Money for Nothing, McMansions for Free

June 30, 2009 2:13 AM

MERS mortgage avoidance: huh?

This doesn't affect me or my mortgage, but a friend of the family is sure he'll get to keep his rather expensive house--for free, mortgage completely voided--rather than being foreclosed on: See here.

This just seems like the same of reasoning that the "the IRS is illegal" folks try. But I'm curious if someone smarter than I thinks there is flame in this smoke, so to speak. (Said FOTF is infamous for get-rich schemes and flights of monetary fancy, so I'm skeptical.)

posted by maxwelton to work & money (6 comments total)

Here is a brief explanation of the lawsuits, with links.
posted by Houstonian at 2:43 AM on June 30

a friend of the family is sure he'll get to keep his rather expensive house--for free, mortgage completely voided--rather than being foreclosed on

IANAL

Your friend is wrong, but he's welcome to ruin his credit trying.
posted by mkultra at 5:53 AM on June 30

Check out this related AskMe.
posted by exogenous at 6:27 AM on June 30

I think the idea with MERS lawsuits is that it forestalls the foreclosure process because of, essentially, paperwork issues. It does not mean that people get houses for free. If MERS files for foreclosure on your friend's house, he can say, "Show me the paperwork that allows you to do this." If MERS cannot provide the paperwork, then the whole thing might be on hold. But that doesn't mean that he got the home for free.
posted by Houstonian at 6:31 AM on June 30

My firm handles dozens of these motions every week. Your sense that there is nothing to it is absolutely correct. MERS can enforce mortgages it holds and in many cases can enforce mortgages on behalf of the principal mortgagee as an agent of the mortgage. Foreclosures can be maddening (for lots of reasons, but also) because notes and mortgages have been traded like baseball cards lately and it's easy to lose sight of the fact that the terms of the notes and mortgage are the terms of the note and mortgage, no matter who currently has the right to enforce it. Very few notes are not freely assignable by the holder.

There are kernels of truth in that blog; MERS does exist to eliminate or streamline the paper trail in assignment of mortgages. Mortgage companies, too, sometimes don't have all the paperwork in order until they file the lawsuit (and sometimes, not until after). That does not render the note and mortgage unenforceable, even if it sometimes requires the lender to refile the suit after the paperwork is in order. You can read a primer on why MERS has standing to sue here.

The much more fun keep-my-house-for-free! motions which I have seen are based upon a misreading of Article 1, Section 10 of the Constitution, Powers Prohibited to States. Distilled to its basics, that argument goes: no-one handed me any gold so I never incurred any debt. Because I have no debt, I can't be sued on the Note. Because I can't be sued on the Note, you can't enforce the Mortgage. Because you can't Enforce the Mortgage, you can't take title to the collateral (my house). Depending upon the court and particular judge you can delay your foreclosure by filing a MERS-makes-up-money motion, but you can't stop it.
posted by crush-onastick at 6:36 AM on June 30

Thanks, everyone. mkultra, the credit is already ruined, as far as I know. But the guy owes LOTS of money to LOTS of people, which, from what I understand, is almost as good as having good credit, as if he goes down literally millions of dollars vanish.
posted by maxwelton at 4:17 PM on June 30