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H Committee

H Committee

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relation to that? MR. HULTMAN: agent of the lender.

We're the beneficiary, but we're an So instead of having two -- one party be

both the payee on the note and the beneficiary in deed of trust, we're the beneficiary as their agent. In other words,

we're holding title to the mortgage lien on their behalf. COMMITTEE MEMBER: nominee? MR. HULTMAN: agent.

Well, nominee is just another word for

COMMITTEE MEMBER:

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deed of trust gets recorded so the world is on notice that there is a lien against the property, which is what the purpose of land records are. COMMITTEE MEMBER: MR. HULTMAN: Right.

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MR. HULTMAN:

And the mortgage gets recorded or the

History, even before MERS, it was never

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the role of the land records to tell anybody who the owner of the indebtedness was. COMMITTEE MEMBER: MR. HULTMAN: I don't disagree.

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And -- I'm sorry? I don't disagree with that.

COMMITTEE MEMBER:

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Okay.

Through this process called

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COMMITTEE MEMBER:

Can you explain what you are in

So the actual record --

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MR. HULTMAN:

Oh, okay.

Fair enough.

Just in response to something else that I heard you

reasons why I think some of the states have not gone down this path about having the certificate of title for the indebtedness is because the federal law already provides a lot of protection for the borrowers. Under RESPA, any borrower is entitled to

write a letter to the servicer and the servicer is obligated under federal law in RESPA to give -- disclose the person who holds their note.

Also, last year from the federal legislation that got passed in May, and this is the (inaudible) amendment, I forget

Act and added a section, 404, that requires now that every time

note is required under federal law to give notice to the borrower that they now own the note. So this notion somehow that we have to put another

record in the land record, and one of the reasons that MERS exists today is because prior to MERS all these assignments

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were not getting recorded or they were being done improperly, they would get rejected, and there would be breaks in the chain of title. MERS (inaudible) the title to the mortgage lien in

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MERS so that from the beginning to the end, the loan, period, is never going to be a break of title because the assignments

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the note is transferred, the transferee or the purchaser of the

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the name, but the statute, but it amended the Truth and Lending

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ask the people from the Banker's Association.

One of the other

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were recorded. COMMITTEE MEMBER: Let me ask this question.

because you from the beginning are the beneficiary -MR. HULTMAN: That's correct.

COMMITTEE MEMBER:

So for purposes of recording in

our courthouses, there is never an assignment that's ever made. The assignment, if there is one, would be a change in the actual underlying promissory note. MR. HULTMAN:

And that's where I think some of the They

confusion comes up with people when they talk about MERS.

use the word assignment and mortgage and mortgage loan and note

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interchangeably when there are two distinct instruments and -(Inaudible) deed of trust and

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there's a note.

When -- I use mortgage, deed of trust. (Inaudible.)

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COMMITTEE MEMBER: MR. HULTMAN:

They're interchangeable from our

perspective.

We're really a holder of the mortgage -Right, but in Virginia you have

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deed of trust that deals with the ownership of the property, and then you have a promissory note which is never recorded, which deals with the obligation on the debt. MR. HULTMAN: That's correct. What you're saying is, is this

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understand it, actually there never is an assignment made ever

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So as I

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language in this bill that talks about assignments really doesn't affect you anyway because -MR. HULTMAN:

than it solves any problems.

I mean, a lot of what we see -Borrowers call me

and frankly, I talk to borrowers everyday. up.

I mean, we heard the story from one of the lawyers here

about how these things went in wrong places and did things. Well, people make mistakes.

You know, if somebody called me up and asked me, which they didn't, we would have helped them sort out that problem. We would have gone to -- and I do this everyday.

Borrowers call us up and they say, I don't know who my

into the toll-free number that they can call, we'll tell them

percent of our members who haven't opted out, we'll give them the name of the noteholder, and sometimes I'll even give them the noteholder's name if they have a compelling reason for it even when they --

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COMMITTEE MEMBER: MR. HULTMAN:

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the identity of the current servicer and we'll also -- for 97

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noteholder is.

Because if they go on our website or if they go

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Contact in -- yeah.

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And their contact information? I mean, we'll give

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that information up to the people.

-- the owner -- we always show who the servicer was. our purpose.

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Now, since all of this activity has gone on,

we've been able to convince our members that, for most of them

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I think it would cause more confusion

Now, again, that's a more That was

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at least, that we'll be willing to disclose the -- who holds the note on their -- who (inaudible.) COMMITTEE MEMBER: COMMITTEE MEMBER: Anything else?

I have a question.

404 you were just talking about -MR. HULTMAN:

Section 404.

COMMITTEE MEMBER: what now? MR. HULTMAN:

Yeah, section 404, it requires

When the note is transferred or sold,

the federal legislation requires a notice be delivered to the borrower from the purchaser or the transferee of the note. whoever has acquired that note for whatever reason, doesn't So

they're the subsequent holder of the note or the owner of the

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loan, they're --

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actually have to be a sale, but it could be -- as long as

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MR. HULTMAN:

Right.

this notice to the borrower, and on it, it says who the owner of the note is. It also tells the borrower who they have to So, for

contact to -- if they have questions about the note.

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example, a bank is using a servicer or a trustee is using a servicer to collect the payments for that, which is what most professional investors do today. So, for example, you know,

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right now 98 percent of the loans are done by Freddie (inaudible) -- purchased by Freddie (inaudible). And, you

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(Inaudible) company? They're required to deliver

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(Inaudible.)

This section

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know, they all use professional services because they're not in that business. They're in the business of owning notes and

they'll tell you who to contact and they'll give specific contact information in that notice to let them know who they need to talk to if they have problems with their loan. COMMITTEE MEMBER: This is just a follow-up.

you're saying that the recordation part here that's in this bill, it wouldn't affect you anyway? MR. HULTMAN:

Well, I think it would cause confusion

and it would up end up --

COMMITTEE MEMBER: it would not affect you -MR. HULTMAN:

(inaudible).

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MR. HULTMAN:

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COMMITTEE MEMBER:

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Yeah, that's right. -- because you're on the original

We're on the deed, and the conveyance

to us has not changed. COMMITTEE MEMBER: So in other words, where the

change is coming is in the promissory notes?

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MR. HULTMAN:

Exactly. And then what you're doing is

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COMMITTEE MEMBER:

you're acting sort of after the -- you're acting as a clearing house for determining -- I mean, that -- but you know that's not very well advertised. I mean, I don't think there are a

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So it would be your position that

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making sure they get distributed to investors world-wide.

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lot of people that know -MR. HULTMAN: I would say that there's a lot of --

MR. HULTMAN:

-- misunderstanding about MERS in the You go to our

press and in the Internet stories about MERS.

website, and maybe our website is not the most user-friendly website, but we're a very transparent company. Everything

about MERS is pretty much on our website, and as I said, we disclose who we're acting for.

The fact that we're acting as this nominee or agent is disclosed in the instrument. The fact that the instrument

and the borrower agrees in the deed of trust that if the

foreclosure process in the states.

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investor or servicer so desires, MERS may actually conduct the And there is no state that

law in any of the 50 states so far.

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has said that we're doing anything in contravention to state There's a lot of noise.

kicked out of court.

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And you've heard about cases where they say MERS got Well, that may be true, but it's not

because MERS is not legal or MERS is not within compliance with state law. It's because there was a defect in the process, and

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the party who is bringing the prosecution had not done all of the paperwork that they needed to be done, and those cases are usually dismissed without prejudice and they can go back and remedy those positions. But a lot of times that gets recorded

as MERS got kicked out of court or MERS loses a case.

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COMMITTEE MEMBER:

I --

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COMMITTEE MEMBER: COMMITTEE MEMBER: COMMITTEE MEMBER:

Mr. Chairman -Any other questions?

question about how I find my mortgage on the website, but I went on their website and I (inaudible) found my mortgage in about ten seconds (inaudible). MR. HULTMAN:

Now, I would say this, MERS only has 60 There are some people who chose not They buy

percent of the mortgages.

to use MERS for -- because they don't sell the loan.

the loan and they hold the service and they hold the mortgage note or they secure -- so, you know, not everybody will find their mortgage on the system because we don't have a hundred

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percent of the marketshare.

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--

I think it was May 2009. Well, what I'm showing is that it

was passed December 18, 2010. COMMITTEE MEMBER: MR. HULTMAN: It was approved. I may be off.

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COMMITTEE MEMBER:

Could have been. Yeah.

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COMMITTEE MEMBER:

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position would be based on that is you now have to provide notice to everybody whenever you transfer -MR. HULTMAN: If history shows anything, adding

additional requirements to record documents with a county or

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Mr. Chair, when was this section

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Mr. Chairman, I was going to ask a

So, I guess, what your

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clerk will result in more problems, not less problems. costs.

It adds

People will forget to do it, because people are human,

it, what impact does it have on the process other than just trying to foreclose.

Part of the problem with the statute can also be looked at is it's only requiring the assignments and these transfer notices to be effective if it's only to prosecute the foreclosure. You know, I get a lot of people who call me up

and say, I can't find who has -- I want my lien released, and we'll sign the lien release if we're satisfied that the note has been paid off. We can go to the title company and they'll

of borrowers.

We probably do this a dozen times where we help

If the statute, you know, it doesn't -- it doesn't -it's not going to change human nature. make mistakes. get filed. forward.

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borrowers release their liens when they're not there.

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give us the information and we can actually do that on behalf

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Assignments and these transfer notices will not

It will cause further problems for borrowers going

(Inaudible) foreclosure process. Mr. Chairman. (Inaudible). Thank you.

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COMMITTEE MEMBER: COMMITTEE MEMBER: COMMITTEE MEMBER:

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Sir, you've been here most of the afternoon; have you not?

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and then there's a question about what happens if we don't file

People are going to

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MR. HULTMAN: yes.

I have listened to the whole testimony,

where folks are saying they couldn't find out who owned the note or anything like that. Do I understand that if their note

were, in fact, being held by your company, that they should have been able to find that out? MR. HULTMAN:

If -- first of all, just -- just to be

clear, MERS doesn't hold the notes except in the limited sense that if they're foreclosing, our rules require us to have possession of the note to foreclose.

But if the note had been registered on MERS, it would

this loan, and one of the problems, and I'll be frank with you,

investor community have -- they're not servicers and they're not mortgage companies.

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one of the problems is that, you know, I think that because the

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certainly have been easier for a borrower to find out who owned

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They're investors.

delegated the authority to modify loans and make deals with borrowers to their servicer. And there's a lot of confusion

with the borrower community about who is the right person to

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talk to.

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You can call up the bank in New York if they're the But that's twelve guys in an office in Washington or

trustee.

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New York City or Chicago who have delegated that authority to people who know how to deal with mortgages, which are the

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They have

COMMITTEE MEMBER:

And you heard a lot of the stories

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mortgage companies, the servicers who are doing these things. So they can call up -- they can call the investors up, but the

the servicer because that's the party that they've empowered to make those -COMMITTEE MEMBER: MR. HULTMAN:

Who are the servicers?

They're mostly national banks.

the five biggest servicers hold probably 80 percent of the servicing in the country today. COMMITTEE MEMBER:

contact MERS, you're the one who tells them who the servicer is to do their loan modification for a --

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MR. HULTMAN:

Exactly.

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MR. HULTMAN:

Yes.

modification or short sale does not happen, you are the entity that acts as the agent for the deed of trust beneficiary to foreclose on the deed of trust? MR. HULTMAN: If the investor chooses to do that. I think

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Most people today do not foreclose in (inaudible).

they have decided because of a lot of the adverse publicity and a lot of the noise in the press and just in general and the uncertainty in their minds in the courts, they have chosen to not do that, in which case an assignment of the beneficial

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So your role is, is if they

-- short sale --

-- and in the event that loan

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investors are just going to tell them they need to go back to

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I mean,

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interest would be made and recorded in the land record. So if, for example, if we're serving the land records

they want to foreclose, typically today they will actually assign the beneficial interest probably to Chase, and that assignment must be recorded, and our rules require that it get recorded before the assignment -- before the foreclosure process is started.

Because, you know, a lot of times, there

have been people who have not done that and done it after the fact and they've been kicked out of court and rightly so. So our rules actually require that if they're going to foreclose in the servicer's name, they need to do the

MERS name.

witness?

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COMMITTEE MEMBER: COMMITTEE MEMBER: COMMITTEE MEMBER:

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assignment of the beneficial interest out of our -- out of the

appreciated the fact that there is a problem here; is that

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right?

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MR. HULTMAN:

I get -- like I said, I get dozens of

calls every -COMMITTEE MEMBER: My question then is this: What

could you tell this panel, I mean, this committee, that would

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Any other questions for this

Just one follow-up, if I may? Go right ahead. Sir, you -- it sounds like you've

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for Fannie Mae as the investor and Chase is the servicer and

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help us understand -- help these people that have talked about these stories that they've given us this afternoon?

MR. HULTMAN:

I'm not -- I think anything that you

can do to help enhance the modification process is probably where the focus ought to be, because that's really what borrowers are looking for.

They're calling me up and saying --

you know, I think you heard that theme throughout the borrowers.

So it's really focusing on the modification process, which means that you have to engage the investor community because ultimately they're the ones who -- and servicers really

Only when they own the loan do they have the ability to make

those provisions are already in -- baked into the servicing agreements that they have with the investors. So it's really the focus should be on the investor

community, and know that in the federal level that's where a lot of the activity is, trying to figure out programs that will

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enhance the ability for people to get modifications, and more importantly, be able to successfully modify. I mean, one of the problems we see today is loans get

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modified and they're still not able -- still unable to make payments. So I think focusing on the underlying economics and

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those modifications, because most of the modifications are --

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are limited and the banks are limited when their net capacity.

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you suggest we could do by way of legislation that would help?

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not the structural procedural things is really where the focus of the legislature ought to be. COMMITTEE MEMBER: COMMITTEE MEMBER: Mr. Chairman?

I do want to add one thing before

we move on to more questions, and that is, I think you're correct. May 2009 is when the legislation went into place that

said that you have to provide notice to the homeowner about any (inaudible). MR. HULTMAN:

Thank you.

COMMITTEE MEMBER: COMMITTEE MEMBER: COMMITTEE MEMBER:

these other folks today, it seemed there were two things.

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Delegate Cleveland -- really, when we heard the testimony from One

claim is not possible given the lack of information that flows through the system.

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they can't get to them. don't know.

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is connecting the investor and the homeowner, which they would

They don't know who these people are, so So they can't modify, because they

And by the time they get to them, it's too late.

And that gets to the second point of the bill that

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they're trying to argue for, and that is extended time, to give some more time for them to find the investors. So I guess my question builds on his, and that is,

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what do you do if -- I'm hearing you say, yeah, we've got to work with the investor community, and I'm hearing proponents of

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You were right on that. (Inaudible). I want to build on a question that

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the bill saying, we can't find them and we don't have enough time to get to them so we can work something out. the answer? MR. HULTMAN: So what's

Well, I think -- first of all, I think I think

it's not correct to say that they can't find them.

sometimes what happens is, is that the investors will tell them you need to deal with the servicer. And -- because I get this They'll call me up and I'll tell

conversation with borrowers every week.

say, can you tell me who the investor of my note is.

them and I'll say, but, you know, they're going to just refer you back to the servicer. And the servicer is the one who

really has -- the infrastructure that is prepared to deal with

I mean, trustees are a small group of people who are

doing is transmitting the payments from the people who made -who take out these loans to the people who invested in them, who could be doctors in Singapore, for all we know. They've delegated that to the mortgage companies

because the mortgage companies admittedly are stressed with the

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amount of work that they have to do given the extent of the prices here. But they're the ones that have the They're the ones who actually have the loan

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infrastructure. files.

possession.

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Investors typically do not have the loan files in their Those loan files are with the servicers who are

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really required to -- and investors, are really -- all they're

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these things.

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collecting the payments every day. So they're really the only party who is into the land

what the loan is and how -- and what's the payments that the borrower could make given their current circumstances. know how to judge credit. things. They

They know how to do all those

The investors are not prepared to do that.

they delegated all of this to the servicer community to do all of that work.

So, and, again, you know, I don't have -- I'm not really -- I don't really have an opinion on whether 45 days or 12 days or 15 days, but there's -- that's not the only part

process.

I think somebody testified who said that it takes at

it's probably longer right now.

mortgagee or we're the beneficiary, we get service of process on foreclosures when we're being foreclosed on. So in other

words, MERS can also be in a subordinate or junior position or

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senior position, and if a loan is being foreclosed, we'll get that service of process. COMMITTEE MEMBER: (Inaudible) second deed of trust

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-MR. HULTMAN: Exactly.

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I think -- we've seen -- and because we're the

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least a year, and I think that's probably right.

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where they have a chance to do things.

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record -- or, excuse me, in position to actually understand

This is an elongated

That -- and

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COMMITTEE MEMBER: (inaudible) -MR. HULTMAN: (inaudible)

(Inaudible) first deed of trust

So we see every day how much mail is coming

through, and I think the system is strained.

we're at capacity how many things we can do, and I think that's causing a lot of problems that you heard today. COMMITTEE MEMBER: witness? COMMITTEE MEMBER: to speak against it? MR. HULTMAN:

Any other questions for this

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All right.

Thank you.

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COMMITTEE MEMBER:

Thank you.

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And we'll get that notice and we

I mean, I think

Does anybody else want

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