Can I avoid foreclosure if there is an error in MERS that shows a break in the chain of title?

The Mortgage Electronic Registration Systems, Inc. (MERS) was created by major lenders to simplify the mortgage process by allowing MERS to stand as the mortgagee of record. This capability allowed mortgages to change hands without the necessity of recording each transfer. However, in the present economic climate with foreclosures rising, MERS has been used by homeowners to dispute the chain of title necessary to bring about a foreclosure. The lenders affected include Fannie Mae, Freddie Mac, Wells Fargo, Citi Mortgage, chase, HSBC and Countrywide (now Bank of America).

MERS provided total anonymity for the lenders even while mortgages were securitized, spliced and then resold to insurance companies. The anonymity enabled the lenders to commit mortgage fraud and practice predatory lending against homeowners. The anonymity through MERS has now become a complex issue as defaulting homeowners facing foreclosure have been allowed to assert that MERS breaks the chain of title as the nominee lender. The actual lenders cannot foreclose unless they can prove the chain of title.

A recent case in the California bankruptcy court held that MERS could not foreclose as a stand-in lender and that the actual lender, Citibank, could not collect on its claim. This ruling and other similar rulings alerted bankruptcy attorneys to seek to discover whether MERS was a party to their clients’ mortgages. If attorneys can show that MERS breaks the chain of title in a mortgage, the anonymous lenders may have a more difficult if not impossible task to pursuing foreclosure actions on homes.

Talk with an attorney to discuss Mortgage Electronic Registration Systems, Inc. and how it may provide a break in the chain of title in your case.