By Dave Krieger
As of this post, two states Attorneys’ General have now decided to investigate Mortgage Electronic Registration Systems, Inc. (hereinafter “MERS” … which decided over a decade ago with the help of Fannie Mae, Freddie Mac, the American Land Title Association, the Mortgage Bankers Association and a host of major banking institutions), which injected itself into the electronic data recording business for securitized mortgages and insodoing, toyed with the chains of titles to over 70,000,000 pieces of American real estate.
As expected, MERS spin folk put out a press release welcoming Beau Biden (DE) and Martha Coakley (MA) investigations, saying they look for quick resolve, while wiping the sweat off their brows that the other 48 attorneys general are just willing to roll over as long as the State they’re in gets some damage money from the banks to put into their respective general funds. That extra budget money doesn’t solve the general crisis however, it just gives the AG’s that won’t investigate thoroughly the mess MERS and its member-subscribers made a campaign platform touting toughness the likes of the tobacco settlements, when in fact, the settlements against the banks just rub salt in an already-gaping wound that are indeed miniscule to the money big tobacco paid.
On July 21, 2011 MERS issued a policy change (2011-5) claiming that members were no longer allowed to foreclose in the name of MERS … like that’s going to change the equation?
If MERS is involved in your title, so are unknown intervening assignees … assignees who didn’t record their interest in the notes they bought and sold on Wall Street and electronically recorded in MERS database. The end result hasn’t changed. MERS new policy dictates that their 20,000+ robo-officers signoff on assignments, transferring the mortgages and deeds of trust into the names of the real owners, many of which are New York trusts that have in almost all of the cases, violated the terms of their own Pooling and Servicing Agreements in claiming ownership of some 30-million claimed current MERS mortgage database holdings and 40-million past.
Many think MERS started out well-intentioned and grew into a monster of catastrophic proportions. My take is that MERS only goal was to show its members how to save billions of dollars by paying it a cheap data entry fee and circumvent the land records, changing the character and status of the promissory notes which they split from the deeds and mortgages, instead of properly sticking to the tried and true (and sometimes slow) process of following state property recordation laws. Judges who look the other way at this mess (in my opinion) haven’t been economically affected enough to wake up yet. When the states and counties can’t afford to keep paying their law clerks (take Florida for example) and judges have to do their own research, the system is going to bottleneck even worse than it already is. Foreclosures in Florida are estimated to take over 600 days from start to finish according to one estimate I’ve read.
Despite all of the claims that MERS is trying to straighten out their preconceived “mess”, the conditions of title have not changed for every single piece of American real estate it has “touched”. The marketability of any MERS-related/mortgaged property hangs in the balance.
Two important elements remain a constant here: (1) the damage to the chain of title is on-going and any recordation past the MERS recordations further convolutes the title to the point of uninsurability; and (2) just because MERS claims they’ve changed their strategies doesn’t put the “toothpaste back in the tube”. Titles to property are still slandered and clouded and MERS and its parent MERSCORP, Inc. are culpable and negligent to that end.
MERS demands to be informed every time one if its members get sued? Why does MERS make itself so hard to serve process on? If you’re an attorney trying to litigate against MERS and MERSCORP in a quiet title action, service of process against these entities is as obfuscated as the loans they preserve on their databases. Any service of this kind that claims it’s got nothing to hide shouldn’t be behaving badly (the latest address of service against both entities is in New Castle, Delaware through CTC). At least with Bank of America, you know it’s in Charlotte, North Carolina. Depending on the MERS mortgages, deeds of trust and assignments, its agents can be anywhere. Finding and deposing these agents drives up the costs of litigation, discouraging homeowners from pursuing methodologies to restore their titles to marketable condition. Having judges out there that think it’s okay for MERS to do what it’s doing further complicates the final resolution to the bigger problem that even Gretchen Morgensen from the New York Times understands. It’s sad that the paper won’t let her out of her cage to really unleash this issue. Everyone would be suing the banks and MERS trying to quiet title to their properties, jamming up the court with millions of lawsuits … and by golly, we can’t have that now, can we? Whether any newspaper reporter, judge or banker smirks at that proposition, there are many who see the groundswell of disgruntled homeowners, foreclosed on or otherwise, chant my new mantra: “If I can’t convey … neither can they!”
I brushed the dust off my old deed of trust (hey, that rhymes too!) recently to find the same thing stated that I’ve seen on dozens of others I’ve audited, the phrase that says, “Borrower Covenants that Borrower is lawfully seised of the estate and has the right to convey” … hmmm? If you as a homeowner are left scratching your head on that one, trying scratching someplace else when you realize that you weren’t the one who caused your title to become clouded (well, actually, you did when you signed a MERS mortgage or deed of trust). You didn’t know at the time you signed the paperwork and moved into your new home that your problems with conveying clear title had just begun. This is why rumors abound that one-third of Kansas City’s properties with mortgages issued between 2003 and 2008 are uninsurable. That means the value of your home is worth ZERO because you can’t sell it … because you can’t convey clear title.
Title companies are going to start feeling the brunt of these legal actions unless they start refusing to insure based on phony or improper assignments and substitutions of trustee. How can a short sale really work if the MERS system has convoluted and obfuscated true ownership of the borrower’s loan? We can only hope that the issue of MERS legitimacy will be squashed like a cockroach before the Supreme Court of the United States at some point in the near future and will be turned into roadside fauna along with the 30-year mortgage loan. MERS policy changes? They look good on paper but it’s just another smokescreen on the part of those who would continue to make the other side think MERS is complying with the April 13, 2011 Consent Order. In my book, there is no indemnification for MERS or MERSCORP, Inc.
Dave Krieger is Managing Member of DK Consultants LLC, a title consulting firm based in San Antonio, Texas.