Calif. Widower Takes On MERS As Bankruptcy Judge Thwarts Foreclosure Attempt, Sanctions Attorney For Sloppy Motion; Homeowner Files Suit Seeking $1M+

In Cerritos, California, msnbc.com reports:

• Questions linger here, as ripe and nagging as the odor that once wafted over this former dairy capital: Who is trying to seize the home of Ray Vargas, child of the Great Depression, D-Day veteran and loving husband who just wanted to do right by his dying wife? And are they entitled to it?

• In bankruptcy court documents, the party attempting to foreclose is identified as Mortgage Electronic Registration Systems Inc., or MERS,(1) a small Vienna, Va.-based company employed by lenders to streamline the resale of mortgage loans and servicing rights. In that role, MERS claims an interest in tens of millions of U.S. home loans and the legal right to foreclose on those in default.

• But MERS never gave Vargas a loan. It never collected money from him or recorded his payments. It had no ability to modify his loan. What it did have was a copy of a document that named it a “beneficiary” of the mortgage on his home and a “nominee” for the lender and “lender’s successors and assigns.” But it has never identified the current holder of the loan.

• While such documentation has allowed many foreclosures to proceed around the nation, the judge in Vargas’ case threw MERS for a loop, ruling that the company had no right to attempt to seize his home on behalf of unnamed plaintiffs. “No such unidentified parties are permitted in a motion before the court,” wrote Judge Samuel L. Bufford. Bufford’s October ruling kept the foreclosure on hold and opened the door for Vargas to sue MERS in an action aimed at clearing his home of the $826,549 in debt he says is the result of fraud, forgery and abuse of process.

***

• [J]udge Bufford’s ruling in Vargas’ case was greeted with enthusiasm by [consumer bankruptcy advocates]. In a withering opinion, the judge said MERS “presented no admissible evidence” in its case. And he found that sanctions should be imposed against [Mark T.] Domeyer, the attorney representing MERS, for bringing such a sloppy motion to court. The bottom line, Bufford said, was that the true owners of the loan — “highly unlikely” to be original lender Freedom — did not come forward in court and MERS failed to prove any right to act on their behalf.

For the entire story, see D-Day vet's tale parallels mortgage meltdown (Ex-corpsman, 84, blames 'greed, greed, greed' as he faces losing his home).

For Judge Bufford's ruling in this case, see In re Vargas, 396 B.R. 511 (Bankr. C.D. Cal. 2008).

Go here for the homeowner's lawsuit against MERS and Freedom Home Mortgage Corporation.

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) A 2007 lawsuit against MERS (Trevino v. Merscorp Inc., et al.) identified its controlling shareholders as: Citigroup, Inc., Countrywide Financial Corporation, Fannie Mae, Freddie Mac, GMAC-RFC Holding Company, LLC, (doing business as GMAC Residential Funding Corporation), HSBC Finance Corporation, JP Morgan Chase & Co., Washington Mutual Bank, and Wells Fargo & Company.

Among other things, the 2007 lawsuit alleged that "MERS is grossly undercapitalized to cover the potential liability stemming directly from its role as primary mortgagee on tens of millions of Mortgage Notes." Because of this, the suit sought to "pierce the corporate veil of MERS" and hold the the controlling shareholders jointly and severally liable for damages as well as MERS (see Trevino v. Merscorp Inc., et al. - page 8, paragraphs 9(l) and 9(m)). See also, Homeowners In Foreclosure Being Clipped For Illegally Inflated Legal & Appraisal Fees, Says Lawsuit. Copyright 2009 The Home Equity Theft Reporter (http:/HomeEquityTheft.blogspot.com) ThetaMissingDocsMtg