Like a rollicking round of Whack-a-Mole, problematic participants in our national foreclosure mess just keep popping up. We've been wailing on subprime lenders for two or three years now, followed by foreclosure mills and robosigners and robojudges and rocket dockets.
Comes now a new mortgage mole that at least one expert claims deserves a whack: a crazy little thing called MERS.
MERS is short for Mortgage Electronic Registration System, the electronic database that holds 60 percent of the nation's residential mortgages. I like to think of MERS as a cousin to HAL 9000 from "2001: A Space Odyssey" without the bubbly personality. Or maybe a robo-robo!
Christopher L. Peterson, a consumer rights attorney and law professor at the University of Utah, recently gave the House Judiciary Committee an earful on how MERS effectively usurped the traditional role of county clerks across the land 12 years ago, to the benefit of mortgage lenders and the detriment of borrowers.
Quick, painless mortgage lesson: a mortgage entails two legal rights, 1) the right of the lender to receive payment from the borrower, which is contained in the promissory note, and 2) the right of the lender to foreclose, which is contained in the mortgage document.
When a home sells, these two documents traditionally are transferred at the same time. But when mortgage securitization (where's my mallet?) caught on in a major way and loans were changing hands five and six times in a matter of weeks, the banks grew weary of ponying up $35 in pocket change to Madge at the courthouse every time, so they dreamed up MERS to handle the chore.
You know where this is headed, right?
"Mortgage loan originators or servicing companies can enter information about changes in loan ownership if they want to. But there are no penalties if they don't," Peterson told the St. Petersburg Times. "The result is in many cases the MERS database is inadequate, and we don't have reliable information about who owns what mortgage loans."
Got a problem with your mortgage? Tell it to HAL ... uh, I mean MERS.
But it gets better. Because there are only a few great and powerful Ozes behind the MERS curtain, "employees at service companies and law firms can go on MERS Web page, fill in a blank form, press submit, then MERS kicks back a corporate resolution that purports to make these employees assistant secretaries or vice presidents of MERS to do business with the courts," Peterson says.
Top that, HAL!
Peterson says streamlining the mortgage process with MERS has perpetrated a legal puppet show that further removes homeowners from fair treatment. Rep. Marcy Kaptur, D-Ohio, has introduced a bill to prohibit Fannie Mae and Freddie Mac from purchasing any more loans drawn out of MERS.
So, whack a MERS? Not me.
To quote HAL, "It can only be attributable to human error."
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