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Gretchen Explains MERS For You

Posted By Barry Ritholtz On September 27, 2009 @ 8:36 am In Credit,Legal,Real Estate | Comments Disabled

“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

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Talk about burying the lead: Gretchen Morgenson does a nice job today explaining the MERS [1] 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.

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Previously:
Mortgage Electronic Registration Systems Loses Legal Shield [2] (September 23rd, 2009)

http://www.ritholtz.com/blog/2009/09/mortgage-electronic-registration-systems-loses-legal-shield/

Source:
The Mortgage Machine Backfires [1]
Gretchen Morgenson
NYT, September 26, 2009

http://www.nytimes.com/2009/09/27/business/27gret.html


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2009/09/gretchen-explains-mers-for-you/

URLs in this post:

[1] explaining the MERS: http://www.nytimes.com/2009/09/27/business/27gret.html

[2] Mortgage Electronic Registration Systems Loses Legal Shield: http://www.ritholtz.com/blog/2009/09/mortgage-electronic-registration-systems-loses-legal-shield/

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