Hawk, as you may know, MERS (Mortgage Electronic Registration System, Inc.) is a Delaware corporation, incorporated in 2003, with its principal place of business in Reston, Virginia.
It was created to allow mortgage loans, which are just promissory notes, and therefore negotiable instruments, to be sold or assigned without recording the transaction.
I should point out that the notes themselves are different from the documents which are recorded in land records. A mortgage is a secured transaction, and the security instrument does get recorded, or the transaction is not secured. In Virginia we call them "deeds of trust" but they are called mortgages in most states. Not at the office today so can't tell you the exact language that is used, but the mortgage recites that Jane and John Doe give a security interest in their property to MERS, as nominee, for Bank of America or whoever. MERS doesn't own the note, the note is owned by Bank of America, but MERS acts as Bank of America's agent. When Bank of America sells the note, the transaction is recorded by MERS in house, in Reston. Very attractive building, by the way, but that's true of Reston, in general.
When you borrow money to buy a house, or refinance, at the closing many documents are signed before a notary public, but the only one that is recorded in land records is the mortgage. Recording a mortgage is very expensive. Fairfax County charges $7 per thousand dollars, so for a $300,000 mortgage that's $2100.
When the note is assigned, Fairfax only charges $21 to record that, so I don't think that's too onerous, but at any rate, Virginia law does not require the assignment to be recorded, so MERS is not acting illegally in Virginia. I am not qualified to give an opinion about the laws of any other state.
I do think it would be useful if recordation of assignment of notes was required, but am not aware of any discussion in the General Assembly to do that. So, to answer your question, MERS is operating legally in Virginia.
Also, in Virginia, MERS does not initiate foreclosures. That is done by the Trustee on the Deed of Trust, although most of the time the note holder appoints a Substitute Trustee who works for a law firm that specializes in foreclosures. Virginia does not require a judge to approve foreclosure. In Virginia, a foreclosure is done by public auction, historically on the courthouse step, after notices of the auction sale are sent to the property owner and also advertised in a local newspaper. In Fairfax, that could be the Washington Post, the Washington Times, the Washington Examiner, or one of the little local papers like the Fairfax County Times.
The problems in other states involve robo-signed documents which are filed in county courthouses for judicial foreclosures by lawyers, who are submitted them as evidence in legal proceedings. My understanding is that the note holders sometimes get sloppy with the assignments, for example, the person executing the assignment signed on a different date than the notary, which means that the notary did not actually see the person signing the assignment, which is a no-no. It's sloppy, too.
As a practical matter, all that means is that the assignment is invalid, and the original note holder still holds the note, and can still execute a valid assignment. So it's sort of like musical chairs, in reverse. The banks have to figure out who holds the note, and make a valid assignment. That doesn't do much for the property owner except buy some time. They still owe the money, to someone, and they still haven't paid it.
I don't think the problem is MERS, per se. I think the problem is that the system got hit with an avalanche of defaults and got overwhelmed. Many lenders folded and sold the notes, and mistakes were made along the way. Lots of human error, clerical errors. But people who bought houses they could not afford tend not to be rational people, I am sorry to say. They are looking for scapegoats. |
