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Schneiderman files suit against big banks over foreclosures

Allegory of Avarice or Fraud, 16th Century. Dirk Vollertsz Coornhert, Dutch (Metropolitan Museum)

Eric Schneiderman, NY Attorney General and  recently named co-chairman of a new state and federal mortgage crisis unit, has filed suit against Bank of America, JP Morgan Chase and Wells Fargo, accusing them of fraud and deceit in their handling of foreclosures using the  the Mortgage Electronic Registration Systems Inc. (MERS). This suit by New York follows similar suits filed by the Attorneys General of Massachusetts and Delaware last year.

“The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages,” Schneiderman said Friday. “Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law.”

The suit also named the registry operator, MERSCORP Inc. of Virginia and here is MERSCORP’s response to Mr Schneiderman’s allegations. And this is how MERSCORP describes itself on its homepage:

MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.

What could possibly go wrong with a system like that? (Irony is intended.)

  • It is all well and good to sue the banks for fraudulent practices, but what about the homeowners who were complicit, applying for mortgages with little to no income and knowing they could not ever pay them back? Where does personal responsibility kick in?

    • Well, that would apply to the banks and real estate brokers too, all of whom were giving NINJA loans. Hey, they made their money so screw everything else.

      Securitization was the driving force here, and that came from the big banks and the hedge funds.

    • Ok, so everybody was basically cheating the system. Let’s fix the problems, learn our lessons, and never do that again. There were far more bankers that knew the loans were high risk than homeowners who were taking them. Bankers didn’t care about the risk since they could sell the loan risk to somebody else. Basically the loan market is nothing more than a shell game. The last person to hold on to a high risk loan when it defaults looses. Everybody else makes a few bucks passing it off to the next person.

  • I’m no finance expert but I would imagine that good business management would assess applicants for a mortgage and if they weren’t up to being able to pay, then the loan would be refused. if however on the other hand you are handing out cheap money to all and sundry who can blame the ordinary Joe from wanting some?

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