Note: I wanted to posted this article in full from bluegrassforeclosure.com The main takeaway is that MERS holds all the land titles. Who gives them authority to do so? How do they know who the originator is? This mortgages were so sliced and diced by Wall Street that we don’t know who owns what or how they own it and what piece. Eric Schneiderman has the regulatory authority to investigate MERS, when will the subpoenas start coming down.
What the heck is MERS, anyway?
October 11th, 2010
This original post can be found at Examiner.com. As we have reported, a federal lawsuit has been filed against banks and MERS. The suit alleges, among other things, that the banks and MERS conspired to file foreclosures against homes that the banks did not actually have a lien against. Confused yet? Don’t worry, I am too. I’ll try to shed some light on what the HECK is MERS anyway . . . ?
Kentucky is a title lien state, wherein title is actually held by the owner of the real property. Then a bank or other financial institution loans money to the owner to purchase the property via a promissory note or contract. As collateral for the note or loan, the bank will take a mortgage or lien against the property. The theory being that if the owner defaults on their payments to the lender, the lender can foreclose its lien or mortgage, sell the property and recoup its losses.
MERS stands for Mortgage Electronic Registration System and is based in Virginia. From its website: “MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.” www.MERSinc.org. Also from their website: “MERS acts as nominee in the county land records for the lender and servicer. Any loan registered on the MERS® System is inoculated against future assignments because MERS remains the nominal mortgagee no matter how many times servicing is traded.”
Where this all gets confusing is the lender or note holder often has a third party company actually “service” the loan. Often, the original company that made the first loan will simply sell off the paper to another company, so the first one can make its money back more quickly and move on to finance another deal. The servicer is the company that collects payments, monitors if an account is in default, and takes the appropriate action. Meanwhile, the lender or note holder sits back and collects its money, makes more loans, and generally is not an active player in the process. So the note, or “paper”, will get sold several times over to different investment companies on down the line.
Essentially, MERS acts as a middleman, wherein it becomes the permanent “nominee” of the company who holds the actual note. Thereby, a company only has to record one mortgage or lien, that being in the name of MERS. Then it does not matter how often the loan is sold and to how many different companies. In the county clerk’s office where public records are filed, you only have to have one recorded lien, in MERS’s name, and then whichever company owns the actual note, can sell it off as needed.
The lawsuit was filed under the federal Racketeer Influenced and Corrupt Organizations Act, or RICO, and brought as a class action. If successful here in Kentucky, this case could certainly have wide ranging, national effect on the mortgage industry. We will watch this case as new developments come up.
Tags: Foster v. MERS
Posted in Uncategorized
Comments
Post a Comment