Foreclosure Fraud Cases: Banks and Mortgage Servicers Have an Achilles Heel, Title Problems Related to MERS

Posted By on August 2, 2011

One consequence of a Wrongful Foreclosure case, relates to the issue of clear title: the banks and mortgage lenders may not have it to convey to a buyer of the property.

As we all know, title to real estate is recorded in our public records because being able to trace the ownership chain of property is very, very important in the transfer of real property.  In Florida, land records can become history lessons because the land can be traced back — just like those family tree commercials on TV – to owners who lived hundreds of years ago.

Even today, there are land documents that document a Florida property’s ownership back to the days when the land was under Spanish rule, as well as that of England (England got part of Florida from Spain in exchange for Cuba as part of the treaty after the Seven Years’ War in the mid-1700s).   Florida land title isn’t wanting for its paperwork.

What is Title?

Each state in the United States has a long-established public records system that protects and documents the land within its borders.  Older land records are handwritten; for a period of years they were typed; now, many states record title via computerized systems with the older records scanned and organized via microfiche.

The land records are used to establish “title” to a piece of real property, or who has the legal right to own, use, possess or hold other rights in that piece of land (for example, mineral, water, or air rights).  The records are evidence of “title,” which is a legal determination based upon state law. The law of land title protects owners from someone stealing their property, squatting on their property, or even pillaging it (deforesting, etc.).

Sometimes when there is a controversy over who has title to or who has the right to sell a piece of land, it becomes a legal issue which is sometimes settled by a “quiet title” action.  Here is where the Foreclosure Fraud cases come into play:  the banks and/or mortage lenders may not have the ability to provide a buyer of the land with documentation that gives the selling institution clear title under Florida law.

MERS Created Chaos in Longstanding, Traditional Public Record Land Title Documentation

As Richard Zombeck pointed out in the Huffington Post this week, MERS (Mortgage Electronic Registration System) was set up by banks to streamline their ability to foreclose on homes throughout Florida and elsewhere.  Problem was, MERS apparently didn’t bother to follow the public record standards established under the state law.  They didn’t file their documents in the land records, among other things.  From HuffPo:

advocates and activists have long argued that mortgages transferred via the MERS system but not recorded with local registries of deeds are invalid and that land titles on thousands of homes are “clouded”. Homeowners with clouded titles could find it impossible to sell or refinance their properties without going to court to clean up problems.

Massachusetts Attorney General Announces Investigation Into MERS – A Really Big Quiet Title Investigation

This week, the Attorney General for the State of Massachusetts announced that Massachusetts will be investigating MERS and whether or not every single loan that went through its processing actually resulted in a cloud on title — which boils down to that state gearing up one big, big quiet title investigation.  If MERS did not follow Massachusetts state laws about protecting legal title during the transfer of the property, then the title is clouded — which most believe will be the case in an overwhelming number of cases.

What About Florida Land Titles?  Florida AG Bondi Can Act – And  So Can the Florida Homeowner

No word yet on what the Florida Attorney General will do: will Florida follow in the footsteps of Massachusetts?  It’s not clear. However, nothing stops an individual Florida citizen from protecting their rights to his or her land or any property they intend to purchase.  The first step?  Gathering all the land records that reference the property which can be found at the county public records department.  They are open to everyone.

Or, a homeowner or prospective buyer can hire an experienced real estate attorney versed in title issues and foreclosure fraud antics to advocate on their behalf.  Land title disputes and quiet title lawsuits can be complicated and stressful.  The complexities of legal title are why title insurance exists today and why their are title insurance attorneys.

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