What most people are unaware of is the importance of the chain of title. You see, the only person who can foreclose on a property is the person who owns the promissory note and deed of trust (together they make up the mortgage). The promissory note is the loan documents – how much was borrowed and by whom, what is the interest rate, when are payments due, etc. The deed of trust is the security document – it is what gives your house as collateral to the bank when you borrow the money.
If you had one bank which gave you the loan and never sold it, this wouldn’t be much of an issue. But that’s not what is happening.
The mortgage business has changed greatly in the past 10 years or so. It’s now not about making money by loaning money to people to buy houses. Now the mortgage business is about getting as many loans as possible, selling or transferring them into a large pool (1,500 to 2,500 loans), and slicing the pool up and selling it off to investors. That’s where the real money in mortgages lies today, particularly when you take into consideration the low interest rates on mortgages.
To transfer these loans around, the banks use MERS (Mortgage Electronic Registration Systems, Inc.), which is based out of Delaware. MERS is a company owned by the major banks which does nothing but track who buys and sells loans. When a loan is transferred from one bank to another, MERS electronically tracks the path of the loan.
The problem comes in when a default happens. When you don’t pay your loan payment (for whatever reason), the owner eventually will want to foreclose. But they almost certainly do not have the deed of trust in the bank’s name to start the process.
This is where it gets interesting. MERS will have a document recorded, often called a “Corporate Assignment of Deed of Trust” or similar title, which purports to transfer the deed of trust from MERS (or the original lender) to the foreclosing bank. Seems straightforward, right?
Not so fast. Look carefully at the signature of the person signing the Corporate Assignment as an officer of MERS. Notice where the person is located, and the name of the notary who notarized the document. Now look at other recorded documents, such as the Notice of Trustee’s Sale or Notice of Substitute Trustee. They are often signed by the same person, only in the other documents, this person isn’t signing as an officer of MERS, he/she is signing as an employee of the trust company or bank who is foreclosing on the property. In other words, somehow this person is an officer of MERS while working at the company who is foreclosing on your property.
So what’s the deal? Simple, really. Very likely that person who signed the Corporate Assignment (as an officer of MERS, such as vice president or assistant secretary) is NOT even an employee of MERS, but instead is an employee of the foreclosure company.
In other words, that person had no authority to make the transfer of the deed of trust to the new lender, so any foreclosure by the new lender is unlawful. Possibly fraud was even committed.
Some attorneys will argue that the person signed under a power of attorney from MERS. First, no they didn’t, they signed as an officer of MERS. Second, no power of attorney was recorded or mentioned in the Corporate Assignment. Very big problems.
The trick with this is to catch it before your foreclosure goes on too long. You need time to raise the defenses and prove to a judge that the Corporate Assignment is invalid.
So be sure to research the title history of your ownership of your home. You may find great ammunition to save your home in the very documents the bank filed to foreclose on you.