Holy Crap! Kansas Supreme Court just ruled

The daily trip to reddit and I chance up a link to this blog entry when I caught the tag line of 60 million mortgages could get invalidated. My interest was piqued. I looked up the original court ruling and it is here. I read it.

Disclaimer: I AM NOT A LAWYER and my summaries can have errors.

My summary:

A guy buys a house and takes 2 mortgages. The second one is from Millennia Mortgage Corp. In the mortgage that he signed MERS, (Mortgage Electronic Registration Systems, Inc) is defined as a nominee for Millenia Mortgage Corp. Some time later Sovereign takes over the mortgage but doesn't notify the local county of it.

Unfortunately for the guy he has to declare bankruptcy. He declares Sovereign bank is the creditor and files intent to surrender the property.

The company that gave the first mortage Landmark Bank, files a petition with the Court intending to forclose the property and names the guy and the Millenia as the defendants. Now the important event. Landmark doesnt serve notice of the litigation to MERS or Sovereign.

Since there are no answers from the guy or from Millennia so the court enters a default judgment. The property gets sold and Landmark files a petition confirming the sale. Now Sovereign goes "hey hold on", files a petition requesting that sale be be invalidated and the summary judgment be overturned, says it was not notified and MERS is a part of the action.

Court goes OK and listens to arguments from all parties and defers judgment. MERS makes an entry and files a petition to vacate summary judgment.

Court says, thanks for playing, you don't have a ground for objections, lo and behold DENIED becoz
1) MERS is an agent, a Thanks for trying.
2) Sovereign didn't register with the local county about it getting the mortgage. Sorry, better luck next time.

MERS and Sovereign, files motions to reconsider. courts go hmmn, no thanks. DENIED!

Lots of stuff happens and the case ends up in Supreme Court of Kansas. The supreme court does a brilliant job of breaking down the agreement that the guy signed and what role MERS plays.

The orginal mortgage was split into different securities and sold. MERS is a electronic system owned by a private company that keeps track of who is the owner of the mortgage that gets split as securities and sold to other investors. MERS also is considered as a nominee of the banks and act on their behalf when it comes to buying, foreclosures and stuff.

The court concluded:
"The relationship that MERS has to Sovereign is more akin to that of a straw man than to a party possessing all the rights given a buyer. A mortgagee and a lender have intertwined rights that defy a clear separation of interests, especially when such a purported separation relies on ambiguous contractual language."

Damn! The court also concludes that the practices of MERS makes it almost impossible for the public to find out who really has the deed to the property on which the mortgage is taken on. If the mortgage is split so many ways, then who has the deed?

Quting the court:
"The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. [Citation omitted.] Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. [Citation omitted.] The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust." Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo. App. 2009). "

Which means MERS which foreclosing properties can possibly no longer foreclose properties. Damn, double Damn! If this stays on, then we are looking at a big problem. A wild ass guess as to the fall out,

1) People who are forced to foreclose by MERS can get more breathing time , peace and some justice.
2) The tax payer will get shafted again unless the public hounds congress to hold people in wall street accountable.

Fun times. bah!