By PAULA LAVIGNE
REGISTER STAFF WRITER
Figuring out which company to deal with during a foreclosure can be daunting. Even if the original mortgage was with a company recognized by the borrower, that company may not be the one acting against the borrower in court.
For example: Wells Fargo filed more than 3,600 foreclosure lawsuits in Iowa from January 2005 to February 2008, more than any other company identified in Iowa court data. But the company could be taking legal action because it processed payments for another mortgage company or acted as a trustee for investors – not because it’s the original lender.
Two company names that often appear on Iowa foreclosures – Deutsche Bank and Mortgage Electronic Registration System, or MERS – can be even more puzzling to borrowers.
Deutsche Bank, a global financial services firm with headquarters in Germany, may be listed as a loan’s owner of record, but it likely doesn’t have an actual stake in foreclosure proceedings. The firm acts as a trustee for investors holding mortgage-backed securities.
A loan winds up in a mortgage- backed security after it is sold by the company that originated the note. An investment bank pools that loan with others. It then sells securities, which represent a portion of the total principal and interest payments on the loans, to investors such as mutual funds, pension funds and insurance companies.
MERS, meanwhile, is neither the servicer nor the lender. Companies pay the firm to represent them and track loans as they change hands.
So while MERS should be able to point borrowers to the appropriate contact in a foreclosure proceeding, Deutsche Bank urges borrowers to contact loan servicers instead.
A tip for borrowers facing a foreclosure action: Make sure the company bringing the foreclosure action has the legal right to do so.
University of Iowa law professor Katherine Porter led a national study of 1,733 foreclosures and found that 40 percent of the creditors filing the lawsuits did not show proof of ownership. The study will be published later this year.
Companies, she said, have been “putting the burden on the consumer – who is bankrupt – to try to decide whether it’s worth it to press the issue.”
Max Gardner III, a bankruptcy attorney in North Carolina and a national foreclosure expert, said the trend is spreading to other states. “You have to prove in North Carolina that you have the original note,” he said. “Judges have not (asked for) that very often, until the last five or six months.”
MERS and Deutsche Bank faced court challenges last year over whether they had legal standing to bring a foreclosure action, with mixed results.
A federal judge in Florida ruled in favor of MERS, dismissing a class-action lawsuit that claimed the company did not have the right to initiate foreclosures. But a federal judge in Ohio ruled against Deutsche Bank, dismissing 14 foreclosure lawsuits after Deutsche Bank couldn’t provide proof of ownership. The Ohio attorney general has not been successful in getting state judges to follow suit.
In Iowa, attorneys and lending experts say they haven’t seen similar rulings against Deutsche Bank
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