If you’ve been following the latest round in the foreclosure mess, you’ve probably read about how some banks have lost the loan documents for some mortgages. The gist, as I understand it, is that after mortgages were signed, some of the larger banks would enter the data into the MERS registry  (which is owned by large banks). The registry helps facilitate the process because banks won’t have to go to the local records office to record the loans, which saves them time. After registering the loans, oftentimes banks shred the paper documents to avoid duplication. (all this I learned from reading Business Week, but I can’t find the nice chart they used)
Well it turns out that last year, March 2009 specifically, a bankruptcy judge in Las Vegas decided MERS could be a beneficiary under a trust deed. Since then, supreme courts in other states found MERS  had no standing in foreclosure proceedings under local state laws. Whoops.
Throw in the robo-signatures debacle and you create an environment that invites a little extraordinary situations… like people getting their homes for free because of clerical error (a broad term, I agree). A judge on Long Island erased a $292,500 debt  and awarded a home to a family after he “concluded that a mortgage company’s paperwork in a foreclosure case was so flawed and its behavior in negotiations with the borrower so ‘repugnant’.”
I believe that you should do what’s right and giving someone a home for free because a company acted badly is a little too far. That said, if a company is willing to act in that manner, maybe an example should be made. One of the downsides of the internet is a reduction in personal relationships. People used to know their mortgage lender, their insurance agent, and the folks they banked with. Now it’s all about business only, transactions, and getting the cheapest possible… so this is a natural result.
What do you think?
(Photo: andrewbain )