Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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The arrangement satisfied the ratings agencies, but it has not satisfied the
courts. Increasingly, judges are holding that if MERS owns nothing, it
cannot foreclose, and it cannot convey title by assignment so that the
trustee for the investors can foreclose. MERS breaks the chain of title so
that no one has standing to foreclose. The homes are effectively owned free
and clear.
That does not mean the homeowners don't owe money to someone. They do. But
the claim for relief is not in "law" (by virtue of an enforceable contract
or rule) but in "equity" (a remedy provided just because it is fair), and
MERS is not the proper plaintiff. Every MERS case involves a securitization,
which means the real parties in interest are a group of investors somewhere;
and before the homeowners can be made to pay, the investors have to come
forward and prove not only that they are the parties owed the money, but the
actual sums they are owed. In some cases they might already have been paid;
for example, by insurers on credit default swaps held by the investment
pool. The investors are entitled to recover in equity only so much as they
are actually out of pocket, not the full amount of the original promissory
notes, since they were not parties to those notes and there is no way to
re-establish the chain of title.

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