By Prashant Gopal
Feb. 18 (Bloomberg) — Merscorp Inc., operator of the electronic mortgage-registration system under criticism by consumer advocates amid a probe into lender foreclosure errors, replaced Bill Hultman as its corporate secretary.
General Counsel Sharon Horstkamp is taking over the job, Karmela Lejarde, a spokeswoman for the Reston,Virginia-based company, said in an e-mail today. Hultman remains a senior vice president and corporate division manager, she said.
Merscorp has made a series of changes as courts debate what role it has, if any, in home foreclosures. Chief Executive Officer and President R.K. Arnold, who hired Hultman in 1998, retired last month. The company also is examining reforms, including a proposed rule change on the company’s website Feb. 16 that would stop members from foreclosing in its name.
“They’re trying to clean up their house,” said Christopher L. Peterson, a law professor at the University of Utah in Salt Lake City who has written law-review articles critical of the company. “I’m not sure Hultman was the problem.
It seems to me the problem is the business model.”
By Joe Sabo and Thom Weidlich – Jan 22, 2011 6:11 PM ET
Merscorp Inc., the parent company of Mortgage Electronic Registration Systems Inc., said R.K. Arnold has retired as chief executive officer and president, and Paul Bognanno will take the job on an interim basis.
Bognanno, former chairman of Radian Guaranty Inc., will lead the search process for a permanent replacement, Reston, Virginia-based Merscorp said in an e-mailed statement.
The MERS system, which Arnold helped develop, has come under fire in courts on the role it has, if any, in home foreclosures. It’s an electronic database of more than half of all the outstanding residential mortgages in the U.S. Merscorp has said it was created by the mortgage industry in 1995 to improve servicing after county offices couldn’t deal with the flood of mortgage assignments.
According to its website, MERS is owned by the largest lenders in the country including Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co., in addition to Fannie Mae and Freddie Mac.
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From the WSJ:
The chief executive of the privately-held Mortgage Electronic Registration Systems, or MERS, is planning to leave the company and an announcement could come within days, according to people familiar with the matter.
The company has been under fire by Congress and state officials for its role in the mortgage-document crisis. The firm’s board of directors has met in recent days to address the fate of the company and its chief executive, R.K. Arnold, the people said.
Arnold and other MERS executives didn’t respond to requests for comment. A MERS spokeswoman Friday declined comment. Arnold, a former U.S. Army Ranger, has served as the CEO and president of Merscorp Inc., the parent company of MERS, since 1998 and has been with the company since its inception 15 years ago, according to a corporate biography.
MERS was built by Fannie Mae (FNMA), Freddie Mac (FMCC), and several large U.S. banks in 1996 as an electronic registry of land records. That created a parallel database to facilitate the packaging of loans into securities that could be sold and re-sold without being recorded in local county courthouses, reducing costs for banks. The company’s name is listed as the agent for mortgage lenders on more than 65 million home loans.
But the company’s practices have begun to receive heavy scrutiny from state prosecutors and federal regulators, particularly in light of foreclosure-document problems that surfaced last fall. State and federal lawmakers have begun to consider bills that would make it harder for banks to use or foreclose on properties through MERS.
MERS’s legal standing also has been challenged by legal experts because it doesn’t own the underlying debt. Previously, the mortgage and the promissory note weren’t split between different parties.
Critics of the company have raised concerns over whether notes were properly assigned or tracked within the electronic system. Judges have also begun to question the company’s practices of “deputizing” hundreds of bank executives to handle foreclosures by naming them “vice presidents” of MERS.
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