When Randy Persten’s mortgage was foreclosed in 2008, he looked at the paperwork and found a mystery. A company he’d never heard of — called Mortgage Electronic Registration Systems, or MERS — was bringing the foreclosure action against him.
Something didn’t seem right. So he got a lawyer and fought the foreclosure, arguing that MERS couldn’t foreclose because it didn’t own the mortgage note he’d signed promising to pay.
Persten ultimately succeeded in getting the action dropped, only to see a new action brought by a different company that says it is the true owner of his mortgage note. Persten still isn’t sure who owns his mortgage.
“Who was this MERS? Now we have no idea who owns the paperwork,” says Persten, an appliance salesman in West Palm Beach, Fla. “If I won the lotto, I’d pay off my mortgage, but I don’t know who to pay.”
Persten’s confusion is shared by other homeowners who are fighting foreclosure by challenging the legal powers of MERS, a company set up by the mortgage industry that is behind scores of foreclosures. Some homeowners are crying foul in lawsuits alleging MERS lacks the legal right to pursue foreclosures and in some cases they allege MERS has filed flawed documents to show it has the right to take a house.
The disputes over MERS are erupting into a second battleground over the mortgage industry’s business practices, just as states and the federal government are opening examinations into whether mortgage servicers failed to properly verify and notarize legal papers to get court approvals of foreclosures in some states. Dozens of state attorneys general are expected to announce this week a joint investigation into alleged paperwork deficiencies, Ohio Attorney General Richard Cordray said Sunday.
The coming investigations and reviews threaten to extend the nation’s foreclosure crisis, delaying the completion of many foreclosures against delinquent homeowners whether or not they win in the end. GMAC Mortgage said last week that even if “procedural mistakes” occurred, there was no disputing that borrowers had defaulted and it has the right to foreclose. JPMorgan Chase and GMAC Mortgage have suspended foreclosures in 23 states while they review their procedures, and on Friday, Bank of America widened its suspension from those 23 to all 50 states.
The MERS challenges are turning into a pitched legal battle playing out in the courts.