Utah Courts Grant Home Owners ‘Get Outa Jail Free’ Card In Foreclosure Mess

by | BiggerPockets.com

Short and sweet today, as I’m pretending I’m an employee enjoying the three day weekend like everyone else.

A court in Utah has now ordered any record of loans previously recorded on a few homes to be eliminated. Put more plainly, the order left the home owners with their homes magically made debt free. Why on earth would a judge even consider such an act?

Simple, the use of MERS, (you can Google it) the lazy, convenient vehicle lenders and Wall Street used to keep investors from knowing what garbage was being sold to them, has come back to haunt them. I predicted this more than a year ago — to laughter and much rolling of eyes.

This isn’t like my last piece, which merely addressed the issue of ‘standing in court’. These rulings have leapfrogged a couple steps. By issuing court orders resulting in the removal of the home owners’ debt, they’ve pretty much told the entire system to put up  or shut up.

These rulings are no less than monumental in scope and potential economic and financial effect. Granting home owners a literal Get Outa Jail Free card will surely generate all sorts of predictable and unintentional consequences.

Next stop — the appeals. We’ll see if we’re a nation of laws or not.

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.


  1. Jeff Brown

    Think of it with a positive spin, if you can. 🙂 It’s a shot off lenders’ bows, intended to scare them straight. Stop the Fred Astaire act in court, get real, and we’ll stop spankin’ ya. It could be the pivotal court decision, combined with the Ibanez case, that gets lenders finally believing their power isn’t infinite, nor does the ‘Golden Rule’ mean they get to make their own rules even when in our court system.

  2. I’m with Jeff – the decision itself is kind of crazy, but these are crazy times, and there’s definitely a silver lining. American homebuyers have been bullied by the banks for years and years – a little scare for lenders is long overdue and may help things balance out to normal.

  3. Jeff Brown

    Joshua — It’s not that they’re chucking contracts out the window. They can’t prove there IS a valid contract. If you and I are the judges on a panel, how do we resolve this when the lender cannot prove what they’re alleging? Not even close. A contract is a contract. But first you must prove its existence. Again, rule of law — for both sides.

    • If that’s the case, then I agree. As I said in my first response, I’d really love to see the decision and frankly, the evidence produced in the case to make an educated comment. I’m just throwing guesses at the wind otherwise . . .

  4. william dziedzic on

    Without the written opinion it is impossible to draw any conclusions from this case. Just like the Ibanez case where it was in a non-judicial state (i.e. essentially no court intervention to obtain the foreclosure) and it was some of the sloppiest lawyering in the history of real estate. The court had no choice but to rule the way it did and the effect of its holding was more in the media than in reality.

    As for MERS, where is the issue with the contract? It is basic commercial law: A promises to pay B X amount of $ as evidenced by a promissory note. Said note is secured by a mortgage deed/deed of trust and recorded in the land records. The banks threw in MERS as nominee to evidence the mortgagee of record. How is this such a travesty to black letter law and public opinion? This happens with securities all the time. The division of interests in property is not a novel concept.

    I am sure it will come to light that this was some sort of default judgment where no real issues were ever raised in front of the judge. I am sure the Utah lender bar has fixed their issues previously and this case is old news.

    Further, what is to stop the “investors” from bringing an action against the original borrower for unjust enrichment and attach a judgment lien against his new property, garnish his wages, or execute his bank account. There is ultimately no free ride.

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