An opening for D.C. foreclosure challenges
D.C. Attorney General Peter Nickles this week created an opening for potentially tens of thousands of homeowners to challenge their foreclosures. He issued an enforcement statement emphasizing that District law requires that the assignment of a mortgage from one party to another be recorded within 30 days of the transfer.
This is a problem because many of the country's biggest mortgage companies list MERS, or the Mortgage Electronic Registration System, as the mortgage holder -- rather than the actual owner of the mortgage -- in local deed offices.
MERS is a computer tracking system for mortgages set up by Wall Street to help speed the process of transferring mortgages as they were bundled and sold and then resold in the securitization process. That allowed the companies to track their ownership of loans electronically rather than having to go through the labor-intensive and expensive process of filing paperwork each time a mortgage was resold.
There have been numerous legal challenges regarding the role of MERS in the mortgage assignment and foreclosure process across the country, but the issue remains unresolved. Some courts have upheld the right of MERS to conduct certain transactions while others have ruled that it has no standing.
Nickles explicitly stated that, in the District, the requirement for recording every transfer of mortgage "is not satisfied by private tracking of mortgage interests through the Mortgage Electronic Registration Systems."
"A homeowner should not be misled into believing that a threatened foreclosure is supported by the District's public records when it is not," Nickles said in a statement, explaining that such practices are a violation of the jurisdiction's consumer protection law.
Nickles said such violations may provide a "good basis for challenging the foreclosure in court" and encouraged homeowners and advocates to contact the attorney general's office so that it "may consider bringing enforcement actions to stop foreclosure proceedings and seek restitution for consumers."
| October 30, 2010; 10:55 AM ET
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