Be sure to check out the Harbinger Analytics Group white paper, MERS: the Unreported Effects of Lost Chain of Title on Real Property Owners in the Think Tank.

Here is the abstract:

“Thanks to the Mortgage Electronic Registry System’s (“MERS”) failure to accurately  complete and/or publically record property conveyances in the frenzy of banks securitizing home loans and in subsequent foreclosure actions,1 neighbors to a foreclosed property (with a sequential conveyance) as well as the foreclosed property itself will have unclear boundaries and clouded/unmarketable titles making it difficult, if not impossible, for these homeowners to sell their properties and for subsequent purchasers to obtain title insurance on that property.  MERS now keeps electronic records on about half of the home mortgages in the United States.

Category: 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.

9 Responses to “How Has MERS Damaged Real Estate Title?”

  1. dead hobo says:

    BR pondered:

    How Has MERS Damaged Real Estate Title?

    Probably none. When I studied business law and secured transactions, MERS never came up. Based on the law that is taught in schools, MERS should not exist and any security interest recorded via MERS should have the status of unsecured debt. But, courts apparently disagree and debt in the MERS system has the same status as debt in the systems described in ‘secured transactions’. A lawyer who is knowledgeable of the legal innovation that has accompanied financial innovation might be able to explain further. Otherwise, this is beating a dead horse. MERS 1 Ritholtz 0. Game Set Match. Wish it were different.

    On the other hand, doesn’t Merkel look more and more like the Travelocity gnome? Really. Tell me ‘no’ and say it honestly.

  2. Petey Wheatstraw says:

    dead hobo:

    What do court decisions regarding debt (and which, BTW, override, by fiat, hundreds of years of law in the western civilization) — secured, or not — have to do with title defects or title insurance?

  3. Lyle says:

    On the boundary issue: One only does a survey when the property is sold it is not done during re-fis. Note also that the deed (which was recorded) does have the legal description of the property, which defines its limits. So there should be no issue to the neighbors in terms of boundaries. Yes the individual properties involved may well have issues of who has what security interest of course but the neighbors have both their deed which defines the limits and the neighbors deed (which was recorded) to define the limits.

    Note on a related issue it looks like most Texas county clerks are filing suit against MERS for failing to pay what is due to them, Dallas County has Harris (Houston) is likley to as is Bexar(San Antonio). There is also a class action suit by a number of smaller counties.

  4. rd says:

    The properties in subdivisions are typically described in the lot maps that are held by the local governments. The surveyors then do a title search to find those lot boundaries and any filed amendments, such as easements and right-ofways or purchases/sales of additonal land.

    The mortgages and notes generally simply refer to these lots and surveys, so abutting landowners should simply have the same risk that they always had of improperly described or surveyed land.

    The buyer of a foreclosed property could have the problem of the local county clerk not showing the mortgage lien being properly eliminated from the property that they are buying if the banks did not do their paperwork and filing properly. This should show up in the title search that a prudent buyer would do which would identify the lien.

    We are looking into refinancing our home which has a Countrywide (BoA) mortgage from the early 2000s. We will probably be refinancing using another lender. I am assuming that the new lender would make sure that the old mortgage is removed from the county records and replaced with the new one, but I intend on following up with the county clerk after closing to ensure that this was done.

    My biggest concern is that BoA would be unable to produce the original paperwork which could resurface at another time with a claim.

  5. readerOfTeaLeaves says:

    Reading about MERS at Naked Capitalism has been mind blowing.
    The security was laughable, and anyone who allowed new users to sign in and alter mortgage docs should do hard time.

    What if the Library of Congress didn’t actually bother to catalogue books? Or they kind of did, just that a whole lot of people could access their database. Suddenly, some guy in Oklahoma claims to be the author of Bailout Nation because he was able to alter the database and overwrite a previous entry for some guy named Ritholtz’s?

    Or what if untold, uncontrolled numbers of people could go online and mess with databases that detail patent ownership?

    If ownership records are not scrupulously maintained, you have endless problems and competing claims of ownership. Which leads to time-wasting and chaos.

    MERS is a classic case of Wall Street penis envy, but appears to have been designed for plausible deniability.
    If someone wanted to design a fraud machine, it might look like MERS.

  6. Lyle says:

    re RD, note that since there is a significant time delay between the time the mortgage is paid off and the time the notice is filed, you have just the closing statement to act as a receipt. The new mortgage company can’t wait until the release is filed, else you would have to pay the mortgage back in the interim.
    However now days if your county has property records on line you can check by looking at them.

  7. DWoolley says:

    As Lyle has stated, each deed has a “legal description of the property, which defines the limits”.

    Farmer A has a platted 10 acres (1925), he sells the east 5 acres to B (1930) and later sells the west 5 acres to C (1932). Each property changes hands several times (chain of title) over the next 75 years (2005).

    Again, each has a legal description which defines the limits. A survey is completed in 2005 which reveals Farmer A only owned 9.5 acres. Valid legal descriptions do not create land which was never there. Who takes the shortage? Is it the successors in interest for B or for C? Suppose the chain of title was lost for one property, now who takes the shortage?

    The mortgage surveys, common in the south, are not land title surveys and are generally useless in determining property rights.

    To further prove the point, most lenders on commercial property commission a land title survey before funding a loan. On the west coast lenders are charged $4,000-60,000 to perform these surveys. Why do you suppose an inherently cheap lender is willing to pay this amount of money for a land title survey? The answer, because they know a marketable title claim or boundary litigation or easement litigation claim will tie the property up for years and/or be the basis for contract rescission.

    In the last two years I have performed two such surveys, one of which was vacant land, with a combined survey cost of $76,000.00. These surveys have a tremendous amount of liability. Lenders will not fund a loan without removing the survey exception clause from a title insurance policy. The lenders require land title surveys on refis.

  8. Francois says:

    “Probably none. When I studied business law and secured transactions, MERS never came up”

    Time to go back to school.

  9. DWoolley says:

    Lyle? Waiting……