The banks cannot legally foreclose because they did not record title changes property. They have divided title using MERS as their "local county recording office". Your "servicer" (who you pay your mortgage to) is NOT the same as the owner of the note. Underneath that servicer, the notes are bundled and sold multiple times. In order to keep that more discrete, the banks use MERS to record the change in ownership. The homeowners are challenging the banks right to foreclose. The judges are state by state ruling in favor of the homeowner because what the banks did by avoiding proper change in title is lose their right to enforce the mortgages. When the banks foreclose they make back most of their money (at least 92%) which, in most cases is insured by fannie mae or mortgage insurance. When the foreclosure is done, banks go to fannie mae and say, "where's my money" If banks can't foreclose then they will lose all the money on the homes and as more homeowners are underwater they realize that the best business, financial decision is to walk or challenge the banks. This has snowballed and there is no way the banks can fix it now. They cannot go back and redo the title as that is akin to back dating a legal document.In Florida, in just one week, the banks dismissed (did not challenge) 1500 lawsuits against them. This week, a judge ruled against the main legal office doing foreclosures in Florida for flawed processes and told them that they could not foreclose or start over on the process. That legal office fired 568 employees the following day. If the banks can't get their money back from fannie mae, because they cannot foreclose, they will crash.
Here's a simple explanation http://www.bloomberg.com/news/2011-02-14/merscorp-has-no-right-to-transfer-mortgages-u-s-judge-says.html MERS ruling in NY which is very significant being that the judge basically ruled the MERS is not a legal entity and has no rights. http://www.stopmyforeclosurehome.com/2011/02/new-yorks-us-bankruptcy-court-rules-merss-business-model-is-illegal.html
