Pressure On "Absurd" MERS' Business Model Continues In Metro NYC Cases; CEO Abandons Sinking Ship; Members Told To Stop Foreclosing In Company Name

The New York Post reports:

• The feds are raising their scrutiny of foreclosure cases in the Metro area. The US Trustee's office, which is a division of the Justice Department, is filing briefs in individual cases asking for judges to disallow motions made by the bank or servicer, and for lenders to cough up supporting data for their filings.

• In a recent Brooklyn case, the US Trustee asked Judge Shelley C. Chapman of the US Bankruptcy Court to disallow a motion by the alleged mortgage holder for confidentiality on the paperwork required to show the servicer had standing to bring the foreclosure action.

• Earlier this month, US Bankruptcy Judge Robert E. Grossman of New York's Eastern District on Long Island laid a new, homeowner-friendly legal foundation for upcoming battles over the 65 million home loans -- half the consumer mortgages in the US -- the Mortgage Electronic Registration Systems, or MERS, claims it holds.

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• MERS tried to throw its weight around in court in the case of Westbury resident Ferrel Agard. It failed. In a 37-page decision, the judge shredded MERS' arguments, noting the court isn't going to turn a blind eye to failure to comply with the law just because MERS is an industry titan.(1)

• Judge Grossman questioned the very core of MERS' business model, calling it "absurd at best" that MERS claims to be both a mortgagee and an agent of the mortgagee, and saying MERS has no right to transfer mortgages.

• This legal challenge adds to a growing list of problems for MERS. R.K. Arnold, CEO, departed late last month, and MERS now plans to change its rules to require "Members to not foreclose in MERS' name," according a Feb. 16 announcement obtained by The Post.

Source: Feds step up bank probes on foreclosure.

(1) In re Agard, Case 8-10-77338-reg (Bankr. E.D.N.Y. February 10, 2011).