“This opinion is hostile to the notion of MERS as nominee and could lead to problems for it in foreclosing. The entire structure of MERS as a recorded nominee could collapse in Kansas, and that could lead to a patch-up job where they would have to run around and re-record the mortgages.”

-Patrick A. Randolph, a law professor at the University of Missouri, Kansas City


Talk about burying the lead: Gretchen Morgenson does a nice job today explaining the MERS situation, tho the best stuff in the article is at the end. The quote above is literally the 2nd to last paragraph in the column.

The following excerpt is also buried:

“For centuries, when a property changed hands, the transaction was submitted to county clerks who recorded it and filed it away. These records ensured that the history of a property’s ownership was complete and that the priority of multiple liens placed on the property — a mortgage and a home equity loan, for example — was accurate.

During the mortgage lending spree, however, home loans changed hands constantly. Those that ended up packaged inside of mortgage pools, for instance, were often involved in a dizzying series of transactions.

To avoid the costs and complexity of tracking all these exchanges, Fannie Mae, Freddie Mac and the mortgage industry set up MERS to record loan assignments electronically. This company didn’t own the mortgages it registered, but it was listed in public records either as a nominee for the actual owner of the note or as the original mortgage holder . . .

As long as real estate prices rose, this system ran smoothly. When that trajectory stopped, however, foreclosures brought against delinquent borrowers began flooding the nation’s courts. MERS filed many of them . . .

As cases filed by MERS grew, lawyers representing troubled borrowers began questioning how an electronic registry with no ownership claims had the right to evict people. April Charney, a consumer lawyer at Jacksonville Area Legal Aid in Florida, was among the first to argue that MERS, which didn’t own the note or the mortgage, could not move against a borrower.Initially, judges rejected those arguments and allowed MERS foreclosures to proceed. Recently, however, MERS has begun losing some cases, and the Kansas ruling is a pivotal loss, experts say. While the matter before the Kansas Supreme Court didn’t involve an action that MERS took against a borrower, the registry’s legal standing is still central to the ruling.”

That’s a nice explaination for the layperson.


Mortgage Electronic Registration Systems Loses Legal Shield (September 23rd, 2009)


The Mortgage Machine Backfires
Gretchen Morgenson
NYT, September 26, 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.

28 Responses to “Gretchen Explains MERS For You”

  1. smoody says:

    The article states that MERS holds 60 million mortgages, but there only about 50 million mortgages outstanding. What’s up?

  2. “…home loans changed hands constantly. Those that ended up packaged inside of mortgage pools, for instance, were often involved in a dizzying series of transactions.

    To avoid the costs and complexity of tracking all these exchanges, Fannie Mae, Freddie Mac and the mortgage industry set up MERS to record loan assignments electronically..”-from above

    that’s one thing I luv about the MSM, the ‘authority’ they use in catapaulting The Answer — out of multiple, potential, answers.

    How is Ms. Morgenson, and/or her NYT Editor, so sure that MERS wasn’t set up to keep the paper-trail of these “dizzying series of transactions” out of plain-sight/away from the Public Record?

    “All the News that’s Fit to Print”, we should wonder.. with that, it’s no wonder the ‘layperson’ is getting _______.

  3. VennData says:

    MERS should be allowed to foreclose, evict, bankrupt, even torture malcontents who abuse the free market system to try to get what THEY want.

    ….when innocent investors – such as hedge funds, high-net worth individuals (whose taxes are a the lowest in… speaking of centuries) and foreigners – in mortgages who simply want to help those malcontents stay in their homes, make American strong, and help the common laid person… er… a… layperson to achieve the American dream: an upper-hundreds FICO while carrying a 300% debt/equity ratio in a subdivision somewhere out in suburbia …and Toto too.

    Somewhere, over the rainbow, way up high.
    There’s a land that I heard of Once in a lullaby.
    Somewhere, over the rainbow, skies are blue.
    And the dreams that you dare to dream
    Really do come true.
    Someday I’ll wish upon a star and wake up where the clouds are far Behind me.
    Where troubles melt like lemon drops, Away above the chimney tops.
    That’s where you’ll find me.
    Somewhere, over the rainbow, bluebirds fly. Birds fly over the rainbow,
    Why then – oh, why can’t I?
    If happy little bluebirds fly beyond the rainbow,
    Why, oh, why can’t I?

  4. call me ahab says:

    KISS- or inversely-

    “obfuscate “- make something obscure: to make something obscure or unclear, especially by making it unnecessarily complicated-

    as i have said before- the banks brought on the their own problems and I have zero sympathy for them

  5. dss says:

    “Produce the Note” is the title of the movie that will be released for the holidays, a romantic musical-comedy starring the cast of “Oceans 13″. Hilarity ensues as Danny Ocean rounds up his band of miscreants in a frantic search for millions of mortgage notes. Dramatic surprise ending when the tenacious group doesn’t find any and Danny and his pals are greeted as the new “Robin Hood and his band of Merry Men”.

    Follow “Produce the Note” happenings on Twitter!

  6. dss says:

    @call me ahab,

    True, except we are the bank’s last resort and we all will eventually pay for this mess. The good news is at least some people will not lose their homes.

  7. Marcus Aurelius says:

    Law doesn’t rely on accurate documentation for nothing – that’s why we have and require ratified contracts in the first place. Taking a litigating party’s word at face value doesn’t cut it as evidence (under boilerplate Rules of Evidence). Don’t have the required paperwork? Go get it, and don’t come back until you do.

    Then again, the law ain’t what it used to be.

  8. Cursive says:

    MERS is, yet again, another example of a good idea that was not thought through all the way. Many of our current problems are the result of inadequate review and improvement of good ideas. Think of how much we could save if we just got it right the first time. MERS…nice try…but not good enough…now time to pay the piper.

  9. WaveCatcher says:

    If MERS loses it will gum up the works for a good while. If bondholders’ collateral is no good, this can’t be good for the economy.

    As usual, unintended consequences will bite us in the asshat.

    We need to go back to a simpler time, when banks were effectively utilities to serve the public good, rather than casinos to serve their execs. Of course, all back stopped by the US Taxpayer.

    Securitization (financial innovation) has changed the game and regulation has not kept up with the new game.

  10. WaveCatcher says:

    If MERS loses, it will gum up the works for a good while. When a large group of bondholders find that their collateral is no good, it can’t be good for the economy.

    We need to go back to a simpler time, when banks were regulated like utilities that serve the public good, rather than gambling institutions. When Investment Banks were partnerships, where the partners had their own capital at risk and were compensated thusly.

    Securitization has changed the game, and regulators have fallen out of step with the new rules.

  11. Transor Z says:

    And you have to produce the note to record.

  12. Moss says:

    MERS became a necessity due to the propagation of the securitization craze.
    Ironic how such financial innovation has led to such basic legal questions.

    Just another indirect tax on the general public, hidden from view.

  13. beaufou says:

    MERS appears to me as a store front for massive trafficking, legal or illegal, people who come up with such schemes are aware of it.

    I don’t see how we could possibly return to some kind of economic stability with such tools.
    As for consequences, well, banks took the money for years and the government let them do it for the sake of growth and medieval distribution of wealth, we’ll have to bite the bullet at some point.

    I just wonder how much of the standard of living is buying what isn’t necessary and how much growth we actually need.

  14. bergsten says:

    OK. So nobody on the lending side seems to have any standing, not being listed on the paperwork. I get that.

    And, borrowers have zero idea of who they owe the money too (they not being listed on the paperwork). Get that too.

    So, neither the banks nor the borrowers can foreclose (as the paperwork is snafu). Ditto.

    My questions are:

    1. How can a borrower be at all sure that their payments are in fact going to whomever loaned the money?


    2. How does a borrower insure ownership once a loan is repaid?

    I think there’s more than one massive screw-job in the works, and I for one would rush right down to the county clerk and see what “my” property records say.

  15. MRegan says:

    There is a central problem in this issue which undermines the assertion of ownership through MERS agency in front of a court. In the securitization process the promissory note was separated from the deed of trust. If the loan originator sold the note their interest in a property has been dissolved. Also, I ask myself- is it a crime to sell a promissory note unattached from the deed of trust? Is it fraudulent? I would recommend that any person going through a foreclosure procedure avail oneself of any and all legal options. Don’t just lie down and take the stomping they want to give you.

    What a clusterf*ck!

  16. jc says:

    Remember when the values of mortgage backed securities collapsed to unbelievably low prices, pennies on the dollar for AAA, top tranche blahblahblah and they kept coming up with apparent double counts of particular mortgages?

    This is The Producers, Bialystock & Bloom all over again!

  17. jc says:

    If I was a homeowner whose mortgage has been bouncing around I think I’d make a couple copies of all mortgage payments, maybe scan them and save them offline as an attachment to email (Yahoo, Gmail – someone who is likely to be around a long time). I could see nightmare scenarios where you get parties popping up out of this MERS tarpit claiming they haven’t been paid when you are selling your home.

    You know these banks are going to lobby for simplified process to “prove” their ownership and shift the burden of proof to the homeowner, right?

  18. jc says:

    Actually you might not know if your mortgage has been traded around like a baseball card at a collectors show.

  19. jc says:

    smoody, 10 million second mortgages, the Kansas case involved a second mort that hadn’t been recorded and the bankruptcy and foreclosure sale had occurred before the second mortgage holder appeared out of the MERSlime

  20. Onlooker from Troy says:

    Well, as bergsten alludes to, I’m sure glad my mortgage is with Navy Fed CU and they have held it with no intention of selling it off (though they can). What a clusterf..ck!

    As usual some innocent victims are getting caught in the story of the banking industry’s making. But they continue to rake in huge bucks at the top for their “superior” management skills that are hard to find. (choke, gag)

  21. Onlooker from Troy says:

    “caught in the STORM”, I have no idea why my fingers typed story; other than the story that the bankers are telling to try to extricate themselves from this morass.

  22. Onlooker from Troy says:


    No doubt the apparent discrepancy you note is because of the huge number of second (and even third, if you can believe it) mortgages that are out there. They became the new way to make your 10-20% “downpayment” (which was a really good plan; way to go Joe Banker). I still remember my puzzlement when I started hearing about this practice. It always did defy logic, not that that stopped anything.

  23. Pete from CA says:

    How does this mess impact potential new home buyers? If the validity of the county clerk’s records is being called into question, then how can a buyer be sure that he is paying the real owner?

    Incidentally, I just saw this poll on cnnmoney.com:

    Are homes affordable where you live?
    Yes, thanks to the housing bust. 25%
    Yes, always have been. 25%
    No, they’re still too pricey. 50%
    Total responses to this question: 57154

  24. jc says:

    Mr Mortgage’s update on how HEMP and other programs have dammed up a tsunami of foreclosures. The HEMPers are one and done. Mr Mort knows his CA RE and these conditions apply to the other sand states too.

  25. Mike Dillon says:

    @Bergsten Sept 27 12:04p

    That’s part of the probelm here Bergsten. The money ISN’T going to the note originator in most cases. The original note holder is usually looong gone in the process of securitization. I’ve seen notes sold/assigned/xferred 3,4,5x within a year’s time. The funny thing about this is that, as long as the SERVICING RIGHTS to the loan stay with the same entity, a borrower never has to be notified of the sale of the note itself. The ONLY time a borrower must be notified, and I beleive that comes from Section 6 of RESPA, is when the servicing rights to the loan are sold/assigned/xferred. When that happens, a borrower is supposed to get a minimum of 15 days heads up in writing. That doesn’t always happen though. In fact, my own “hello/goodbye” letter from then Fairbanks Capital Corp. n./k/a Select Portfolio Servicing, wasn’t even authored until October 16, 2001 saying “Hi there, as of October 1, 2001, we own the servicing rights to your loan.” Guess what happened shortly thereafter….

    Before I get into this any further, I would HIGHLY advise anyone at all concerned about their mortgage to take a trip to your county registry or recorder of deeds either via the internet if you are lucky enough to have access that will show you the actual documents (not all registries are on line and not all of them will show you the actual docs). What you find may surprise some of you a bit. Servicers, from what I’ve gathered, don’t like to record assignments, etc, until absolutely necessary usually either when a loan is paid off – when a discharge can be recorded – or, more commonly, several days to weeks before an attempt to foreclose is made. I’d venture to guess that this is because until that time, the assignment of mortgage is usually left “en blanc” or not filled in for either simplicity or laziness, whichever one works. In my own case, I was asking for the better part of two YEARS as to why Merrill Lynch was trying to foreclose on me. It wasn’t until literally five days before (12/19/03) I was served(12/23/03) with a Notice of Intent to Foreclose that multiple assignments were recorded. Two years. My loan originated 03/12/01 if I remember correctly. It was supposedly sold to Merrill Lynch Mortgage Capital two weeks later. The assignment just wasn’t recorded until two years later. Of course, the assignment itself wasn’t even CREATED until between July and December 2003. Of that I have irrefutable proof.

    As far as making sure the payments are recorded, that’s a bit of a process but one that can be at least reasonably, if not slightly more expensively, done. As has already been suggested, scan your checks before you send them out each month. Even better if you can get the original checks back with the processing info on the back – good luck on that one with Check 21 in place now. Send your payments certified return receipt if possible to ensure that you have proof that the payment was received. You may need to send CRRs to a different address so double check with your servicer before attempting this. You may also want to coordinate your payment with the month in which it is sent. I.e. for an October payment of $1020.75 round it up to $1021.10. For November $1021.11. December $1021.12, etc. I wish I could take credit for this basic but ingenious thinking but I can’t. If nothing else, what this does is make it that much easier to track a payment if/when you need to audit your loan.

    As far as making sure that you do, in fact, have lien and claim free ownership of your property upon payment in full, that’s an easy request – although potentially more difficult for the note holder/servicer to grant. Demand the original note stamped “Paid in Full”. If they can’t come up with it, then I suppose you have to figure out if it’s worth the litigation, expense and headache to go after the (assumedly) 30 years worth of principle and interest that you’ve forked over…

    Something else to consider that’s neither here nor there with regard to Constitutional or prudential standing… MERS is – or at least was the last time I looked – screwing each and every county registry/recorder of deeds, and therefore the people of each and every county in every state, out of most likely hundreds of millions of dollars worth of filing fees.

    According to Wikipedia – http://en.wikipedia.org/wiki/MERS , “Shareholders and owners of MERS include AIG, Fannie Mae, Freddie Mac, WAMU, CitiMortgage, Countrywide, GMAC, Guaranty Bank, and Merrill Lynch. It is argued that the U.S. government may currently control MERS via its control and ownership of many of these MERS’ shareholders.”

    In my own opinion, there was no “mistake” as I believe one poster alluded to with the creation of MERS. MERS was/is designed to do exactly what it was/is supposed to and has been doing for a long time.

    If anyone is at all curious, feel free to run ” Mike Dillon NH foreclosure ” through your favorite search engine for more info on me…

    Mike Dillon
    Manchester, NH
    -Because after all, all you have to lose – is your home.

  26. jc says:

    Mike D
    Sorry to hear about the grief you’ve been thru.

    An unsettling thought – what if the note holder makes you prove many years of payments before they will stamp “paid in full” or if they simply refuse to stamp it. Nobody is dealing with the local S&L anymore and maybe MERS or these big banks may simply refuse to stamp any mortgage “paid in full”.

  27. jc says:

    Title search. Anybody buying real estate better get a RE attorney that knows what he’s doing and isn’t LAZY, tell him that you want to see his work and explain it to you. Ask him who did the actual title search, usually a first year law student earning beer money.

  28. Mike Dillon says:

    JC, if that happens, in my extremely non-legal opinion, you get your evidence of payment together, demand a copy of the account history from the servicing entity if it’s different from the note holder, demand a copy of the contact history report on your loan, find a good CPA/CFE or forensic account to audit your loan and go speak to a good consumer protection attorney familiar with FDCPA, RESPA, TILA, state equivalent statutes and litigation experience because you’re obviously going to have a fight on your hands so better to gear up for it early and be ready. Because if a note holder DOES make a borrower do something like that it’s a HUGE red flag that something is wrong with the accounting of the loan.

    At the end of your time with a particular loan, if you don’t have the original note stamped “Paid in Full” in your possession it potentially opens the door for sooo many things to happen. I’ve heard theories that notes that go unreturned simply get reinserted into RMBS pools again and investors are none the wiser. And what happens after you’ve paid off the note when someone comes knocking a year down the road claiming to be the note holder and THEY have the original note in their possession? The game of “What If?” gets even more interesting when you get into states like Pennsylvania, more accurately a Commonwealth I know, that somehow allow the bifurcation of note and mortgage and allow the holder of EITHER document to foreclose. I have no idea how that gets around Article 3 of UCC but apparently PA is attempting to make it fly.