From the dusty files of the excruciating minutiae of bankruptcy court proceedings (courtesy of the NY Times) comes this story:
But while banks may have booted a few robo-signers and tightened up some lax procedures, one question at the heart of the foreclosure mess refuses to go away: whether institutions trying to take back a property can prove they even have the right to foreclose at all.
Some in the industry believe that questions about this issue — known as “legal standing” — are trivial. They say it’s just a gambit by borrowers’ lawyers to throw sand in the foreclosure machine. Nine times out of 10, bankers say, the right institutions are foreclosing on the right borrowers.
Maybe so. But the United States Trustee Program, the unit of the Justice Department charged with overseeing the integrity of the nation’s bankruptcy courts, is taking a different view. The unit is stepping up its scrutiny of the veracity of banks’ claims against borrowers, and its approach is evident in two cases in federal bankruptcy court in Atlanta.
This, to put it mildly, could be a thermonuclear land mine. There’s no reason to panic yet, since no court has ruled on the standing issue, but the action by the U.S. Trustee hints at the possibility that this issue will become larger and larger, and likely require significant litigation to resolve. And looming in the background? MERS… which is not tech-speak for merde, but the entrance of the DOJ (the parent department of the U.S. Trustee) could result in a major merde-storm.