View full sizeNationwide, the pace at which homes are entering the foreclosure process has slowed in recent months amid bank and court delays, but RealtyTrac today estimated they still account for at least one of every four home sales. UPDATE below added on 5/27 at 6 a.m.:
The foreclosure fight in Oregon jumped to a new level this week after a federal judge in Medford
the industry's sloppy practices in blocking the seizure of a Jacksonville home, and mortgage issuers turned to the Legislature to find a quick fix to the legal quagmire.
U.S. District Judge Owen Panner questioned whether big banks should be allowed to foreclose without court supervision -- as required in 23 states but not Oregon, where one in every 500 homes is in foreclosure, according to
. That's compared with one out of 600 nationwide.
Panner specifically warned of problems in cases involving the Mortgage Electronic Registration System.
was set up by the banking industry to rapidly package and sell mortgages as securities without recording each sale in county recorder offices.
The "MERS system raises serious concerns regarding the appropriateness and validity of foreclosure by advertisement and sale outside of any judicial proceeding," he said Wednesday
.
"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," he wrote.
UPDATE:
A spokeswoman for MERS, Janis Smith, said it would appeal the ruling, which Smith described as inconsistent with earlier court decisions in the state.
POLL:
Should Oregon lawmakers give foreclosures, MERS a do-over?
Since October, federal judges in six separate Oregon cases
, saying its participation caused lenders to violate the state's recording law. At least one federal judge has ruled in favor of MERS, industry lobbyists said.
Today, the mortgage and banking industry turned to the Oregon Legislature for help. The
entertained a last-minute amendment to an affordable housing bill that would
. Lobbyists for banks, credit unions and title companies said the amendments were needed to lift a cloud over thousands of Oregon homes.
"It's created a significant issue for the title industry, certainly, and, among others, the people who own these homes," said Alan Brickley, an attorney for
in Portland. The
and
also testified in favor of the amendment.
was proposed to
, which is designed to protect affordable housing financing in foreclosures. Its introduction sent the bill's co-sponsor,
, D-Beaverton, and a deputy of Oregon Attorney General John Kroger scrambling to defend the state's existing recording law.
Committee co-chair
R-Gold Beach, postponed action on the amendment
.
"It's a gut and stuff and will emasculate the recording requirements," said
, a real-estate attorney in Portland. "It should be strongly opposed."
Nationwide, the pace at which homes are entering the foreclosure process has slowed in recent months amid bank and court delays, but Realty Trac today estimated they still account for at least one of every four home sales.
Meanwhile, federal regulators and all 50 states continue investigating major financial institutions amid reports of flawed foreclosure practices. California and Illinois plan to investigate whether Lender Processing Services Inc. rushed the processing of foreclosure cases for lenders in a practice known as "robo-signing."
Most foreclosures in Oregon occur relatively quickly outside of a courtroom. But state law requires the lender to clearly document its interest in the property or prove its case in court.
Panner's ruling is the most sharply worded among the six foreclosure cases blocked since last fall and the clearest outline of the confusion caused by MERS and banks as they foreclose on homeowners.
"MERS makes it much more difficult for all parties to discover who owns the loan," Panner wrote. "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."
Panner's ruling halted the foreclosure on the Jacksonville home of Ivan and Katherine Hooker after finding the bank, a trustee company and MERS violated Oregon recording law.
Bank of America and the trustee, Northwest Trustee Services, did not immediately respond to requests for comment.
In November 2005, the Hookers took out a $260,000 loan from GN Mortgage, which then sold it to Wells Fargo Home Mortgage, which in turn sold it to Bank of America. They fell behind on their payments, failed to modify the loan and stopped payment in September 2009, according to their complaint. Northwest Trustee Services issued a notice of default in May 2010, and the couple filed suit to block the foreclosure in September.
Panner found that none of the transfers was recorded in Jackson County land records, where the couple live. He also found inconsistencies and gaps in how the documents describe MERS and other parties.
"While I recognize that (the Hookers) have failed to make any payments on the note since September 2009, that failure does not permit defendants to violate Oregon law," Panner said.
He noted that the trust company at one point canceled the foreclosure after discovering documents were recorded out of order. It was later restarted.
"The 'out-of-order' recordings demonstrate problems, not atypical in my view, often caused by foreclosing parties rushing to expedite non-judicial foreclosures.
Panner also found that just four days before filing the first default notice, three MERS executives signed mortgage documents to other parties all in the same day, leading him to question how carefully they had been reviewed.
"The same notary public apparently witnessed all three executives sign the documents on the same day," he said. Considering the parties relied on those documents to justify foreclosure, Panner said, the review "appears rushed."
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