The Complete Breakdown of Law Regarding Home Ownership: The Essex County, MA Edition

I haven't talked about Big Shitpile (the housing-initiated economic collapse in a while), but this report from the Essex County Register of Deeds (Massachusetts) describes nothing less than the breakdown of the property title system in the U.S.:

Yesterday at the Annual Conference of The International Association of Clerks, Recorders, Election Officials and Treasurers (IACREOT), Register John O'Brien revealed the results of an independent audit of his registry. The audit, which is released as a legal affidavit was performed by McDonnell Property Analytics, examined assignments of mortgage recorded in the Essex Southern District Registry of Deeds issued to and from JPMorgan Chase Bank, Wells Fargo Bank, and Bank of America during 2010. In total, 565 assignments related to 473 unique mortgages were analyzed.

McDonnell's Report includes the following key findings:

- Only 16% of assignments of mortgage are valid

- 75% of assignments of mortgage are invalid.

- 9% of assignments of mortgage are questionable

- 27% of the invalid assignments are fraudulent, 35% are "robo-signed" and 10% violate the Massachusetts Mortgage Fraud Statute.

- The identity of financial institutions that are current owners of the mortgages could only be determined for 287 out of 473 (60%)

- There are 683 missing assignments for the 287 traced mortgages, representing approximately $180,000 in lost recording fees per 1,000 mortgages whose current ownership can be traced.

The practical implications of this, at least in Massachusetts, are pretty straightforward: most foreclosures are invalid since the foreclosing party can't claim title to the mortgage. It also calls into question bundled mortgages--those who sold these mortgages never owned the mortgages and consequently committed fraud (it's as illegal as if I sold you PZ's house without his knowledge).

But there's a larger problem. Quite simply, lenders have repeatedly in most cases violated the law. This isn't some 'ticky-tack' paperwork either. Titles are, and have been for over two centuries in America, the primary mean by which ownership of residential property* is established. This is open season on the fundamental nature of property, yet, mysteriously, conservatives have been very, very quiet about all of this.

Registrar John O'Brien sums it up:

"My registry is a crime scene as evidenced by this forensic examination," stated John O'Brien. "This crime that has affected thousands of homeowners in Essex County who, through no fault of their own, have had their property rights trampled on and their chain of title compromised. This evidence has made it clear to me that the only way we can ever determine the total economic loss and the amount damage done to the taxpayers is by conducting a full forensic audit of all registry of deeds in Massachusetts. I suspect that at the end of the day we are going to find that the taxpayers have been bilked in this state alone of over 400 million dollars not including the accrued interest plus costs and penalties. The Audit makes the finding that this was not only a MERS problem, but a scheme also perpetuated by MERS shareholder banks such Bank of America, Wells Fargo, JP Morgan and others. I am stunned and appalled by the fact that America's biggest banks have played fast and loose with people's biggest asset - their homes. This is disgusting, and this is criminal," said O'Brien.

Meanwhile, in Michigan, a recent court decision finding that MERS compromised the chain of title has led to a 97% reduction in foreclosure filings.

The large banks broke the law so they could avoid paying filing taxes and so no one could determine just how shitty the bundles of mortgages actually were. Now, hopefully, they'll pay for it.

I realize Big Shitpile is, like, so 2009, but the rule of law and the legitimacy of home ownership are kind of important. Yet this almost never penetrates the national media, especially television. Odd that...

*And commercial property too.

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It's kind of astonishing that county registrars let MERS & co. get away with this for so long, and even now, when so much evidence of chicanery is coming to light, only a few are taking any real action. Just from a financial point of view, it makes no sense: as O'Brien says, avoiding recording fees was part of the plan, and the states could really use that money. It's good that O'Brien is trying to get his colleagues to sit up and notice, though.