Here is the simple anatomy of foreclosure fraud.
An individual would take out a loan in order to purchase a home. Unknown to the individual at the time, the bank would have already lined up a purchaser to buy the loan along with a bunch of other loans from the same time period.
The purchaser would enter into a “Pooling and Servicing Agreement” with a couple of other purchasers, which called for the creation of a Trust. One of the other purchasers in the Agreement would become the “trustee.” The original lender was supposed to deposit the mortgages into the trust. Often MERS was designated as the virtual warehouse for the mortgages.
This was where the problems began. At the time that the purchaser bought the mortgages from the original lender, it did not know where that particular loan was going to end up. So, although it paid money for the mortgage, often times the lender did not sign it over to the purchaser right away. Instead, they would wait to find out where the loan was going to go with the intention of signing it over later. This was because the mortgages often changed hands many times before the attempt to deposit it into the trust was made. So at the time the purchaser paid the money, they never actually got any loans. All they got was a spreadsheet with a list of mortgages on it.
This resulted in nothing actually being deposited into the trust. Ideally, they were to go back after the deposit was done and have the lender assign the loans to the Trustee for the benefit of the trust. The problem was, for various reasons, the assignments never got made, so the trusts were empty
If the trusts were empty, it means that the servicer collecting mortgage payments on behalf of the trust, had no right to collect.
It also means that the securities Mortgage Backed Securities backed by these trusts were useless as well, and that the people offering to sell them may face liability to the investors in those securities.
To cover up the failure to properly convey the mortgages, MERS and the Banks got a document mill to forge a backdated assignment or allonge, or produce a false affidavit claiming that a proper chain of title exists and that the foreclosing entity has the right to foreclose, even though they do not. This is where the foreclosure fraud comes in.
Many people feel that they have no options other than to go along with what the bank tells them to do. It is important to realize that in most cases, the bank is NOT on your side. There are far too many instances of people being led to believe the bank was “working with them” only to find that the foreclosure was proceeding anyway.
If you have received a Notice of Trustee’s Sale, you must act quickly to protect your rights. You DO have rights, but what good are rights if you are not aware of them or how to protect them? » Read more: Anatomy of Foreclosure Fraud