FindLaw KnowledgeBasePublished: 2012-01-19
A recent bankruptcy case in the state of Massachusetts may be the catalyst for a radical change in the world of foreclosures. Judge Melvin Hoffman of the United States Bankruptcy Court for Massachusetts recently overturned a foreclosure judgment on the grounds that the transfers of the mortgage from party to party through the Mortgage Electronic Registration System were never recorded properly, which meant that the plaintiff in the foreclosurewas unable to show ownership of the mortgage.
What Is the Mortgage Electronic Registration System?
The real estate finance industry created the Mortgage Electronic Registration System (MERS) as a way to track and record the sales and transfers of the ownership and servicing rights of mortgages. The system was put in place to make trading residential and commercial loans easier by making it unnecessary to prepare and record assignments of the loans that were being traded.
A Flawed System
Mortgages are traded through MERS but records of these trades are unavailable to the public, which means homeowners have no way of knowing who owns their mortgage unless they are notified. In most cases, there is no such notification. Judge Hoffman overturned the foreclosure, in part, because Deutsche Bank, the company foreclosing on the mortgage, was unable to prove that they owned the mortgage at the time of the foreclosure.
What Effect Does This Ruling Have on Future Foreclosures?
The ruling by Judge Hoffman has led MERS to tell its members to stop foreclosing in its name. This case has exposed the fact that the chain of titles in thousands upon thousands of homes is unclear and homes could potentially be foreclosed on improperly. This ruling may be beneficial to homeowners in foreclosure cases in Massachusetts as well as other states in which mortgages were transferred or assigned through MERS.
A foreclosure can be a confusing and scary proposition, but you have options. Filing for bankruptcy can protect you from the financial liability associated with a mortgage foreclosure as well as slow the process down to give you more time to prepare for life after foreclosure. Be sure to contact a reputable bankruptcy attorney to discuss your options.