MERS: Scandal or Smokescreen?

Another week, and the economy is still in a holding pattern. “RoboScandal” is on the tips of everyone’s tongue.
And throughout the media and financial worlds, people are poised to take sides. In discussions this week with parties involved in different aspects of the lending business, I heard all types of comments.

One lender, in particular, believes that this will be another political witch hunt aimed at the “big boys”, making them the scapegoats of a political climate that is “poised to make [them] pay for the economic woes the country is currently suffering”.

Lou Barnes, a mortgage broker and nationally syndicated columnist based in Boulder, CO, writes in Inman News, “Despite frantic media digging, I have not heard a single, documented case in which an owner lost a home who did not owe the money and was not in default. We are a nation of laws, and hence procedures that must be followed; there should be embarrassment and penalties for bad-faith actors. However, when courts consider damage awards, separating actionable from incidental, culpable from sloppy, they ask who was harmed and to what degree. No one, to my knowledge, has been harmed in RoboForeclo.”

Individuals see it differently: “It is not ok for the banks to ignore and gloss over the law. Goodness knows the people who lost their homes were held accountable for every little dot on the paper. How many times have people had wages garnished etc and the “notice” given was a certified letter to an address they hadn’t been in in years. The “big boys” need to observe the laws just like the “little people”.”

But what is the substance behind the opinion? A 2009 ruling by the Kansas Supreme Court held that MERS, a private company that that registers mortgages electronically and tracks changes in ownership, has no standing in real estate foreclosure proceedings. MERS is an acronym for Mortgage Electronic Registration Systems. It turns out that about one-half of all new mortgages in the US are registered with MERS and recorded in its name. MERS facilitated the process where banks would purchase pools of mortgages and then securitize them – basically chopping them into pieces and selling them off to investors. MERS reduced the transparency of the mortgage market to such an extent that the homeowner no longer knew who held the mortgage note. It may have been held by one bank in Frankfurt, or pieces of it held by hedge funds and insurance companies.

This ruling has since spread to other states; hence, Bank of America responded by halting foreclosures as it regroups and reassesses its foreclosure procedures.

Your opinion? Scandal or smokescreen?

Deborah Bremner
The Bremner Group at Coldwell Banker
REALTOR, 00588885,
(O) 310-571-1364 DIRECT
(D) (310) 800-2954

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