Beau Biden is wrong on MERS lawsuit
The MERS System has been an efficient way to register the majority of home mortgage loans in America for more than a decade. The press and politicians paid little attention because the MERS System works. It works for lenders and for homeowners.
The MERS System helps to eliminate breaks in the chain of the homeowner’s title and streamlines the mortgage process by using e-commerce to replace paperwork, resulting in lower overall mortgage borrowing costs.
Unfortunately, MERS has been making national headlines recently as the subject of politically motivated rhetoric and litigation, including in Delaware with Attorney General Beau Biden’s recently announced lawsuit. Critics of the MERS database are publicly blaming it for just about everything that went wrong in the housing industry, for local revenue problems, and even for some of Wall Street’s transgressions.
The reality is, many factors contributed to the challenges we face together as a nation. The current rhetoric — and the legal challenge — is without merit.
We understand that losing a home is one of the worst things a family can experience, but no one has lost a home to foreclosure because the mortgage was registered on MERS. The MERS system is not complex, and the easiest way to set the record straight is to talk about what MERS is and how it works.
MERS runs an electronic registration system that tracks changes in mortgage servicing rights. All mortgages registered on the MERS System are recorded in public land records and the proper recording fees are paid. And, whenever an assignment out of MERS’ name is made, the necessary assignment is recorded and paid for, so public land records remain accurate. The MERS System is not a legal system of record or a replacement for public land records and no interests are transferred on the system — they are only tracked.
Homebuyers agree to MERS’ role at closing. Standard, clear and unambiguous language is on page one, paragraph one of homeowners’ mortgage documents, naming MERS as mortgagee and giving the company the legal right to act on behalf of the lender. As mortgagee, MERS is a common agent for all of its members, so an assignment is unnecessary when servicing rights or ownership of the promissory note transfers between members. The lien remains in MERS’ name. There is no need for an assignment, so there is nothing to record.
MERS doesn’t service loans, doesn’t receive or store any mortgage documents, doesn’t collect mortgage payments, and doesn’t make loan modification decisions or decisions to foreclose. The MERS website provides homeowners with the identity of their mortgage servicer and links homeownership and foreclosure prevention resources.
Contrary to the claims of Attorney General Biden, the MERS System does not hide ownership. Anytime a change in ownership or servicing occurs, federal law requires that borrowers are notified by the parties making the change. In addition, mortgage servicers are required to provide ownership information to the homeowner upon request. Borrowers don’t depend on MERS for this information.
That’s what MERS is and does. Our business model is transparent, straightforward and provides an important service. MERS was created in the 1990s partly in response to the disappearance of a lot of lenders that failed during the Savings and Loan Crisis, wreaking havoc for homeowners and the mortgage industry. The mortgage finance industry was changing rapidly, and mortgage securitization was growing on its own — we didn’t help Wall Street create securities. In fact, the first mortgage-backed security was issued a decade and a half before the MERS System became operational. And use of the MERS System has been validated by federal and state courts around the nation, and the MERS business model is operating in all 50 states.
It is unfortunate that there are so many misconceptions about our company. It’s easy to play the blame game and make MERS the villain in the foreclosure story, but it’s irresponsible when the rhetoric is based more on fiction than fact. It’s also irresponsible to offer false hope to borrowers by suggesting that if MERS was named in their mortgage then the foreclosure can’t proceed.
Despite all of the challenges, MERS continues to play an important role and supports the American dream of homeownership.
Reposted in full for historical and educational importance.
I think I just threw up in my mouth, twice…