This is a guest post by Amy Weiss. Amy is originally from Richmond, Virginia and is a second year law student at the University of Richmond. She graduated from the College of William and Mary in 2007 where she studied history and anthropology.
The large number of improper foreclosures in recent years has brought to light some big problems with procedures and records. Knowing who owns your mortgage, who you owe money to, and who has the power to foreclose on your property is absolutely essential to preserve property rights in our modern free market economy. Here in Virginia, many homeowners’ notes do not list the real party in interest of the loan, but the umbrella company called “Mortgage Electronic Registration System” (MERS).
Responding to constituent concerns, Delegate Bob Marshall (R-Manassas) sponsored HB 1506, the Home Ownership and Title Protection Act which would have required all assignments to new mortgage holders to be filed with the court. This bill would also penalize those lenders or services who use of fraudulent documents to foreclose on homeowners. Unfortunately, the bill died in the Virginia General Assembly on Monday January 24, 2011 in the Civil Subcommittee of the House Courts of Justice Committee. The only person to vote against killing it, was Del. Jennifer McClellan (D-Richmond). The committee testimony of MERS general counsel William Hultman before members of the Virginia General Assembly raised some troubling questions.
Yves Smith analyzed Hultman’s testimony. Smith found most of Hultman’s statements were completely false or misleading. Hultman described MERS as simultaneously the agent of the direct lender and the beneficiary of the note. This is legally impossible. It makes no sense for MERS claim it represents the direct lender while directly receiving the benefits of being a mortgage lender itself.
Smith also criticized Hultman for arguing MERS is a better, more accurate alternative to the local court system. MERS was originally formed as a way for mortgage lenders to get around the requirement to record mortgages with the local court. There is no evidence to support Hultman’s claim that before MERS courts only had bad mortgage records with breaks in title. In addition, the MERS records are not consistently updated and often inaccurate, leading to an increase of breaks in title. MERS refuses to take responsibility for errors in the records of its members. Hultman’s implication MERS is better than the county court recording system is simply wrong.
Hultman also told Virginia delegates the MERS website was “transparent” and made records available to property owners. Mortgage borrowers can supposedly search the MERS database and find the name of their specific note holder. Unfortunately, the website only provides the name of the general investor instead of the specific trusts borrowers would need to know in the event of a foreclosure. In order to get this information, the borrower would need to be familiar enough with the law to know how to request the information from MERS directly. This is much more complicated than the county court recording system, where anyone could easily look through the court’s records to see who the note holder is.
The MERS procedure requires borrowers to go through a lot of hoops to simply find out who they owe money. It is a shame the General Assembly did not recognize the importance of making this information more easily available to borrowers, especially in the event of a foreclosure. Mr. Hultman’s false claims about the reliability and superiority of the MERS records deserve more attention and scrutiny.