being trustworthy. 

Having lots of money MEANS being absolutely un-trustworthy.

When we learn this we will have taken the first step toward a better world.

I can’t wait for the scrutiny that will be applied to this murky “MERS”.  I suspect it was a “money-printing” device, meaning it meant that the banks never lost, no matter what the circumstances.

Even though the cynic in me questions the timing of all of this just before the elections, the Homeowner Advocate in me is yelling “IT’S ABOUT TIME!” I have been at this with many others for so long now. We have shouted and written and pleaded to no avail. Thank goodness for that robo-signer and for the lawyer who had the hutzpah to ask the right question.


The American character has become corrupt, no more right or wrong, your measured successful or not by how much wealth you have accumulated . Remember “life styles of the rich and famous” ? Now I see “American Greed” .Its the American Dream to get rich the old fashioned way I earned it . Its the American Nightmare to get rich by fraud,deceit and buying government law makers who make it legal to be corrupt . There is endless evidence now available to bring charges forward , there seams to be a lack of will power by those whose job it is . No justice, no foundation of mutual trust, no civil society .

Just Say the truth.  FRAUD BY BANKS !!!!!

The banks received the bail out to stabilize the economy including helping homeowners by modifying loans. After they received billions they gave themselves bonuses refused to modify mortgages and rushed to foreclose on properties by fraud.

Now that the truth came out of fraudulent foreclosures. I wonder when will come out that Banks never had any intention of helping homeowner modifying mortgages.
If there could be an open investigation on loan modification scams, banks would be in hot water.
When will banks be held accountable?

4 words could save your home from foreclosure and the unruly robo-signers: Show me the note!

Gabor, banksters are scheduled for record 144 Billion dollar bonuses this year alone…up more than even last years record numbers!!!!!!!!

David E Y Sarna

Oct. 12, 2010, 7:38 p.m.

MERS is Bernie Madoff in a different dress. Worse than paying the fox to watch the chickens. Segregation of duties is accounting 1a. You can’t audit yourself. A recordkeeper needs to do just that. Once they can foreclose, the situation is ripe for fraud.
Will be interesting to see who goes to jail on this one. In my next edition of History of Greed ( I certainly will have a chapter on MERS.

In general, there seems to be rampant use of taxpayer money, allocated to help bail out struggling homeowners, to feather the nest of financial institutions and those who run them.

everyone stop paying their notes and esp. the made-up “we will squeeze your last dime” temp mods.
just stop.
your credit is already trashed just for applying.
the mortatorium and then the holiday-season no-foreclosure time frame give you until the new year.
get a flat rate lawyer or law student or paralegal. fight back against the banker-felons.
we can stand united against them. the time is come. the stench is clear and the rats are frantic to cover their tracks.
starve ‘em out. don’t pay.
I stopped. (I do still pay insurance and taxes, and maintain immaculate upkeep.) No more $$$ for banker-felons.

Roy. $144 Billion dollar is a lot of money. So let see. this amount to make it easy is
actually 144 thousand times 1 million dollar.
So basicly if every homeowner would get a $100.000 brake on their mortgages. We could save 144 thousand times 10 homeowners. = 1,440.000 homeowners.
This amount could help a lot of underwater homeowners.
If my numbers not accurate please forgive me and correct it.

and Starry:  I agree with you. If everybody would stop paying the banks would wake up. Or the ” fed ” would just print more money. But the problem is the large Banks own the FED. because the Fed is a private company. We soon will have mayhem in this country unless this problem get solved.


Oct. 12, 2010, 10:13 p.m.

Institutionalized Corruption

Now it’s banks and their coconspirator MERS; a short while ago—as if we’ve forgotten—it was Wall Street itself, General Motors, Freddie & Fannie, forced healthcare, and so much more.  At the end of this sordid trail of thieving and dirty tricks on the sovereign owners of this country is our fat-ass Congress.  “We The People…” need to confront them—the real problem head on, eyeball to eyeball.

Begin by gaining a clear and concise understanding from a variety of resources about our last lawful resort to force Congress to do their job and call a convention (http://www.article-v-convention).  This was written into the Constitution by the Founders to deal with the tyranny they knew was possible in a Republic.

The time is now for amendments to Balance the Budget, establish a Universal Voting Unit, make Transparency in Government mandatory, bring Gerrymandering to a halt, Audit the Federal Government, establish Fair Taxation, investigate and prosecute White Collar Crime, and a few others.

An Article V Convention provides a method by which individual states can propose amendments and refine them, and present them to all 50 states for possible ratification, and ultimately Constitutional law.  It gives “We The People…” the sovereign authority by bypassing Congress, the President and the Supreme Court.

Freedom is not free.

They have the money and as we speak they are bidding on officials who will play on their team . We are 98% of the people, who need to stand in solidarity to take back our government from a hostile takeover by giant corporations . This corrupt , greedy band of criminals need to be in jail .  These corporate zombies have under estimated this crime . Do not pay them a dime and do not sign a thing . Pay your property taxes and insurance as suggested above , and get in a class action suit or find a lawyer who comes verified by people fighting the banks now or

It could turn out that MERS is the method banks use to spin off multiple security sales from a single mortgage. If there is no longer a public record, then the bank’s “trust me” is the only assurance investors’ will have. 

“Trust me”, Mr. Investor, I have not sold this mortgage to anyone other than yourself.

How did MERS save the big banks over one billion dollars? Simple. They ripped off every courthouse in the country by not getting the mortgage papers recorded every time they changed ownership.

For that reason alone the chain of title on millions of homes have been irreparably broken. And for that reason alone, every mortgage that was written and placed into MERS is now null and void!

Because of their greed and fraudulent business practices, the big banks are now sitting on trillions of dollars of worthless mortgages and are effectively bankrupt. They screwed themselves, but they are also criminals who should all be tried under the RICO Act.

Now get ready for the largest bank runs in history!

It’s October. SURPRISE!

Superdave Otto

Oct. 13, 2010, 7:17 p.m.

Last March Fannie issued instructions to the foreclosure mills that MERS could no longer be listed as the plaintiff on the foreclosure complaint, soooo now MERS issues an assignment of mortgage, usually signed by one of the robo-signers, to to a bank like Wells or BofA who despite the fact you send them your payments, do not have any ownership in your loan, but merely act as the servicer or paperwork pusher. The obvious question then is, if MERS doesn’t have the standing or right to be the plaintiff, how do they have the standing to convey that right to be the plaintiff to a third party?  Wall St. and the GSAs and trusts that are holding the loans are in a pickle with angry homeowners on one side saying show me the note and investors on the other end complaining about the fraudulent securities they were sold.  Maybe we will get to see how that new TBTF resolution works.


May I ask what TBTF resolution is? Sorry, I am not being facetious.

superdave Otto

Oct. 13, 2010, 9:34 p.m.

That would be the claim of the Dodd-Frank financial regulation bill that if a Too Big To Fail bank screwed up again they would not be bailed out by the gov’t, but forced to go through some sort of liquidation

just got a trial converted to perm from ocwen and a 3 mo forebearance from Bof A. Keep the faith and stay diligent

I’ve went thought the whole process of obtain a LOAN MODIFICATION,which finally received though my mortage company First Franklin did the 3 month trail payment which were just as high as before,BUt I compiles because I WON’T to stay in my home,after the trail I recently learn my loan has a new serve who is now Bank of America they sent us a mortage payment for close to $1600.00 a month.THIS IS CRAZY.i TRUELY BELEIVE THE Government don’t want the American people to stay in there home.i WORK ALL AND PAID MY TAXES AND PLAYED THE GAME OF HELPING THOSE ON THE HILL GET RICH NOW ME AND MY FAMILY ARE TO LIVE IN THE STREET.If anyone want to help please contact me through my e-mail cedwards501@yahoo i’m so depress and I’M AT THE END OF MY FIGHT FOR MY HOME AND MY LIFE

Cassandra, you need to contact the Attorney General of your state where you live…immediately! Try to keep your emotions in check (I know it will be difficult) and explain to them the events that have transpired to this point. SAVE all paperwork you have and put down on paper all conversations you have had and the dates and times. BUT CONTACT YOUR STATE AG NOW!!!!

We can all “preach to the choir”, as misery loves company. But we need to let our elected Senators,Representatives and State Attorney Generals know of our individual circumstances. Otherwise it is going to be business as usual for these heartless DEVILS!

clarence swinney

Oct. 16, 2010, 7:44 a.m.

Reply to Conservative Bob Livingston on Big Government
clarence swinney write :
October 15, 2010 at 11s:15 am

Sorry Bob Your creation ?”Big Government” by Reagan + Bush
is not our imminent threat to Democracy.

It Is Your creation of WSA–Wall Street Of America–
Your pals created the Great Redistribution of Income and Wealth to 1% or 1.2 million ultra rich. Yes Bob! You. You. You.

Let 1% go from 20% ownership of Total Financial Wealth in 1980 to 43% in 2009.
From Ten percent of Total Income to 24% in 2009
Yes Bob, You created a Third World called Wall Street Of America formerly United States Of America.

You Bob increased spending by 80% and Debt by 170% from 1980 to 1989.
Yes! You Bob increased spending and debt each by 100% from 2000-2009
Yes! You Bob created our current Big Government. You.
Yes! You created 99,000 net new jobs in 20 years just enough to cover new entries into the work force.
Yes! It was not Clinton or Carter who in 12 years created 222,000 per month.
Yes! It was you who freed banks where large investment Gamblers could own all our bank assets for their Gambling Empire.
Yes! It was you who modernized financial empire to allow unrestricted Gambling in your new CASINO DERIVATIVE OF AMERICA
Yes! It was you Bob who in eight years in the Bush created 31,000 new jobs per month lowest since Hoover.
Yes! It was you Bob who allowed the ultra rich to rush into the Casino Derivative and leave investments  in stocks which built businesses, assets, and jobs.  You Bob.
Yes! You knew Bob that Casino Derivative had no assets. You knew.
Yes! You knew Bob that Casino Derivative adds no value to our economy. You knew.
Why Bob why did you push down Middle Class 120,000,000 workers who from 1980 gained nothing.
That Bob is knows as creating a Third World Population. Yes Bob you you you did it.
prove me wrong with numbers and facts not rhetoric .
clarence swinney—olduglymeanhonest mad mad mad—political historian-lifeaholics of america-burlington nc
.(JavaScript must be enabled to view this email address)


A smart man once said “People get the government they deserve.”

C. Boyer and All…

A smarter man, Thomas Jefferson, said, “When the people fear their government, there is tyranny; when the government fears the people, there is liberty.”

Folks, Congress IS THE PROBLEM because they’ve taken a salary and perks to represent “We The People…”, then turned right around and accepted even more money, incentives, perks or whatever to represent corporations, corporations, corporations!  We know this is WRONG, and we know they should be tried and jailed for accepting what amounts to BRIBES, but it’ll never happen because the two-party system and their stooges in DC help them stay in office forever (...for their share of the booty).  Here’s the way to CHANGE all this:

The ONLY way we can lawfully deal with this situation is an Article V Convention—it alone gives us the POWER to propose amendments to the constitution (NOT rewriting the Constitution, as some will say.).  Proposed amendments are difficult to pass into high law because 38 states (75%) must ratify any and all proposed amendments before they become effective.  The bright side is that Congress can’t sneakily change or alter ratified amendments like they do with Bills (stuffed with all sorts of extras!).  So, line-up behind an Article V Convention—go to and read, read, read.  Tell your family, friends and associates—help save the Republic before they ruin it completely!

Gordie Hayduk. It is all nice and tendy however we have one problem. No matter who you put in congress they all will represent the corporations and not the people.

When someone Like in California spend $ 150 million to become the governor that pays $ 175K you know the intentions are not honest.

We have millioners running for power. But if they get elected it won’t be different. They all promise everything like ( READ MY LIPS NO NEW TAXES) and when they get in you and I and everybody can go and .....................

Our country has lost it . It has been ruined. I did not see 1 Republican standing up for the people to save their homes.

I am neither one. Dem Or Rep. However I have seen many Democrats like Maxine Waters, The California Democratic Caucus to speak up to help homeowners.

You vote Republican we all going to end up on the street homeless. I guarantee you.


The whole point of an Article V Convention is to lawfully force Congress (and POTUS & SCOTUS) to temporarily step aside while “We The People…” propose amendments to be ratified to potentially be made into high law or Constitutional Law.

That’s what Article V of the Constitution of the United States is about—the Founders gave a “TOP KILL” button if we can use it effectively.

“We The People…” are SOVEREIGN, not our employees in government—we call the shots IF we have the cajones to pull all the angry citizens together and create LAW to make Congress obey their oath of office OR immediately stand down from their office.  We can do that—and we can do more, like going after Wall Street and the Banksters.

ALL other efforts are short lived or virtually worthless.

And yes, they will fight for their very life, because that’s what it will be.  They’ve denied our right to use the Article V Convention for almost 200 years+.  It’s about time for use to stand up and be counted!!!

The Move to movement is using this also , to make corporations subordinate to “we the people”
to reverse the unbridled powers given to corporations ?
Is that correct ?

Equity Free..

Not that familiar with the Site, but did take a quick look—it’s registered to Ben Manski of Liberty Tree.

It appears that has a single issue, that being corporations.  They don’t collaborate with any like-kind groups I know about.  I’ll try to contact them.

These organizations are collaborating:

Visit some of the websites and learn more—if it make sense, spread the word to friends, family and associates.  We need a tipping point volume of voters and others to get the Article V Convention.  If you’ve got the time, get involved—it’s your Republic they’re stealing.

Not all the groups take the same approach or support the same amendment issues.

Sorry maybe this will work for Banksters video

Oct. 29, 2010, 10:53 a.m.

I’m trying to publicize that the REST Report calculates an unbiased Net Present value for mortgage modification or short sale. With that the courts will hold mortgage servicers accountable for good faith negotiations. It will halt foreclosure fraud. Click for Information on theDo it Yourself Mortgage Modification

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