Wednesday, June 29, 2011

Law Offices of Robert E. Brown, P.C., featured on CBS Evening News for foreclosure defense

Nicholas M. Moccia, Esq.
Law Offices of Robert E. Brown, P.C.

Robert E. Brown, Esq., of Staten Island, New York, was featured tonight on CBS Evening News regarding the state of the foreclosure crisis.  Also featured was Robert Brown's client, Rubin Martinez, who has managed to remain in his home for six years without paying his mortgage under Mr. Brown's representation.

Wednesday, June 15, 2011

The Appellate Division, Second Department, of the State of New York renders a landmark decision regarding MERS' standing to foreclosure

Nicholas M. Moccia
Law Offices of Robert E. Brown, P.C.

The Second Department in Bank of New York v. Silverberg, 2011 N.Y. Slip Op 05002, has rendered a landmark decision regarding the ability of Mortgage Electronic Registration Systems ("MERS") to effect valid mortgage assignments.  The reason why this decision is so significant is that MERS purportedly holds approximately 60 million mortgage loans, and is involved in the origination of 60% of all mortgages in the United States.   Accordingly, a fair majority of all foreclosures in the state of New York will be directly affected by the Second Department's holding in this case.

The MERS system was created by several large participants in the real estate mortgage industry in order to track ownership interests in residential mortgages, and to streamline the mortgage process by incorporating the efficiencies of information technology.  Christopher L. Peterson, who has written authoritatively on the MERS system, noted that MERS' implementation followed the delays occasioned by local recording offices, which were at times slow in recording instruments because of complex local regulations and database systems that had become voluminous and increasingly difficult to search.  See Peterson, Foreclosure, Subprime Lending, and the Mortgage Electronic Registration System, 78 U Cin L Rev 1359 (2010);  see also my previous blog post on Peterson's article, Unmasking the Masked Executioner on Wall Street (January 1, 2010).  Peterson has also suggested that MERS was created in order to help financial institutions evade filing fees that are charged by local recording offices.

The question presented in this appeal was whether a bank has standing to commence a foreclosure action when that party's assignor--in this case (and in very many cases), MERS--was listed in the underlying mortgage instruments as a nominee and mortgagee for the purpose of recording, but was never the actual holder or assignee of the underlying notes.  The Second Department answered resoundingly in the negative.

In many cases, when a bank originates a loan, it immediately assigns it (i.e. sells it) to another financial institution.  Sometimes the loan is transferred very many times.  In order to assign a loan "correctly", the assignor must transfer both the note and the mortgage (two separate instruments) to the assignee.  MERS' plays a central role in the assignment process, and acts as the mortgagee of record from the origination of the loan to act on behalf of the originating bank and its successors-in-interest to facilitate the assignment process.  Unfortunately for the banks, MERS is hardly ever the actual "holder" of the note, and is never given any rights with respect to the note--it's only given rights with respect to the mortgage.  As mentioned above, MERS cannot transfer a mortgage without the note, and it cannot transfer the note unless its is the holder of the note, and MERS almost never is.  On this theory, the majority of mortgage assignments which MERS has had a hand in are void.  That means many financial institutions, which were assignees of a MERS assignment, do not own the mortgages they think they own, and, therefore, do not have the right to foreclose on the same.  This will wreak havoc among financial institutions and their attorneys, who are already struggling through an increasingly regulated residential foreclosure process.