Mortgage Electronic Registration System (MERS) Inc. wasn’t a party to the federal-state foreclosure settlement with five big banks this week, but its practices have raised the ire of county registrars.
“This system has bypassed the New Hampshire Registry of Deeds Offices and aided in the chaos and destruction that has crashed our economy. The MERS well of data is now completely toxic,” Kelley J. Monahan, register of deeds for Grafton County, wrote in a Feb. 3 letter to Attorney General Michael A. Delaney.
Delaney specifically mentioned that MERS was not released from any potential claims against it in announcing the settlement Thursday.
Because MERS becomes the lienholder of record, it can record the mortgage once, then the note can exchange many times without being recorded again at county registries.
MERS played a key role in securitization, or bundling, of mortgages by the banks for the secondary market.
“It provided this shell game for the homeowner to find out who they were dealing with, because they were dealing with one entity one day seeking a modification and then the next week, the loan would be sold and the game would be started from the beginning again,” Monahan said.
“Foreclosure is a personal and mortifying situation, so people don’t talk about it,” Monahan said. “The more we get this out there, the more people can share.”
Senior Assistant Attorney General James T. Boffetti said, “we have met with almost all of the registers of deeds to talk about the problem with MERS.
“There are some significant problems with the registries precisely because they weren’t recording all of the assignments,” he said.
“The banks created MERS to allow them to do all this mortgage-backed security business,” Boffetti said. “It was a way to quickly make all of these assignments of mortgages electronically without going through the traditional recording of assignments in the registry. That’s a problem. “
While the AG’s office continues to review the MERS situation, Boffetti said he couldn’t say more.
MERS spokesman Janis L. Smith said MERS was not in any current discussions with the multi-state Attorneys General task force.
“Federal and state courts around the country have repeatedly upheld the MERS business model and also affirmed the validity of MERS as legal mortgagee and nominee for the lenders, and we will continue to defend claims against MERS in the court system. We’ve had a very good litigation record.”
Smith said when a mortgage closes, it is recorded in county public land records with MERS recorded as the lienholder.
“Whenever there are transfers taking place between MERS members, the lien is in MERS’ name and MERS is the common agent,” she said. As long as the lien remains in MERS’ name there is no need to record transfers among MERS’ members, she said.
“In the event that there is a transfer from one MERS members to an institution that is not a MERS member, in that case, there would be an assignment of the mortgage or the servicing out of MERS name into the new owner’s name and that would be recorded,” she said.
Mike Dillon, founder of Stellionata Consulting LLC in Manchester, said, “MERS is a privatized national registry of deeds that was developed by a conglomerate of national and international banks.
“There is very little to no transparency whatsoever in the MERS system,” Dillon said. His business provides assignment and securitization analysis and foreclosure defense litigation.
“The only time anything is recorded with regard to MERS is when you originate a mortgage involving MERS or the mortgage is either satisfied or when a foreclosure action is initiated, and in between those periods, a borrower’s note can be sold/assigned/transferred literally 1,000 times without anybody being the wiser to it including the registries of deeds,” he said.
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