I meant to mention this NYT article from Thursday, with a wild graphical depiction of MERS — Mortgage Electronic Registration Systems — that holds over 60 million mortgages on American homes:


click for ginormo graphic

via NYT

The full article is worth reading . . .


Tracking Loans Through a Firm That Holds Millions
NYT, April 23, 2009


Category: Credit, Legal, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

18 Responses to “The Mortgage Netherworld”

  1. larster says:

    You have to come to the conclusion that this is a fraudulent scheme devised by the banking/investment industry.

  2. Larster –

    I won’t disagree with you that is was nefariously created, and likely fraudulent in its intent — but I would bet its technically legal.

  3. larster says:


    Agree on the legality issue. The fact that it obscures loan ownership speaks to the intent.

  4. “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,…”–toward larster’s point

    sounds, as well, like a Racket to defraud the State of Fees..

    RICO, so useful, so seldom used..

  5. zell says:

    Tangentially: did anyone see the NYT piece “Fannie Mae Creates Housing Mirage with Bum Loans”, by David Reilly. It edescribes the “Home Saver Advance” program in which mortgagees that have fallen behind due to illness or unemployment catch up money.
    Sorry I can’t link this or whatever due to computer illiteracy.


    BR: Bloomberg

  6. Marcus Aurelius says:

    Law is based on technicalities. Primary among them, and with a legal history that most likely dates back to the dawn of contract law, is the ability to produce a document signifying an agreement between the parties involved. That document must be ratified by both parties.

    On the other side of the issue are the intentional complexities involved in the transmutation, packaging, and redistribution of the contract documents — that while not necessarily created to advance fraud, are characteristically used to obscure the chicanery involved in such schemes. To put it more simply, the devil is in the details.

    At Calculated Risk, the late Tanta was an expert on the legal basis of this scheme, and frequently buttressed her argument as to their validity with a simple question a court might ask a defendant (the borrower) in the absence of a ratified contract: Do you expect the court to believe that someone gave you possession and use of a valuable asset like a house without having you sign documents of indebtedness in return for taking possession?

    The smart and brave witness would respond that they do not remember signing such a document as a counter-party with the plaintiff (the entity claiming ownership of the debt), that there is no such document in evidence, and that the defendant cannot speak to the actions of the plaintiff. They would then produce the document that showed a ratified agreement between themselves and the lender with whom they originally contracted — in this case, the now defunct Fieldstone.

    In their haste to securitize and in their greed to realize as yet unearned profits, the banks may have technically screwed themselves by not leaving a clear, ratified chain of ownership of the debt.

    This puts the courts in a dilemma of having to override one of the bases of contract law in order to support the otherwise legal transfer of debt owed from one party to the other, with no clear contractual obligation between the two parties.

    I have no doubt that Judicial fuckery will support the corporate/governmental entity that now controls the power structure of our country, and that the banks will win out in the end.

  7. Marcus Aurelius says:

    MEH: RICO is the answer to many of the problems we’re experiencing.

  8. willid3 says:

    and here i thought banks were so worried about the sanctity of contracts. but it appears only if its in their favor. so much for respect for the law.

  9. willid3 says:

    did you see where wall street wizards are back on the bonus program again?


  10. sailorman2003 says:

    I plan on applying for a second mortgage using mark to model to value my house. After all, isn’t the housing market illiquid and current market sales distressed?

    Think the banks will buy that?

  11. call me ahab says:

    I’ll second MEH and MA

  12. Whammer says:

    MA says:
    “In their haste to securitize and in their greed to realize as yet unearned profits, the banks may have technically screwed themselves by not leaving a clear, ratified chain of ownership of the debt.”

    Marcus, I think it is pretty obvious that you have not fully considered the impact of the CRA, Jimmy Carter, and Bill Clinton on this whole scenario. Clearly, govt. intervention has distorted the miraculous free market, which never would have allowed such a thing as this, or for that matter any of the other bad stuff that has happened. Oh, yeah, Obama sucks too. Where’s my dang tea??


  13. Dan Duncan says:

    Fraud? Rico?


    What exactly is the fraudulent scheme here? That the banks are making themselves unavailable?

    There is no law that the banks have to renegotiate these Notes.

    OK, so what about the fictitious assignments? Sure, this is fraud. But that’s more of a tangential element to the story. This is not a story about an industry wide conspiracy of banks to fraudulently endorse assignments. This is a story about banks establishing the MERS mechanism to avoid the hassles of continually recording each and every assignment…and that mechanism proving to be faulty. OK, it needs reform, but that’s quite different from saying it’s fraudulent.

    And to the Marcus Aurelius .”intentional complexities involved in transmutation…..are characteristically used to obscure the chicanery involved in such schemes….”


    This is absurd. Whatever fraud occurred…and there was a lot of it…occurred on the front end. Loan originator to Borrower. Then, the fraud occurred from Loan Originator to Loan Investor. [With a healthy dose of borrower fraud as well.]

    The ultimate MERS Assignee—the one “camouflaged” by the MERS front, if you will—DID NOT commit the fraud unless they forged the assignment. The article is muddled by not stating this fact more clearly.

    “At Calculated Risk, the late Tanta was an expert on the legal basis of this scheme….”

    Again, what scheme are you talking about?

    Damn, you guys aren’t even alleging that the originating lender committed fraud by falsifying borrower docs., etc., etc…Instead the “fraudulent scheme” is that we have a purchase money mortgage, the Borrower didn’t pay and the Assignee was too lazy to authenticate. Therefore the Assignee not only has lost the right to authenticate and therefore collect—but the Assignee has also committed fraud.

    This is a dramatic overreaction.

    Unless that MERS assignee forged the assignment….then, at worst, the assignee just needs to validate the chain of indebtedness. Obviously, the banks consider this basic requirement to be beneath them and a royal pain in the ass. So on this I agree with: Tough shit—produce your valid claim. After enough banks go through this hassle, the entire premise of MERS will be called into question.

    But to allege fraud in this circumstance is only going to encourage BS legal claims that all MERS transactions are fraudulent. Beyond being legally incorrect, it’s counterproductive to cleaning up this mess.

  14. usphoenix says:

    If Joan offers to sell you a car of suspicious origin, and you know it’s acquisition was under illegal/illegitimate terms, and you agree to buy it, doesn’t that make you a party to the crime? The banks perpetuated the fraud by trading in sub-prime fallaciously founded mortgages. MERS simply clouded the audit trail to their door. Or, as they used to like to say in courtrooms before corporate america, ingorance is no excuse.

    Besides, the MERs banks traded these pieces of paper as “nothing more than simple securities” . Forget about the notion of a contract being a “sacred” agreement between two parties.

  15. [...] I meant to mention this NYT article from Thursday, with a wild graphical depiction of MERS — Mortgage Electronic Registration Systems ? that holds over 60. … Politics (580), Psychology/Sentiment (1109), Quantitative (47), R&D (4), Real Estate (825), Really, really bad calls (57), Regulation (64), Research (3), Retail (195), RR&A (47), Science (58), Short Selling (73), Sports (2), Taxes and Policy (238), Technical Analysis (515), Technology (125), Television (115) … more… [...]

  16. bman says:

    We’ve known for a while the banks turned a blind eye to the legal proprieties. What is new here?
    Have there been any substantial rulings against the banks based on that?

  17. Patrick Neid says:

    Getting upset with MERS is akin to yelling at your filing cabinet. The people who should be tarred and feathered are Bush/Paulson/Obama/Summers/Bernanke/Geithner for lack of leadership in forcing banks et al, months ago, in tracking down the electronic trail that every mortgage leaves.

    Instead they went for the billion/trillion dollar bailouts because it was easier and more importantly fit a larger political agenda. Had they said instead that every member of MERS would be fined $10 million a day until they located every deed we would know where every piece of paper was located.

    That said nothing would be different today. The Times would have had to write some other story with the same hang dog pics and great graphics.

  18. Al Bergette says:

    I am not a lawyer, but by virtue of my business experience I have seen cases where the court gives judgement in favor of the side that did NOT write the contract where the contract is vauge in spite of the contract containing a clause holding all other paragraphs being in effect in spite of any one paragraph being unenforcable.

    So, it seems to me mortgages such as the one outlined in this thread is null and void and relief going to the debtor.

    Because it is so vauge as Marcus Aurelius points out in the 5th paragraph of his post.

    Lenders as the formulators of loan contracts/documents are expected to forsee every possible scenario. Similar to the legal tecnicality obligation as I understand it for McDonalds having to pay millions to that woman who spilled hot coffee in her lap while at the drive-thru window.

    That being said, as Marcus points out statutorial fuckery of the courts will protect banks that set people up to default ( I don’t mean to imply predatory borrowers should be held blameless).