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Foreclosures Halted in Florida; MERS Status Questioned


"...some existing foreclosures may experience delays while corrective action is taken, there will be no interruption in new foreclosures."

Just as repossessions hit an all time high, it appears that bad legal advice may be responsible for a halt in foreclosures in 23 states by the nation’s fourth-largest home loan originator. 

Ally Financial Inc.’s GMAC Mortgage has halted foreclosures, evictions, lockouts and the sales of property taken in foreclosure, the company confirmed to  Bloomberg News.

GMAC Mortgage wrote $26 billion in mortgages in the first six months of 2010, according to industry rankings.

“Urgent” Action on Foreclosures, Evictions

A two-page memo dated Sept. 17 and marked “urgent”  directed brokers to immediately stop evictions and foreclosure-related actions, according to the Palm Beach Post.

Opposing lawyers were quoted as asserting that Florida judges had disqualified a GMAC employe from signing many thousands of foreclosure-related documents each month.  The grounds were said to be the employe’s inability to say that he had personal knowledge of the accuracy of the individual foreclosure documents.  The employe was identified as a vice president of Mortgage Electronic Registration Systems, the creation of large banks to ease sale and transfer of homes, and of bundled, securitized part interests in real estate.

On its website, MERS cites cases purportedly standing for the proposition that the firm has standing in Florida to maintain mortgage foreclosure cases.  The standing flows from the plaintiff’s status as the holder of the note and the mortgage.

Endorsements in Blank

“When MERS forecloses, MERS is the mortgagee and it is the holder of the note because a MERS officer will be in possession of the original note endorsed in blank, which makes MERS a holder of the bearer paper,” according to the company’s website.  “MERS will not foreclose unless the note is endorsed in blank and held by MERS.” 

Once before, in 2005, MERS suspended its own foreclosure activity in Florida because of adverse trial court rulings. MERS prevailed on appeal in every case, according to the web site. 

One of those decision concluded that it made no difference that MERS does not actually own the note at foreclosure.   The court noted that  Florida rules of civil procedure allow an action to be brought by an authorized agent on behalf of the real party in interest.

“Corrective Action” Needed in Foreclosures

GMAC Mortgage may “need to take corrective action in connection with some foreclosures,” according to the Palm Beach newspaper.

“We are unable to comment on the specific merits of the legal challenge because some of them are in litigation,” said GMAC spokesman Jim Olecki, according to the Palm Beach publication.

 ”Nevertheless, a new process has already been developed and implemented so that though some existing foreclosures may experience delays while corrective action is taken, there will be no interruption in new foreclosures.”

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Foreclosures Halted in Florida; MERS Status Questioned - One Comment

  1. John Spano wrote:

    thats a great ponit, but I’m sorry to hear you’re caught in this mess. It seems that good legal advice would have avoided the problem from the beginning.

    Thursday, October 7, 2010 at 5:17 pm | Permalink

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