Saturday, January 08, 2011

court rules against banks in pivotal mortgage case

"There is no dispute that the mortgagors of the properties in question had defaulted on their obligations, and that the mortgaged properties were subject to foreclosure. Before commencing such an action, however, the holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order," Justice Cordy wrote.  Read more in WT.

Okay, here's my lazy, I'm not going to read the case but will opine anyway, comment.  My first reaction reading this news yesterday was that it's just another example of the absolute degradation of standards in our industry.  I'm certain there are a bunch of others like me who used to do this stuff for a living that ask out loud - "Why didn't you just file an assignment?"

Back in the old days, every time a mortgage was sold, an assignment was filed.  Even when we pooled the mortgages into securities, the servicer acted in this capacity and accepted an assignment which was filed.  

The impetus behind the creation of MERS  wasn't bad.  There was merit in the idea that mortgage servicing of security pools or even whole loans could move within the MERS system without filing assignments.  The original mortgage was either assigned to MERS or MERS was nominated as the lender within the mortgage instrument.  It was presumed, I believe, that the last man standing, the servicing lender at the time of default, would receive and file an assignment from MERS prior to foreclosure.

I believe - and perhaps you will disagree and if so, I'd like to hear from you - that this wholesale dependence the industry fostered in technology cause a dearth of actual know how.  Is there anybody left in the business who remembers how it's supposed to work?  Did the folks who still had knowledge in their human brains retire or did everyone else decide to stop listening to them?

I consider this court's reaction like a well deserved wrap on the knuckles from good old fashioned teacher.  I'm sorry that it mucks up the party and I do hope that lenders jump in and get those assignments filed pronto.  

MERS isn't a culprit.  It's a tool which if used correctly works.  The overriding problem - the REAL problem behind all of the crap that has gone down is a chosen reliance upon tools of technology as replacements for human analysis and decision making.  

Mortgage backed securities aren't culprits.  They are a phenomenal tool when issued in conjunction with a due diligence system run by capable humans.

Tools are for use by capable and trained humans, not as replacements.  Someone has to be driving the bus and that someone should know how to drive and understand the rules of the road.  The bus should be monitored and maintained by a capable mechanic who understands how the bus works.  Consumers are riding the bus and the court is the traffic cop and the mortgage business just got a whopping ticket.  The bus isn't bad.  We needn't outlaw buses.  The cop isn't bad.  The cop is doing his job by keeping the roadways safe.

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