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IPFS News Link • Housing

Foreclosure-Gate: MERS Stumbles Badly in Court

It is ironic that MERS officers continue to brandish the canard that the US was rife with bad mortgage records prior to the widespread use of the data service. Prior to MERS, the mortgage securitization industry was not very happy with how long recording took, but there is no evidence that it caused a breaks in title. It simply took time and created hassles. If a recording was rejected, before and after MERS, it could be cured by the filing party. In a securitization, that would be the servicer’s job. A break would not occur unless someone else came in and recorded an intervening assignment. But if there was a backlog, the odds of this would be pretty remote. And there is a good reason why, contrary to Hultman’s claim, there is no evidence of pre-MERS widespread problems with the integrity of local records. Real property transactions are usually significant to the parties involved, and mortgage recording is required for the lender to have a priority claim. The “first” mortgage is “first” because it was RECORDED first. If someone puts another lien on a house and rushes to the courhouse and files it before the earlier lien is recorded, it becomes the senior lien. That gives lenders a very big incentive to make sure their lien is recorded promptly and accurately. But Hultman later makes further false claims about the accuracy of the local recording system: If history shows anything, adding additional requirements to record documents with a county or clerk will result in more problems, not less problems. It adds costs. People will forget to do it, because people are human, and then there’s a question about what happens if we don’t file it, what impact does it have on the process other than just trying to foreclose. The implication is that MERS is superior to the local courthouse system. The evidence is the reverse. Chris Peterson has described the utterly unorthodox corporate governance system of MERS, where employees of other firms put on a MERS hat for a short period as a “MERS certifying officer” and execute documents. MERS does not supervise these individuals. Indeed, it specifically disavows any responsibility for the accuracy of MERS’s records: