The Mortgage Electronic Registration Systems (MERS) is an American privately held company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States. Never heard of MERS? Read The New York Times’ Business Day, “Mers? It May Have Swallowed Your Loan.”
MERS was the subject of a study by Harbinger Analytics Group Real Estate Fraud Experts, authored by David Woolley which outlined how MERS destroyed the chain of title, and has ultimately damaged the housing industry as a whole. Woolley writes, “thanks to the Mortgage Electronic Registry System’s (“MERS”) failure to accurately complete and/or publically [sic] record property conveyances in the frenzy of banks securitizing home loans and in subsequent foreclosure actions, neighbors to a foreclosed property (with a sequential conveyance) as well as the foreclosed property itself will have unclear boundaries and clouded/unmarketable titles making it difficult, if not impossible, for these homeowners to sell their properties and for subsequent purchasers to obtain title insurance on that property.”
Tara Steele, News Director at AgentGenius and author of “Study Says “MERS Has Destroyed the Chain of Title, Hurt Housing,” said that anyone involved in real estate from brokers and agents to loan officers and title agents should be up to date on MERS’ role in the industry as many have proclaimed it to be the biggest force working against the housing sector in history. You can read the 85-page white paper — MERS: The Unreported Effects of Lost Chain Title on Real Estate Owners — and her full article here.
The City of San Francisco recently released a report revealing the widespread nature of foreclosure abuse, with 84 percent of the 400 local foreclosure cases studied showing illegal activity. The drastic rate puts the housing industry on alert, but not surprised, in light of the MERS report.
Other cities are chiming in, claiming similar levels of foreclosures that are illegal due primarily to paperwork flaws due to robosigning. Robosigning is done by banks most frequently to push foreclosures forward without human review, resulting in mistakes in paperwork and illegal foreclosures. The debacle was the primary reason for the recent $25 billion civil settlement among the nation’s five largest lenders.
Experts point to the robo-signing scandal and the role of MERS in housing to have caused chaos in the housing industry. Lenders foreclosed on wrong addresses; paperwork on loans were never completed or reviewed prior to repossessing properties. When mortgages were packaged and repackaged to investors and lenders acquired each other or shut down, the chain of title in many cases gets lost and it is unclear who actually holds a loan.
In the study performed by the City of San Francisco, 45 percent of loans studied were sold to entities claiming to be the loan holder but actually were not and lenders foreclosed on homes they do not even own.
Some point out that in non-judicial foreclosure states, as in California, foreclosure fraud rates are higher due to the lack of judicial oversight over the foreclosure process.
It will take years and years to sort out this tangled mess we are in.