Robert Gover, USA, firstname.lastname@example.org
Lately, the news has carried stories of foreclosures put on hold. This is
another sign of the presently tightening Uranus-Pluto square—a surprising development in the established foreclosure business. It emerged out of a California court ruling that may enable thousands of foreclosed homeowners to save their homes.
Let's say you bought a home by obtaining a mortgage from a bank for $250,000. That bank sold another 1,000 mortgages to your neighbors, then "bundled" those mortgages and sold them as securities (bonds called mortgage credit obligations) to investors around the world.
Then came the crash of 2008 and you lost your job and could not make the mortgage payments. The bank wants to foreclose and resell your property. But it no longer holds the paper showing that it owns the loan you took out. That paper departed when your bank bundled its mortgages and sold them. Without proving that it owns your loan, how can your bank foreclose?
The real estate industry believed it had solved that problem by creating MERS (Mortgage Electronic Registration System). Although your bank no longer holds the deed to your house, by relying on MERS it can claim it has the right to foreclose, kick you out and conjure a new loan. Then bundle the new mortgage with others and sell that bundle to investors far and wide. And, if new borrowers can't pay their mortgages, repeat this wondrous profit-generator ad infinitum.
However, on May 10, 2010, a California bankruptcy court held that MERS could not enable foreclosure. (See In re Walker, Case no. 10-21656-E–11) The judge said that since MERS did not own the underlying Deed of Trust note, it could not transfer it to another entity. Any attempt to transfer a trust deed without ownership of the underlying note is void under California law. You can't transfer something you don't have.
The creation of a worldwide debt derivatives market in effect means that trust deeds have disappeared as surely as if they'd been shredded. MERS kept records of sales but not trust deed titles proving ownership.
An article in Mother Jones Magazine put the problem this way: "With so many loans having been bought, sold, securitized, and traded, establishing who owns the mortgage is hardly a trivial matter. It frequently requires months of sleuthing in order to untangle the web of banks, brokers, and investors, among others."
Until the California court decision in May, judges overlooked this legal technicality and sided with the foreclosure companies against distressed homeowners. Mortgage foreclosures have so far cost $7 Trillion in lost real estate equity and untold suffering by unwitting victims of the Wall Street scheme that crashed the economy.
Concurrently, the foreclosure business has netted tremendous profits for those who have used MERS to obtain "ghost" titles to distressed properties and resell them. If the California court ruling holds up, it will mean a surprising stroke of true justice for many a victimized homeowner.
Uranus in hard angles to Pluto has a way of turning established systems upside down, as events in the1930s and 1960s attests. If the California court ruling catches on around the country, sixty-two million homes could become foreclosure-proof, hanging a lot of financial sharpies by their own petard.
This is upsetting to people in the foreclosure business who'd been counting on the crashed economy to make another killing. But it's an unanticipated stimulant to the overall economy, for it halts the avalanche of lost home equity and homeless families.
Notes: For more details see a San Francisco Chronicle article by attorney Sean Olender. Also see http://www.webofdebt.com/articles/homeowners.php.