More on the Foreclosure Scandal and the Mortgage Machine

Propublica:

New York Times graphic , which shows why MERS — which was designed to “reduce paperwork” and provide “clarity, transparency and efficiency” to the housing finance system — in some cases had the opposite effect. More from the Times , which reported in 2009 that MERS has saved banks more than $1 billion in the last decade, while making life “maddeningly difficult for some troubled homeowners”:

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 — about 13,000 in the New York region alone since 2005 — confounding homeowners seeking relief directly from lenders and judges trying to help borrowers untangle loan ownership. 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.

Over the weekend, MERS defended its practices and its CEO, R.K. Arnold, said in a statement that “MERS helps the mortgage finance process work better.”

The company also noted that courts have ruled in favor of MERS “in many lawsuits, upholding MERS legal interest as the mortgagee and the right to foreclose.”

But that’s not always been the case , and the company is now, more than ever, likely to be challenged by homeowners on that front.

A draft report on MERS released earlier this month  — before the furor over foreclosure documentation really took hold — raised some ongoing questions about the legality of MERS’ role in mortgage lending and foreclosures.

The report’s author, University of Utah law professor Christopher Lewis Peterson, noted that the common practice of using MERS as both a record-keeper and an entity having the right to foreclose on a property for the banks is legally incoherent. According to Peterson, it usurps a longstanding tradition of local governments' retaining records on property ownership. It also saves the banks money by allowing them to skirt recording fees that would otherwise go to these county and state governments.