The Salt Lake Tribune has an interesting article on Utah’s “Quiet Title Laws”, MERS, clouded titles, and record keeping. Several people won titles free and clear to their houses or condos when debts as great as $417,000 were dismissed in court. Here are a few snips.
A Utah court case in which the owner of a Draper townhouse got clear title to the property, even though he still owed $132,000 on it, raises new legal and financial questions about a property-records database created by mortgage bankers.
The award of a title free of liens means that whoever owns the promissory note on the Draper property — likely a group of faraway investors — no longer has the right to foreclose to collect on a delinquent loan. Indeed, the townhouse owner has sold the property and kept the money. Those who own the promissory note probably don’t even know what occurred.
Last year, the owner of the Draper property contacted attorney Walter T. Keane to help him deal with lenders, though Keane won’t say what the problem was and the owner declined an interview request.
The lawsuit over the title to the townhouse named Garbett Mortgage and Citibank FSB as the holders of promissory notes as recorded on trust deeds filed with the recorder’s office. Integrated Title Services was listed as trustee of the Garbett Mortgage trust deed, while First American Title was the trustee of the CitiBank trust deed.
But there also was another entity listed on the trust deeds called the Mortgage Electronic Registration Systems (MERS). The Mortgage Bankers Association, the Washington, D.C.-based trade group that represents major mortgage lenders, created MERS in the mid-1990s.
Under the state’s quiet title laws, Keane said he did not have to name MERS or serve it legal papers in the lawsuit because it was not the legal owner of title to the property. Those were title companies. In addition, attorneys contend, MERS cannot be the “beneficiary” or holder of the promissory note because it readily has admitted it has no financial interest in any notes or mortgages.
What happened next is easy to explain. First American did not know who could collect payments. Nor did Garbett Mortgage who told the court it had no interest in the property. Integrated Title withdrew as a trustee.
After four months of waiting, 3rd District Judge Glen Iwasaki awared the title free and clear to Keane’s client. According to the article, Keane has two other successes.
Moreover, another attorney, Abraham Bates got a “Quiet Title” on a home where a whopping $417,000 was owed. In that case, Bates named the original lender and trustee. Like attorney Keane, Bates said it was not necessary to serve MERS legal papers.
Please see the article for other interesting details.
Over 100 Lawsuits In Progress
Bates said he has more than 100 lawsuits pending over MERS-related questions and has hired more attorneys for his firm to handle the increasing load.
Rulings have gone different ways in different courts. But Bates said he and Peterson are teaming up to appeal a recent ruling by U.S. District Judge Tena Campbell that dismissed a lawsuit claiming MERS did not have the legal right to initiate foreclosure proceedings.
The attorneys are appealing Campell’s ruling as it relates to Utah law to the Utah Supreme Court. A decision will help sort out the issues with MERS over whether it actually can initiate foreclosures even if it does not have any financial interest in the promissory note, Bates said.
A ruling favorable to the homeowner “would be an absolute tsunami in terms of foreclosure in the state of Utah,” he said.
If MERS is not able to start a foreclosure action, “then there will be a brick wall put up over all nonjudicial foreclosures prosecuted in this state,” Bates said.
So far, this is not every judge in Utah. I expect an appeal in the cases in the article.
I also expect to see someone ask for an injunction on these cases until the State Supreme Court settles the issue.
Travesty of Justice
Assuming these “quiet title” lawsuits are public, someone is going to quickly start watching every filing in Utah. That will add to the expense of doing business in Utah. Is that justice? In what way?
Should these decisions be overturned (and I hope they are), someone will be going after the assets of the winning parties.
In the meantime, every MERS related title in Utah seems to be suspect. Why would title insurance companies want to do business in such an environment? Is that justice? For who? In what way?
Some investor just lost $417,000 through no fault of his own. Another person who deserved to lose his house because of default just got one free and clear. Is that justice? In what way?
Certain people will be cheering these developments. Unfortunately, there is nothing to cheer about here. No justice was served by these rulings.
Here are a couple comments of note…
“Dr. Evil” (the Dr. Evil who frequently comments on this blog, NOT the Dr. Evil European Bond trader) writes …
Mish – I have mixed feeling on this. The bottom line is that justice should be done at every level. No one who owes on a house should get it free and clear but at the same time the lenders know damn well how to legally transfer interest in a property and chose not to follow the proper procedure. Beyond that you have an entire financial/political system that is controlled by a few who are apparently above the law or they would be doing life sentences by now – so justice on a far grander scale is not being done and until it is I have a hard time getting too upset about this sort of thing. It may involve a few million vs trillions in theft by the bankers. Plus the proper transfer of property is vital to upholding property rights. If the lenders decided to disrespect it then they should be punished in some way.
Similarly “Southernmost” writes …
People have to get over the free house thing, and deadbeat borrower. YES, investors and OUR pension funds invested in the notes. However, it was the banks, servicers, and MERS that INTENTIONALLY destroyed the title chain so that they could perpetuate the fraudulent ponzi scheme. ANY mortgage with a MERS clause on it casts doubt on the fact of your mortgage payment getting credited to the correct investor. Whether you are making your payment or not, if you have a MERS clause you probably are not paying the correct party, or “at best” you are paying into a twisted algorithm to satisfy some tranch of MBS temporarily. This is as a DIRECT result of the banks intentional destruction of the title history. WE WILL NEVER KNOW WHO JUSTLY OWNS THE NOTE. Again as a direct result of the banks, not the borrower. Sorry, but I got tired of paying into a criminal enterprise that has destroyed our Country and land records and they had the audacity to come up with a fraudulent doctored note as the original. Should I get a free house, NO. I am proposing to auction it to charity, but BoA certainly shouldn’t get title to it so they can sell it and perpetuate THEIR ponzi scheme and pay bankers bonuses.
Greyzone writes ….
Baloney, Mish. The big banks violated clear law regarding transfer of titles. They did so WITH PURPOSE. That purpose was to resell toxic bad mortgages as AAA securities. The clear title was deliberately obfuscated to make the investor unaware that he was deliberately being ripped off.
That comment immediately above might make some sense if it was the banks getting hurt. In general, they passed the trash, something Greyzone even stated.
“Setmefree” writes …
I am current on my mortgage, not upside down. I “own” my residence and rent my residence prior to this with positive cash flow and good equity. I have a fear that I will make my payments to Chase over a long period of years, then not be able to clear my title at the end because of all the MBS snafu. Is that an unreasonable fear? Would it make sense to do a quiet title action now just to assure that doesn’t happen?
That is exactly the problem this has unleashed. Every title in MERS is potentially clouded. How do you prove you paid the correct party. How do you prove you bought a house from someone that could legally discharge the liens on it? If you didn’t, some genius lawyer, bank, or title company might find “legal” cause to come after you. That in turn may cause Congress to get into the act. This is a theoretical exercise so far, but not without concern.
In general, I share the “mixed feelings” of Dr. Evil. Unless Congress botches things up (always a distinct possibility), we will likely get a better system out of this than before. That is one way, the only way to legitimately have “mixed feelings” about this. Certainly there has been no justice served in regards to bank fraud. Not a single person has gone to jail or even been significantly fined.
For still more comments and the underlying root cause of this mess, please see Comments Regarding “Quiet Title” and Banking Fraud; MERS a Symptom, Fed is the Real Problem
Mike “Mish” Shedlock
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