If you still think, like Shaun Donovan, that the crisis in the mortgage markets merely concerns foreclosure paperwork, you need to take a look at these two Law Review papers from Professor Christopher Lewis Peterson of the University of Utah (via). They provide, in excruciating detail, the story of MERS, short for Mortgage Electronic Registration System: the private corporation built by the mortgage lending industry, whose tool for electronically trading mortgages has thrown the entire housing market into turmoil. In the name of saving a buck, the mega-banks used this tiny company with almost no employees and entrusted it with 60 million of the nation’s mortgages on its system – 60% of all mortgages in the United States – to predictable results.
Starting in the early 1990s, the mortgage lending industry, seeking speed and the evasion of land title costs, decided to bypass the state and county registrars which would normally track and assign the title ownership of properties. Instead they created and used MERS, which operates a database to track that ownership. And they list MERS as the “mortgagee of record” with the county recorder – so that all the sales and resales and securitization of the mortgages will not result in the fees that follow the recording of mortgage assignments. Peterson explains that this saves the servicers a measly $22 a loan, which of course adds up when you consider the number of loans and trades per year.
Once again, MERS does not actually advance any loan principal to the homeowner, does not have the right to receive any payments from the borrower, and is not the actual party in interest in any foreclosure proceeding. Nevertheless, the actual mortgagee pays a fee to MERS to induce MERS to record the mortgage in MERS’s name. By eliminating the reference to an actual mortgagee or the actual assignee, MERS estimated it would save the originator an average of $22.00 per loan.
This saves the industry money in recording, but basically shields the county recorders from actually divining the owner of the loans. When a loan falls into delinquency and then foreclosure, MERS carries out the foreclosure process in their own name – despite the fact that they don’t own legal title to the mortgages on its database, and therefore lack standing to foreclose. MERS also doesn’t have the personnel (they have almost no employees) to engage in millions of these foreclosure operations or perform any of the other legal duties required of a mortgage owner. So they outsource this capacity in just about the most fraudulent manner possible, relying on the lack of public records and their role as a masked agent for the servicers
http://news.firedoglake.com/2010/10/17/mers-y-mercy-me-the-sewer-drain-at-the-bottom-of-the-housing-market/
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