An important article to read about another example of the fading rule of law in America

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Summary:  An important article at Harper’s, one every American should read, about the Mortgage Electronic Registration Systems (MERS), created in 1995 by the banks to circumvent property and mortgage laws in the US.

“What’s happened is  that, almost overnight, we’ve switched from democracy in real-property  recording to oligarchy in real-property recording. There was no court  case behind  this, no statute from Congress or the state legislatures.  It was accomplished in a private corporate decision. The banks just did  it.”
— Christopher Peterson (Prof Law,  U Utah)

“Stop Payment! – A Homeowners’ Revolt Against the Banks“, Christopher Ketcham, Harper’s, January 2012 — Open PDF’s are online at Scribd (until it’s taken down). Hat tip to Barry Ritholtz.

Other posts about the housing bubble

  1. Diagnosing the eagle, chapter I — the housing bust, 6 December 2007
  2. “Idiots Fiddle While Rome Burns” – comforting and facile rhetoric, 24 July 2008
  3. A must-read for every American citizen: “The Fannie Mae Gang”, 25 July 2008
  4. A vital but widely misunderstood aspect of our financial crisis, 18 September 2008 — Too many homes.
  5. Knocking down houses in order to save the village, 20 October 2008
  6. Destroying houses in order to boost home prices, 16 December 2008
  7. The housing crisis allows America to look in the mirror. What do we see?, 9 March 2009
  8. Another step to solving the housing crisis: downsize cities by destroying neighborhoods, 2 April 2009
  9. Sparks of justice still live in America – cherish them and perhaps they’ll spread, 11 September 2009 — About foreclosures.
  10. Who should we blame for the mortgage crisis?, 16 January 2010
  11. Cutting through the fog to clearly understand the housing crisis, 8 July 2010
  12. Housing Update – dynamite to blast us out of our lethargy?, 27 July 2010
  13. Here’s an opportunity for the Tea Party: fighting foreclosure fraud by banks!, 22 September 2010
  14. A briefing about the foreclosure fraud crisis: its origin and impacts, 14 October 2010
  15. Who caused the housing crisis?  Why do people not believe all the studies?, 15 November 2011
  16. More use of the big lie:  shifting the blame for the housing crisis, 29 December 2011

3 thoughts on “An important article to read about another example of the fading rule of law in America”

  1. Pluto

    I just want to tell you that this post had a huge impact on me. But I haven’t finished processing the thoughts and emotions it brings up. There’s just so much to think about and so many different possible responses it will take a long time to think them through and to formulate a reasonable course of action.

    Thank you for this post, I consider it to be one of the most important of the year and might be one of the 10 most important posts you’ve ever written.

    Reply
  2. Another step away from the rule of law in America

    “The Restatement of Property and the Road to Mortgagocracy“, Adam Levitin, CreditSlips, 5 January 2012 — Excerpt:

    I came across another American Law Institute document that just floored me, showing how deeply captured and compromised part of the legal elite is.

    … I’ve never seen anything like this before. The Restatement here is saying that “courts should bend over backwards to make sure that the lender wins no matter how badly the lender has screwed things up.” Is it really an accurate restatement of the law to say “lenders win even if they screw up and don’t follow the law”? That sure sounds like a Mortgagocracy. I suspect that many ALI members would be pretty shocked to find that’s what the Restatement is saying. But it’s got the ALI imprimatur on it.

    I get that the borrower has no right to a windfall, but I can’t see why that means that basic principal of agency law should be disregarded and agency relationships implied where they do not exist; the

    … I don’t think anyone deserves a free house. But a mortgage is a contract, and a background term to that contract is that the foreclosure has to follow the law. That’s part of the deal, no different from any other (non-severable), material term. Otherwise, why not allow self-help foreclosures and evictions?

    I don’t think it’s too much to say that if you’re going to engage in a major financial transaction like making a mortgage loan, you’ll be expected to follow the law correctly or not enjoy its benefits. Both lenders and borrowers have to play by the rules. If you don’t pay the mortgage and the lender follows the law, you lose your house. But following the proper legal procedure is no less important than the default in a foreclosure; both are equally important requirements. It’s not a windfall. It’s part of the mortgage contract.

    … It’s really disturbing to see an ALI product moving so blatantly away from rule of law and towards mortgagocracy. Now the good news is that the Restatement isn’t law. But this is a scary sign of how part of the legal elite, which used to fight for rule of law above the rule of monied interests, has been co-opted.

    Reply

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