Thursday, February 17, 2011

MERS Is Slowly Going Away

I'm not an attorney and don't know the full implications but I do no the most recent MERS action is not a positive for an already struggling housing market.  MERS (Mortgage Electronic Registration System) was created by the mortgage banking industry as a way to "streamline" the securitization process and make home loans more affordable.  In reality, it was created to bypass recording fees across the country.

If memory serves, MERS is involved in about 50% of all mortgage transactions.  This means that half of land transactions in the US have not been recorded at the state level and therefore only MERS knows who owns what.  I'm not making this stuff up.  MERS has been ruled against a number of times during foreclosure proceedings and as a result has issued a 90-day comment period ahead of a stoppage of foreclosure under MERS.

"Mortgage Electronic Registration Systems, or MERS, told its members Wednesday not to foreclose on residential mortgages in its name."

The amount of fees bypassed over the years is in the billions (possibly hundreds of billions).  With states facing over 200 billion this year alone in budget gaps, it is only a matter of time before they proceed with their own suit to reclaim these lost revenues.

During judicial state foreclosures (about half the states in the US), MERS was shown as holder of the title and not the note which is a problem in itself.  Equally problematic that the courts will not allow is lack of endorsement of title and note.  MERS is now asking to not be involved in any future foreclosure proceeds.  This begs the question then, who holds the mortgage?  Are the true holders in theory unsecured creditors?  The problem facing the industry is very simple in eyes of the law, there is no sign of who sold what and therefore who owns the note and the mortgage.  As to how this is remedied, no one really knows.  But one thing for sure, this action by MERS today has made the solution even more confusing.


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