Vampire squid
This is a potentially gigantic story. It seems that a court has ruled that about half of the mortgage market [MERS, Mortgage Electronic Registration Systems] has been run as a criminal enterprise for years, which would invalidate any potential forelosure proceedings for about, oh, 60 million mortgages.
The real parties in interest concealed behind MERS have been made so faceless, however, that there is now no party with standing to foreclose. The Kansas Supreme Court stated that MERS’ relationship “is more akin to that of a straw man than to a party possessing all the rights given a buyer.”
That’s because the mortgages were bundled into bonds, sliced and diced futher into bizarre financial entities called CDOs, and which point ownership and control becomes nebulous at best.
Only the securities holders have skin in the game; but they have no standing to foreclose, because they were not signatories to the original agreement. They cannot satisfy the basic requirement of contract law that a plaintiff suing on a written contract must produce a signed contract proving he is entitled to relief.
And they go on to say that a major player in creating CDOs is everyone’s favorite vampire squid, Goldman Sachs.
The pirates seem to have captured the ship, and until now there has been no one to stop them. But 60 million mortgages with fatal defects in title could give aggrieved homeowners and securities holders the crowbar they need to exert some serious leverage on Congress – serious enough perhaps even to pry the legislature loose from the powerful banking lobbies that now hold it in thrall.
