MERS And Mortgages

A friend asked me what I thought of this blog post on MERS, the self-designated “nominee” on millions of U.S. mortgages.

Golly, I have been screaming about MERS for years.

Well, not to everyone, I guess.

So MERS is less than 20 people, a company whose name is on over 60 million mortgages, which does not actually own any mortgages.

Huh?

Well, Michigan is a perfect example.

Each state has a system for recording of deeds and other real estate documents, like mortgages.

This is so you can check the official records to see if there are any liens, like mortgages, on property that you might want to buy.

Or, if you are a bank or mortgage company, you can see if someone else has a lien that would be ahead of yours.

That is, the first lien has to be paid first, second next, and so on, when the property is sold or transferred.

By Michigan law, the state of Michigan comes first.

Hey, you and I would do the same.

So property taxes have to be paid first regardless of when any mortgage was recorded.

Now, you probably never checked this stuff yourself.

That is what title companies do.

Well, oddly enough, the county register of deeds, who handles these things in Michigan, charges for the service of recording documents.

I just checked the Macomb County Michigan web site: $14 for the first page, $3 for each additional page.

Remember how many pages your mortgage was?

Blame the damn lawyers, but 35, 40 pages or more is not unusual.

Back in the old days, no big deal, you got the mortgage, they added the charge for recording it to what they charged you.

Somewhere in the 1990s, that changed enormously.

I have dealt with parts of the whole meltdown before on this site, let’s just say mortgages were bought and sold and packaged and re-packaged and sold again.

Take that recording fee and multiply it by all those pages and all those mortgage transactions, well, MERS claims to have saved some $2.4 billion.

Sounds innocent so far.

Except that MERS is filing motions to lift the stay in bankruptcy court, starting foreclosure proceedings in some areas, and more.

But, their documents say they are the “nominee” for the mortgagee or note holder or whatever.

Lots of the terminology depends on state law, in Michigan: mortgagee.

So, the savings occurs because MERS is the nominee on the recorded mortgage, for whoever is the actual owner of the note, holder of the mortgage.

All the shuffling and selling and packaging and re-selling goes on behind the scenes, with no notice to anyone who checks the public record.

No problem while the housing bubble was still inflating.

Big problem when that bubble burst.

MERS and the mortgage companies seem not to have kept accurate record of the mortgage assignments and sales and so on.

So, when challenged in courts in Ohio and New York and Nevada and Kansas and Idaho, and especially, Florida, courts have been throwing out foreclosure actions because no one can prove who actually owns the mortgage, that is, who has the right to foreclose.

In Michigan we have foreclosure by publication, so it is difficult to raise this issue as a defense.

What do I think?

I am ready, just get me the right case.

MERS And Mortgages

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