JPMorgan Chase, Bank of America and GMAC have made headlines for their foreclosure process woes. These processes have been paused as they work through information integrity issues related to the Mortgage Electronic Registration Systems.

The latest news is that a group of homeowners in Kentucky have sued Citigroup, charging that under the umbrella of its relationship with MERS, it is foreclosing on homes even though it does not hold the title to those homes.

"The homeowners claim the defendants filed or caused to be filed mortgages with forged signatures, filed foreclosure actions months before they acquired any legal interest in the properties and falsely claimed to own notes executed with mortgages," notes Bloomberg. Interestingly, they are pursuing racketeering claims against the bank.

So what to make of this? It all boils down to the legal interpretation of what the banks own via MERS. Some think the MERS system is legally vulnerable. "MERS maintains it is a merely an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. But several recent court opinions agree‒and ruled that to foreclose on real property, lenders must be able to establish the chain of title entitling it to relief," notes UPI. Various plaintiffs have certainly been successful raising this issue. But defenders of MERS note that mortgage holders think this is hogwash.

Writes a former CEO of Ginnie Mae: "When a borrower signs the mortgage security instrument at closing, they grant and convey the legal title to the mortgage to Mortgage Electronic Registration Systems, Inc. (MERS) and MERS is the mortgagee. As the agent for the promissory note owner, upon instructions from the owner, MERS will commence a foreclosure. The mortgage instrument states that MERS has the right to foreclose and sell the property. Courts around the country have repeatedly upheld and recognized this right."

For more:
- here's the Bloomberg article

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