Bank of America and MERS in trouble in Oregon

So it seems that Bank of America and MERS can’t make their story stick in Oregon. The Courthouse News Service has an article under Dee Moore’s byline Ruling Challenges Ore. Foreclosure System that shows that Oregon law may make the securitization house of cards fail a bit further.

Bank of America and Mortgage Electronic Registration Systems broke the law when they failed to record every time the trust deed for a couple’s home mortgage changed hands, a federal judge found in a ruling that questions Oregon’s system of allowing banks to foreclose without going to court.

Although home owners Ivan and Katherine Hooker have been in default on their loan since 2009, Judge Owen Panner found that the bank and Mortgage Electronic foreclosed on the couple’s loan after too many unrecorded transfers left the couple in the dark about who to contact for a loan modification.

“While I recognize that the plaintiffs have failed to make any payments on the note since September 2009, that failure does not permit defendants to violate Oregon law,” Panner wrote.

Oregon is one of the few states that allow banks to foreclose on mortgages outside of the courtroom. The only caveat to this is a state statute which requires that all records of sales and transfers be listed in the county land records office where the property is located. Banks are required to record these transactions before initiating a non-judicial foreclosure according to the Oregon Trust Deed Act.

Mortgage Electronic (MERS) argued that the Act allowed it to be lax on recording each individual transfer with the county, as long as it kept track of the transfers in its own internal system and recorded the “final assignment” with the county before initiating foreclosure.

But Panner said the law requires every transfer to be recorded with the county.

One of the keys to this ruling was the judge finding that the couple could not FIND the bank that owned their mortgage to ask for a modification.

In the case of the Hookers, the paper trail to find the holder of their deed was convoluted and, completely missing in some places, making it impossible to figure out which bank to approach about a loan modification.

According to Panner, this information could have helped avoid the pain of foreclosure.

“When a borrower on the verge of default cannot find out who has the authority to modify the loan, a modification or a short sale, even if beneficial to both the borrower and the beneficiary, cannot occur,” the judge wrote.

Although many will see these people as deadbeats who should be foreclosed on, at least the judge has a sense of defending the rule of law over bald declaration of bank’s rights.

Panner said the fact that an agency which can not accurately police itself has the authority to foreclose on people’s homes was cause for concern.

“Foreclosure by advertisement and sale, which is designed to take place outside of any judicial review, necessarily relies on the foreclosing party to accurately review and assess its own authority to foreclose,” the judge wrote. “Considering that non-judicial foreclosure of one’s home is a particularly harsh event, and given the numerous problems I see in nearly every non-judicial foreclosure case I preside over, a procedure relying on a bank or trustee to self-assess its own authority to foreclose is deeply troubling to me.”

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