MERS: "A Corporate Cloak" To Obscure Identity Of Predatory Lenders, Cushioning Them From Fallout From Their Reckless Practices?
The New York Times reports:
- [A]lthough the average person has never heard of it, MERS — short for Mortgage Electronic Registration Systems — holds 60 million mortgages on American homes, through a legal maneuver that has saved banks more than $1 billion over the last decade but made life maddeningly difficult for some troubled homeowners.
- Created by lenders seeking to save millions of dollars on paperwork and public recording fees every time a loan changes hands, MERS is a confidential computer registry for trading mortgage loans.
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- If MERS began as a convenience, it has, in effect, become a corporate cloak: no matter how many times a mortgage is bundled, sliced up or resold, the public record often begins and ends with MERS. In the last few years, banks have initiated tens of thousands of foreclosures in the name of MERS [...] confounding homeowners seeking relief directly from lenders and judges trying to help borrowers untangle loan ownership.(1) What is more, the way MERS obscures loan ownership makes it difficult for communities to identify predatory lenders whose practices led to the high foreclosure rates that have blighted some neighborhoods.
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- To a number of critics, MERS has served to cushion banks from the fallout of their reckless lending practices. “I’m convinced that part of the scheme here is to exhaust the resources of consumers and their advocates,” said Marie McDonnell, a mortgage analyst in Orleans, Mass., who is a consultant for lawyers suing lenders. “This system removes transparency over what’s happening to these mortgage obligations and sows confusion, which can only benefit the banks.”
For more, see Tracking Loans Through a Firm That Holds Millions.
For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here.
(1) According to the story, the potential for confusion is multiplied when the high-tech MERS system collides with the paper-driven foreclosure process. Banks using MERS to consummate mortgage trades with “electronic handshakes” must later prove their legal standing to foreclose. But without the chain of title that MERS removed from the public record, banks sometimes recreate paper assignments long after the fact or try to replace mortgage notes lost in the securitization process. This maneuvering has been attacked by judges, who say it reflects a cavalier attitude toward legal safeguards for property owners, and exploited by borrowers hoping to delay foreclosure. Last February, a State Supreme Court justice in Brooklyn, Arthur M. Schack, rejected a foreclosure based on a document in which a Bank of New York executive identified herself as a vice president of MERS. Calling her “a milliner’s delight by virtue of the number of hats she wears,” Judge Schack wondered if the banker was “engaged in a subterfuge.” See Bank of NY v Myers, 2009 NY Slip Op 50159(U) [22 Misc 3d 1117(A)] (February 3, 2009). EpsilonMissingDocsMtg
