Thomas A. Cox is a retired bank lawyer in Portland, Maine who serves as the Volunteer Program Coordinator for the Maine Attorney’s Saving Homes (MASH) program. He represents homeowners in foreclosure, and assists and consults with other volunteer lawyers in providing pro bono legal services to these Maine homeowners.
United States House of Representatives
Committee on the Judiciary
Hearing on: “Foreclosed Justice: Causes and Effects of the Foreclosure Crisis”
Written Testimony of
Christopher L. Peterson
Associate Dean for Academic Affairs and Professor of Law
University of Utah, S.J. Quinney College of Law
Salt Lake City, Utah
December 2, 2010
It is an honor to appear today before this Committee. Thank you for the opportunity to share some thoughts on our national foreclosure crisis. My name is Christopher Peterson and I am the Associate Dean for Academic Affairs and a Professor of Law at the University of Utah where I teach contract and commercial law classes. I commend you, Chairman Conyers, Representative Smith, and other members of the Committee for organizing these hearings and for providing an opportunity to discuss this important and timely national issue.
The foreclosure crisis is an extremely complex problem. With so many fundamental changes, opportunities for moral hazard, agency cost problems, consumer abuses, and impending lawsuits, it is easy to lose track of some of the basic legal and business practice problems that departed from past traditions and helped bring us to our present situation. In particular, it is somewhat perplexing that relatively little attention has been paid to the one company that has been a party in more problematic mortgage loans than any other institution. Mortgage Electronic Registration Systems, Inc., commonly known as MERS, is a corporation registered in Delaware and headquartered in Reston, Virginia.1 MERS operates a computer database that includes some information on servicing and ownership rights of mortgage loans.2 Originators, servicers, and other financial institutions pay membership dues and per?transaction fees to MERS in exchange for the right to use and access MERS records.3 In addition to operating its computer database, MERS also pretends to own mortgage loans in order to help its members avoid paying fees to county governments.
My testimony is largely derived from two scholarly articles I have written on this topic which I invite the committee to review for further information.4 My prepared statement today will: (1) discuss the Origin and Business Practices of MERS; (2) explore the problematic legal foundation of MERS; (3) suggest that MERS is a deceptive and anti?democratic institution designed to deprive county governments of revenue; (4) explain how MERS is undermining mortgage loan and land title record keeping; (5) argue that MERS was a contributing factor in the foreclosure crisis and has made resolving foreclosures more difficult; and (6) propose some solutions for the committee to consider.
An April 25 Salt Lake Tribune article on the legal controversy surrounding the loan registry system known as MERS prominently mentions the scholarship of Christopher Peterson, a professor at the University of Utah S.J. Quinney College of Law, and also includes an interview with Peterson.
MERS, an acronym for Mortgage Electronic Registration Systems, was created by the nation’s largest lenders in the early 1990s as a mechanism to reduce paperwork and recording fees. The private computer system allowed lenders to “in effect, put loans under MERS’ name, “ thus enabling lenders to “avoid having to file public documents each time a mortgage was bought and sold,” according to the Tribune article.
Peterson, the author of a forthcoming scholarly article on MERS in the University of Cincinnati Law Review, described it as “one of the buried, yet-to-emerge bombs in the whole mortgage crisis.” He also describes MERS as “a tax evasion broker,” that prevents counties from collecting millions in recording fees.
To read the Salt Lake Tribune article, click here.