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streeteasy.com | April 11, 2014

Mortgage Electronic Registration Systems, headquartered in a nondescript office building in Reston Town Center, has flourished quietly over the past decade, saving financial firms hundreds of millions of dollars by helping them avoid the time and expense of filing mortgage documents and paying fees each time a loan changes hands.

Its motto: "Process loans, not paperwork."

The MERS headquarters is tucked amid chain restaurants and retail stores near Dulles International Airport. But the firm's reach extends far beyond this slice of suburbia.

The company is an integral part of the system that emerged during the global housing boom, when mortgages were created and sold, sliced and diced, packaged and repackaged so quickly that financial firms had neither the time nor the patience to file paperwork in local courthouses as the loans were traded. By using MERS, lenders were able to reassign loans quickly and cheaply. But often the chain of ownership was not accompanied by an official paper trail.

The MERS registry tracks more than 65 million mortgages throughout the country and continues to facilitate rapid-fire transfers that keep the market for mortgage-backed securities humming.

But if courts increasingly begin to nullify the MERS model - different judges have issued differing rulings - this could call into question the legitimacy of millions of mortgages, wreak havoc on the real estate market, spur costly litigation against Wall Street banks and ultimately harm the broader financial system.

Faster, easier

The land title system that went largely unchallenged in the United States for centuries became an obstacle in the 1990s. That's when financial firms began to ramp up a process called securitization, bundling and selling pools of home loans to sell to investors. Each time the loans were reassigned, the new owner had to record the transfers with local clerks.

Several executives in the mortgage industry came up with a faster, easier approach: MERS. The list of MERS shareholders includes an array of banks, lenders and title companies. Among them: Fannie Mae, Freddie Mac, Bank of America, GMAC, Washington Mutual, Wells Fargo and AIG's United Guaranty Corp.

Here's how MERS works: When a homeowner closes on a house, the paperwork signed at settlement often appoints MERS as a "nominee" for the lender and for whomever the lender might sell the mortgage to down the road. Each time the loan is sold and resold, MERS tracks the reassignment in its computer system, without generating paperwork.

But after the MERS computer system went live in 1997, some county recording offices complained that the company was bypassing the legal process and raking in money charging fees that were lower than those charged by municipalities. They were largely ignored.

"It wasn't like Congress or state legislators did anything," said Christopher L. Peterson, a law professor at the University of Utah who has consulted in cases against MERS. "The mortgage industry just changed how the land title system worked without getting anyone's okay."

MERS has consistently claimed authority to act as a representative, or "nominee," on behalf of banks and lenders.

 

Back to April 2014 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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