Lord, Have MERScy

Note: Stay tuned for additional updates on this post as more information becomes available.

Ever since 2008, there has been a growing controversy with regard to entire Foreclosure process. It involves a bizarre financial entity called MERS (Mortgage Electronic Registration System). It's well worth doing further research on this complex legal entity, but suffice to say that it was created to manage the transfer of mortgage note ownership within various Mortgage Backed Securities (MBS). Apparnetly mortgage notes get bought and sold on a regular basis from one MBS to another and MERS is supposed to track the re-assignment. As of current date, apparently 60% of all US mortgages are registered in the MERS system.

But when it comes to foreclosure, it's important that the actual note holder be represented as the debt holder in question. But if these notes are bought and sold constantly, it's difficult to identify who actually holds those notes at the time of foreclosure. And if you can't identify who actually holds the note, legally you can't foreclose. At least, that the argument that is being debated in various courts. There are very specific laws related to foreclosure and I don't pretend to be an expert in any of it. But the fact that legal authorities, including the Kansas Supreme Court, have stepped in to question how MERS has been utilized is good enough for me.

So, that said, here are few links that are worth reviewing. The first one deals with the apparent fact that MERS has no employees. Therefore, the agents they assign at various banks have no one to report to. This very fact calls into question the legitimacy of MERS, which apparently lacks any duly authorized personnel to oversee foreclosures:

There's no life at MERS

And quite a little cottage industry is rising up to contest MERS:

Foreclosure Defense Nationwide

More on MERS..

And Bloomberg had this article the other day that bares reading:

Foreclosure Flaws may delay US recovery

Zerohedge is piping in on this issue as well:

Representative Alan Grayson has a nice synopsis of MERS:

Foreclosure Fraud Crisis

Q2 Foreclosure sales about to be reversed?

(Edit Oct 5th) Link to Zerohedge article suggesting that the MBS market may collapse over this foreclosure fraud issue. Title insurers are starting to halt coverage for foreclosed homes, out of doubt about who actually holds the title. No title, no sale.:

Title insurers terminating title insurance for foreclosures

If banks are engaging in foreclosure fraud, it could add impetus to the questioning of the entire MERS system and leave banks on the hook for the entire mortgage loan amount.

And if the banks on the hook to the MBS holders, it's going to get VERY UGLY!! So ugly that it's going to require Federal (Congressional or Executive order) action to resolve it.

That's not a good scenario for the US financial system. And it's becoming increasingly clear to me that this is going to take a major political initiative to resolve, with consequential uncertainty in the markets. But it's going to take something that supercedes the current foreclosure and bankruptcy courts.

Take some time and Google MERS and study up on the subject and legal questions. You'll be amazed!!

Scrutinizer

Recession is officially "over"

Much of the recent market gains seems to be due to an economic report stating that the recession is officially over and ended in June, 2009. Well.. it might be official, but for the millions of Americans living on food stamps and other government assistance it sure feels like we're still in one.. So is the market just going up as a response to a declining US Dollar, or in response to a rising gold price (indicating inflation and price recovery)? Or are just pumped up on an economic "sugar high" from that stimulus that increased our national debt by over 10%, a stimulus that may lead to a major hangover.

Please review the following and ask yourself if we're out of recession:

The following are 15 shocking poverty statistics that are skyrocketing as the American middle class continues to be slowly wiped out....

#1 Approximately 45 million Americans were living in poverty in 2009.

#2 According to the Associated Press, experts believe that 2009 saw the largest single year increase in the U.S. poverty rate since the U.S. government began calculating poverty figures back in 1959.

#3 The U.S. poverty rate is now the third worst among the developed nations tracked by the Organization for Economic Cooperation and Development.

#4 According to the U.S. Department of Agriculture, on a year-over-year basis, household participation in the food stamp program has increased 20.28%.

#5 The number of Americans on food stamps surpassed 41 million for the first time ever in June.

#6 As of June, the number of Americans on food stamps had set a new all-time record for 19 consecutive months.

#7 One out of every six Americans is now being served by at least one government anti-poverty program.

#8 More than 50 million Americans are now on Medicaid, the U.S. government health care program designed principally to help the poor.

#9 One out of every seven mortgages in the United States was either delinquent or in foreclosure during the first quarter of 2010.

#10 Nearly 10 million Americans now receive unemployment insurance, which is almost four times as many as were receiving it in 2007.

#11 The number of Americans receiving long-term unemployment benefits has risen over 60 percent in just the past year.

#12 According to one recent survey, 28% of all U.S. households have at least one member that is looking for a full-time job.

#13 Nationwide, bankruptcy filings rose 20 percent in the 12 month period ending June 30th.

#14 More than 25 percent of all Americans now have a credit score below 599.

#15 One out of every five children in the United States is now living in poverty.

The Middle Class Recession

So am I buying into this economic recovery scenario? Not yet.

My view of the market action of late is that we're in a short-squeeze scenario. With everyone being so negative, including myself, it shook a lot of people out of the markets, while others were going short. And short interest is a terrific level, so short-covering could fuel a significant rally if buying interest continues:

NYSE Short Interest Remains Near Record

Personally, considering the lack of volume being seen, it's not a sustainable rally. But it can go on for a few more weeks, or completely collapse tomorrow. It's very vulnerable to "event risk".

Be nimble and look for longer term trends.

Scrutinizer