There are actually two MERS companies at this point. There’s MERSCORP, which owns some physical assets, including an office location in Reston, Virginia, and has about 60 employees, including a group of lawyers. There’s also MERS Inc., which has zero employees. This shell company is the one listed as the “mortgagee” on about 60 million American homes, or 60% of the total mortgage market.
Peterson described MERS to me as “a big Excel spreadsheet,” where financial institutions can input mortgage trades and information. “I don’t even like the word tracked,” he said. “They don’t assign records or anything.” The servicers use it to make a loan or a trade, and MERS stays as the mortgagee throughout the duration of the loan. This avoids recording the mortgage change each time with the county recorders office, altering the tradition for hundreds of years of recording the mortgage. This particularly becomes important if there’s a dispute on the property, which is what we’re dealing with now.
The other advantage of using MERS is that they will bring the foreclosure action instead of the mortgage servicer. This has tactical advantages; companies don’t have to take the PR hit of foreclosing on borrowers. In addition, Peterson said that some judges might not ask to produce the promissory note if MERS does the foreclosure action as the mortgagee. While MERS stipulates that the servicers must convey the promissory notes to MERS, it appears they didn’t do that in all or even most cases, and the underlying paperwork could be lost.
Because MERS has no personnel to bring foreclosures, they basically outsource the operations back to the servicers and foreclosure mills, just as the assignment of the mortgage was outsourced to them. Employees of the servicers simply pretend to be Vice Presidents or assistant secretaries or certifying officers of MERS Inc. Therefore, a company with no actual employees has thousands of Vice Presidents and certifying officers.
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