Irvine Housing Blog

The securitization of mortgages in this country has been a powerful innovation

I enjoyed Humphries’ article, but every time I hear the adjective “innovation” applied to a financial concept, I reach for my gun.

I cackled when, in reference to a world without title insurance, that loan balances “would be a small fraction of what they are today.” It is cruel to tease us with such a delightful vision; one which the government and our corporate masters will never permit to become reality.

I’ll try not to get too much into the legal discussion of MERS.  I’ll leave it at the fact that MERS has repeatedly been recognized as legal and legitimate in court rulings (many of which I was involved in as a representative for MERS).

I’ll touch on the broader policy implications of actually finding MERS as “illegal” or as an illegitimate wasy of tracking assignments.

IF, and that’s a big IF, MERS was somehow found to be illegal or an illegitimate way to track mortgage assignments, I can’t imagine that we don’t get a congressional fix.

Is the country really going to throw out over 60 million mortgages and leave them effectively unenforceable? You want to talk about the destruction of wealth (or perhaps calling it a transfer of wealth might be more appropriate). At that point, doesn’t someone in congress stand up and say that we need to enact legislation that recognizes the legitimacy of this system? (I’m not looking to get into a discussion about federalism and state’s rights under the constitution, but I’m confident that congress would have the authority to legally enact such legislation).

Faced with the choice of giving 60 million borrowers a free home, or enacting legislation that leaves security interests intact and enforecable (as was understood at the time people were borrowing money to buy their property), I think that congress would step in and preserve the enforceability of those mortgages.  But, I could be wrong.  60 million borrowers (voters) make quite a faction.  Should that happen, we will be headed for Thunderdome.

A U. of Utah prof brought the house down at the summer American Bar Assoc Conference by giving a speech titled “MERS is Bull Shit.”  In front of an audience of 300+ financial services attorneys whose income is derived from banks, this prof methodically went through the MERS BS and after every point, repeated “MERS is Bull Shit.”  It was classic.

I’m really trying to understand this paperwork mess but let me throw a question out there with regards to the me, you and Sally analogy. I thought that part of the problem was that I didn’t just sell the 123 Main Street mortgage to you, but I bundled a bunch of ‘em together and sold you a batch and Billy a batch and Tommy a batch. Now when you go to foreclose on 123 Main Street, you in fact own one-third of the mortgage and Tommy and Billy own part of the mortgage….. so the resident at 123 Main is gonna claim that you don’t own all of the loan so you can’t kick ‘em out….. am I wrong? In other words, could one mortgage be chopped into many pieces and sold, or can mortgages only be sold whole?
Naive question from a guy just trying to figure it out….

Doesn’t the Depository Trust Company perform a similar function for corporate securities?  What is the big deal?  Someone acts as a central nominee to speed up and simplify the title transfer process.

It seems to me that MERS does an end run around the official and legal registration system of mortgages.

It is one thing for a Title Insurance Company do duplicate the official records, but organize it better making it more searchable and accessable.

But MERS has many transactions that are not in the officaial registry. This seems to usurp the role of government and put control in the hands of a private company that is owned by the government.

It’s like a shadow government of some kind.

It seems to me that MERS does an end run around the official and legal registration system of mortgages.

It is one thing for a Title Insurance Company to duplicate the official records, and then organize it better making it more searchable and accessable.

But MERS has many transactions that are not in the officaial registry. You can’t just go to the the official county registry to see who owns what. The must be only one primary source of information.

MERS seems to usurp the role of government and put control in the hands of a private company that is owned by the the lenders. It’s like a shadow government of some kind.

Let me try to reword my concern with MERS.

There can be only one official place to register all these real estate transactions. If there was more than one, what happens when they don’t match. Which would be deemed correct? So clearly there has to be only one official registry. There can be duplicates, but they should reflect what the one official one holds.

Now who has the authority to keep these official records? Isn’t it the local governments, like all the counties in every state?

Now maybe, if it wanted to, a county could assign the responsible for record keeping to some private firm like MERS. Or maybe not. I don’t know.

MERS is acting like they are the one official registry for all these mortgage transactions. But who granted them the authority to be the official registry?

How does a lender show to a court that he has standing to foreclose on a property. Wouldn’t all the transactions that lead to that lender being the one with standing have to be recorded in the official registry at the county office?

Another thought…

You don’t need to undo all the 60 millon unrecorded mortgages at once to unwind MERs.  You only need to do the ones entering into foreclosure, the rest can be done over say 3-5 years.

wheneth dideth this comment section, dearest prudence, get taken over by lawyers?

we shall start here

It is a question of trust.

If you are going to take someone’s property by force of foreclosure, you must be sure that the person doing the foreclosing actually has the legal right to foreclose.

So how do you know who has that right? Well you look in the official registry at the county office to see who owns the note and who holds the mortgage.

But the lenders apparently want to circumvent that and use the MERS database alone to make that determination. But can you trust a private database of a firm that is owned by the lenders?

Isn’t there an conflict of interest here? The same people that are taking the property, i.e. the lenders, are also providing the evidence, through MERS a database that they control, that they are entitled to take the property. Not trustworthy.