Excellent Article on MERS
Loan registry raises legal questions
A small real estate data-management company is the focus of a widening legal controversy that could affect millions of U.S. foreclosures, including thousands filed against distressed homeowners in Utah.
The nation’s largest lenders created Mortgage Electronic Registration Systems (MERS), of Reston, Va., in 1994 as a loan registry designed to save millions of dollars on paperwork and recording fees. By registering mortgages with the private computer-tracking system and, in effect, putting loans under MERS’ name, lenders could avoid having to file public documents each time a mortgage was bought and sold.
The arrangement served its purpose well as markets went up. By MERS’s own estimates, it saved mortgage lenders more than $1 billion during a decade, and the efficiencies it brought to mortgage trading played a key role in the growth of mortgage-backed securities and the housing boom.
But with the economic downturn and crush of foreclosures, MERS is now showing up on tens of thousands of foreclosure notices sent to delinquent homeowners, including nearly 3,000 sent in Utah since July 2008, most of them in Salt Lake County.
Here and nationally, the company’s legal status as a party in these actions is increasingly being challenged.
“This is one of the buried, yet-to-emerge bombs in the whole mortgage crisis,” said Christopher Peterson, a University of Utah law professor and author of the first scholarly analysis of MERS and its legal underpinnings, to be published this spring in the University of Cincinnati Law Review . “This has the potential to fundamentally affect the trajectory of our recovery.”
‘A tax evasion broker’ » MERS officials vigorously disagree, but Peterson contends the MERS system has violated a deep-seated principle of American law — transparency in land-ownership transactions — by effectively removing much of that information from the public record. In so doing, Peterson says, MERS also has served as “a tax evasion broker,” denying counties millions of dollars in recording fees — revenue that might otherwise have funded essential public services.
And now, by allowing actual lenders to pursue foreclosures under MERS’ name instead of their own, Peterson says the company is acting as a “foreclosure doppelganger.”
“Throughout history, executioners have always worn masks,” the U. professor writes in his article, Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System .
“In the American mortgage lending industry, MERS has become the veiled man wielding the home foreclosure ax.”
continue reading… SLTribune