Monday, September 21, 2009

Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks

A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose – on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.

1 comment:

  1. As one who was in the title insurance biz for over 30 years, I can tell you this is a big deal. If the title companies get spooked enough by the various court rulings, even though they may not be in their state, and refuse to guarantee trust deed foreclosures. That will in effect put an estoppel on trust deed foreclosures, at least statutorily. The banks may well try to foreclose through a judicial process, as in a mortgage foreclosure, through the courts. That would be interesting, I don't know if it would be allowed. To a former title guy, this is indeed very big news as well as very interesting.