Because the foreclosure scandal has become such a big news story, and one that seems to drag on and on as the foreclosures themselves prove to be an ongoing drag on California's and the nation's economy, we are learning more about foreclosures. Exactly how foreclosures work, or, more specifically, how the mortgage lenders go about foreclosing on homeowners, used to be knowledge that was only of interest to a small number of professionals.

Homeowners themselves usually were not all that interested in the workings of the system in the past. After all, if you cannot pay the mortgage and you are resigned to losing your home, what difference does it make if the bank is going by the book or not? Not much, at least if the result would be the same if the bank started to go by the book. That was the attitude that the big mortgage banks began to count on when it came to foreclosures. It was sort of, "we could prove that this foreclosure is legal if we had to, so, in the meantime, we'll just pretend that we're proving it." That is the robo-signing scandal in a nutshell.

So how did the banks take their shortcuts? One was with robo-signing, where they presented false documents as being real. But that was just the icing on the cake. One of the real shortcuts involved a database called MERS. MERS stands for Mortgage Electronic Registration Systems. The database was a way for the big banks to keep track of changes in ownership of mortgages.

The thing is, the banks changed the ownership of the mortgages so many times, that it became cumbersome to register each transfer in the local county courthouses. Instead, they eventually just kept track of transfers on their own system, MERS, without bothering to actually register changes of ownership.

Eventually, MERS came to be considered the owner of many mortgages. Instead of saying who the owner really was, the banks listed MERS as the owner. It was sort of like saying, "Who knows who really owns this thing? You'd have to ask MERS."

Now that the scandal has broken, though, San Diego foreclosure lawyers note that many state attorneys general are looking into the banks' use of MERS, and bringing legal action against the banks. Eventually, these actions may help homeowners. In the meantime, just like everything else in the foreclosure story, nothing seems to happen fast enough to help financially troubled homeowners.

Source: Reuters "MERS subpoenaed by New York, sued by Delaware" Oct. 27, 2011