This is one of the reasons why the banks are very scare. The homeowner is the least of their problems because the banks must pay for an investigator to back track and locate the last known location of the title/note. Firms that had it last and lost it can have a lawyer fill out a state form and affidavit to document the lost documents. This option always exist for banks and service companies in case lost documents happen (usually due to natural disasters, fire, etc). The mess up in the MERS just gave more time for the homeowner to stay in their house, but eventually the documents will be located or accounted for and the foreclosure process will restart. However the MBS is another story because these investments were sold with a prospectus that must be accurate and meet SEC/banking regs. Claiming that the MBS are backed with mortgage notes/docs and rated AAA when they are not opens the banks to hot legal problems. Whoever prepared and signed off on the prospectus is already in legal trouble. Question now is will the state governments prosecute and disrupt the banking system with trials. Sec of Treasury and Fed Reserve may be lobbying via federal government for the states to hold off or risk causing more public panic and triggering another financial meltdown of 2008.