How Will the Banks Atone for Their Robo-Signing and Forging of Foreclosure Documents?

The question uppermost is how will the banks atone for their robo-signing and forging of foreclosure documents? Four months have passed since a deal was floated but since then the public remain in the dark about the outcome.

Recently the executive of the banks and the attorneys general of the states met at Washington to smoothen out their differences. The core issue was what amount the banks should come forward with and how; to whom should it be given to make all the clouds of doubts go away. Initially it was rumoured that the price tag would be $20 billion.

But the vital question is that how much would such an agreement give protection to the banks from future accountability? Will the AGs come to such an understanding that will in effect place bars on any sort of lawsuit being brought against the banks?

If the settlement is comprehensive then there will be celebrations in the banking world. If not, the banks will have to be prepared to face more lawsuits – something they are too eager to avoid.

One of the important points that need to be ironed out is the liability arising from the involvement of MERS or Mortgage Electronic Systems. The firm was set up in the middle of the 90s and owned by the big financial entities, like Fannie Mae, Freddie Mac, and Mortgage Bankers Association etc. The goal was to expedite the foreclosure process.

MERS did away with the necessity of recording mortgage transfers with the county land deed officers; neither was fees paid for each change of ownership. This saved the banks money, time and effort. Over ten years the banks have saved $1 billion. Nearly 60% of all the residential loans came under the umbrella of MERS.

During the foreclosure crisis the MERS machine developed cracks. Lawyers are throwing  challenges at its right to initiate foreclosures because it did not technically own either the property or the promissory note. Some courts accepted MERS but other courts refused to acknowledge it.

The courts in New York for example have been more and more hostile towards MERS.  Last February federal judge, Robert E. Grossman of Long Island wrote in his judgment, “This court does not accept the argument that because MERS may be involved with 50% of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law”.