2to the detriment of the public and the local county recorders who depend upon recording incometo support their offices and the integrity of the records they maintain.To avoid paying county recording fees each time the mortgages were assigned, mortgage bankersand the title insurance industry formed a plan to create one shell company that would pretend toown all the mortgages in the country. By doing so, the mortgage bankers and their investmentpartners would never have to record assignments since the same company would always “own”all the mortgages.The company they created is now known as Mortgage Electronic Registration Systems, Inc. orMERS. 60% of the nation’s mortgages are now held by MERS, whether as a nominee or as theactual mortgagee. At present, the number of mortgages “tracked” in the MERS system isroughly 31 million. Prior to the mortgage meltdown in 2008, the number of mortgages in theMERS system was nearly twice that number, or approximately 61 million mortgages. Theregistry fees paid by member banks to participate in the MERS system has generated millions of dollars in revenue for MERS owners and given the mortgage banking industry unfettered accessto the securitization market where billions of dollars have changed hands since 1997.
Who is MERS?
MERS is a wholly-owned subsidiary of a Delaware corporation that is owned by a broad base of organizations in the mortgage, banking and title industries known as MERSCORP, Inc.Shareholders in MERS include: the
American Land Title Association
First American TitleInsurance Corporation
Stewart Title Guaranty Company
Bank of America
AIG United Guaranty Corporation
Wells Fargo Bank
Washington Mutual Bank
Chase Home Mortgage Corporation
Mortgage Bankers Association
.The CEO of the American Land Title Association, Kurt Pfotenhauer, is the Chairman of theBoard for MERS. Investment in the MERS venture has reaped huge rewards for the closelyconsolidated owners of the registry. Thus, the effort to protect MERS from opponents of theregistry has been vigorous.
Where Does MERS Go Wrong?
In the typical MERS scenario, Bank A lends money to a borrower via a promissory note securedby a mortgage. Bank A, as a participant in the MERS system, permits MERS to appear on themortgage or deed of trust for the perceived purpose of holding title to the mortgage or deed of trust as nominee for Bank A, whether as the mortgagee or as an assignee. From there, thepromissory note travels the secondary market through various assignments and holders until,upon default or thereafter, the foreclosing entity requires proof in court that it is the holder of thenote and mortgage in order to foreclose. Because the manner by which MERS tracks theassignments in its registry, often times the assignments are lost, the information contained in theregistry is erroneous or, worse, the individual with purported authority to assign the MERS note