Thursday, March 17, 2011

Lions and Tigers and MERS - Oh My!

When I was a little boy, four years old I think, I saw "The Wizard of Oz" for the first time.  It frightened me so much that I hid behind the couch, peeking every so often over the back of it to try and follow along.  Something about those flying monkeys gave me such a case of the heeby jeebies.  I've got 'em again!

The New York Supreme Court ruled a few days ago that MERS (Mortgage Electronic Registration Systems) has the right to foreclose on delinquent mortgages. MERS has already prevailed in New Hampshire, California and Kansas. Is your state next?

This can't be right.  Is everyone clear about what MERS is and what it does?

I submit that one of the reasons America has become the most prosperous nation on earth is because property rights are so clearly defined, vigorously defended, and publicly delineated.  Anyone in the world, and that means literally anyone, can go down to your county courthouse and ask to see your deed.  It is a public record.  It is this transparency that makes it such a valuable asset.  No one can dispute that you own it - again,  it is a matter of public record.  Now that's not to say that there are never any errors in the public records, no foul-ups ever committed in the process of recording a deed.  There are, in fact, some busy attorneys that bill a lot of hours embroiled in challenges to property rights.  By and large, though, they are statistically rare compared to the enormous volume of property transactions that take place in the United States in a given year.  It is a fact that it's a somewhat convoluted process to painstakingly record every single property conveyance that takes place in your county.  But, again, it's the fact that it happens that makes your property worth something.  Because you can prove you own it, you can sell it.

And what does MERS have to do with this?  MERS is a streamlined process to record transfers of mortgage and real estate instruments.  It is not, let me repeat, it is NOT a transparent process.  There is a group of "too-big-to-fail" banks that have created a club for their convenience to streamline the process for bundling mortgages into mortgage backed securities.  In order to record the transfer of mortgages without having to go through the oh-so-annoying tedium of waiting in line at the courthouse for each and every transaction, someone hatched the idea that they could just keep an electronic registry and that they would all agree among themselves it would be correct, and legal, and moral - because it is in the interest of commerce, after all.  It would also be, very conveniently, private.

Each bank can, because they decided it to be so, certify whoever they chose to be the recorder of mortgage transfers.  There is no qualifying process, no professional certifying board that oversees who is an authorized  recorder of this electronic registry.  The wicked witch of the east (MERS) has her little monkeys flying around the electronic countryside doing her bidding while she stirs her cauldron of mortgage documents into a thick murky soup.

I'm not an attorney - but I don't think I have to be one to conclude that MERS is, at the very least not fair, and probably down-right, blatantly, illegal.  How can it be right, that a process that is meant to be transparent and naked for all to see, should be sequestered and hidden away by a very tiny group of bankers?

"Come here, my little pretty..."

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