MERS Exposed II: General Counsel Tells Whoppers in Testimony Before Virginia House

It has become so common for members of the securitization industry to play fast and loose with the truth that nothing should surprise me any more. Nevertheless, I am taken aback by a rough transcript of the remarks by William Hultman, the general counsel of MERS (formally “senior vice president and corporate division manager“), before members of the Virginia House of Representatives last week. The overwhelming majority of statements he made about matters that can be verified are either untrue or at best disingenuous.

Here is the transcript.

Transcript of VA House Presentation HB 1506 by MERS General Counsel William Hultman

We’ll parse the troubling bits more or less in order, starting here:

We’re the beneficiary, but we’re an agent of the lender. 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.

Law professor Chris Peterson in his legal analysis of MERS said “it is axiomatic that a company cannot be both an agent and a principal with respect to the same right”. Being a beneficiary is tantamount to being a principal. The necessity under the law of playing one role or the other renders Hultman’s statement, which reflects ongoing MERS’s contention that it really can have its cake and eat it too, incorrect.

Corroboration of Peterson’s view comes via court rulings in multiple states, including some state supreme court rulings, that have effectively found that MERS can only play one role. For instance, the Supreme Court of Arkansas in Mortgage Electronic Systems, Inc. vs. Southwest Homes of Arkansas and the Supreme Court of Kansas in Landmark National Bank v. Kessler found that MERS was only an agent. Similarly, per Mitchell, a Nevada bankruptcy court case that has been cited in other cases in that state as a precedent:

MERS does not have standing merely because it is the alleged beneficiary under the deed of trust. It is not a beneficiary and, in any event, the mere fact that an entity is a named beneficiary of a deed of trust is insufficient to enforce the obligation.

Note that the idea that MERS really can legitimately play multiple roles comes up repeatedly in Hultman’s discussion.

Here is the next questionable claim by Hultman:

….prior to MERS all these assignments were not getting recorded or they were being done improperly, they would get rejected, and there would be breaks in the chain of title.

It is ironic that MERS officers continue to brandish the canard that the US was rife with bad mortgage records prior to the widespread use of the data service. Prior to MERS, the mortgage securitization industry was not very happy with how long recording took, but there is no evidence that it caused a breaks in title. It simply took time and created hassles.

If a recording was rejected, before and after MERS, it could be cured by the filing party. In a securitization, that would be the servicer’s job. A break would not occur unless someone else came in and recorded an intervening assignment. But if there was a backlog, the odds of this would be pretty remote.

And there is a good reason why, contrary to Hultman’s claim, there is no evidence of pre-MERS widespread problems with the integrity of local records. Real property transactions are usually significant to the parties involved, and mortgage recording is required for the lender to have a priority claim. The “first” mortgage is “first” because it was RECORDED first. If someone puts another lien on a house and rushes to the courhouse and files it before the earlier lien is recorded, it becomes the senior lien. That gives lenders a very big incentive to make sure their lien is recorded promptly and accurately.

But Hultman later makes further false claims about the accuracy of the local recording system:

If history shows anything, adding additional requirements to record documents with a county or clerk will result in more problems, not less problems. It adds costs. People will forget to do it, because people are human, and then there’s a question about what happens if we don’t file it, what impact does it have on the process other than just trying to foreclose.

The implication is that MERS is superior to the local courthouse system. The evidence is the reverse. Chris Peterson has described the utterly unorthodox corporate governance system of MERS, where employees of other firms put on a MERS hat for a short period as a “MERS certifying officer” and execute documents. MERS does not supervise these individuals. Indeed, it specifically disavows any responsibility for the accuracy of MERS’s records:

MERS makes no representations or warranties regarding the accuracy or reliability of the information provided. MERS disclaims responsibility or liability for errors, omissions, and the accuracy of any information provided. MERS does not input any of the information found on the MERS® System, but rather the MERS Members have that responsibility regarding mortgage loans in which they hold an interest.

So if MERS makes no assurances as to accuracy, and only the MERS members are in a position to know the accuracy of their inputs, how can Hultman make any claim as to the performance of its system compared to traditional mortgage recording? In depositions, MERS CEO R.K. Arnold and Hultman have consistently given evasive responses in depositions to questions about audit trails and quality control processes.

And there are widespread indications of member non-compliance with MERS processes, such as making assignments without having proper corporate authorization (including out of bankrupt entities). Moreover, the updating of records by MERS members is strictly voluntary.

This part from Hultman takes a bit more unpacking but is also demonstrably inaccurate:

MERS (inaudible) the title to the mortgage lien in MERS so that from the beginning to the end, the loan, period, is never going to be a break of title because the assignments were recorded.

First, there are already breaks in title. MERS effectively separates the note (the borrower IOU) from the lien (confusingly called a mortgage or in some states, a deed of trust, but the property rights of a deed of trust are stronger than those of a mortgage). In so-called lien theory states, the mortgage and the note must travel together; the lien by itself is a “mere accessory”. No one has directly challenged the implicit MERS view in court, that it’s fine to separate the note and lien by having the note travel through multiple parties in a securitization chain while the lien sits at MERS, and then be reunited if needed for the purpose of foreclosure, but this is an area where the MERS process is at risk. Consider this discussion by securitization industry expert and law professor Linda Beale:

MERS claims that it serves to provide a consistent database that reduces errors caused by frequent assignments and reassignments of mortgage loans. See MERS fact sheet (pdf available at home page). But it seems to do the opposite–eliminate the actual assignment even though securitization has moved the mortgage loan from originator to bank sponsor to servicer or whatever, and avoid the ability of anyone to know who actually owns the mortgage loan from looking at county property records….Further, the idea of letting anyone represent themselves as an employee of MERS when they actually are an employee of a party that might have a reason for committing fraud by inappropriately claiming to own a mortgage seems at least a questionable practice and one that should not be tolerated when it compromises the integrity of the mortgage system. If I were a judge dealing with one of these foreclosure cases, I would have serious qualms about accepting such a document as “proof” that a particular bank had a right to foreclose.

Moreover, title insurers are on a widespread basis refusing to provide insurance on policies written on homes acquired out of foreclosure unless the bank owning the property eats the liability. Why is that? The title insurer sends someone to the local courthouse, sees a lien recorded in the name of the originator, say Countrywide, and then discharged by a trust or a trustee, say Wells Fargo. Folks that is a break in the chain of title. That is the direct result of MERS. And this is not simply our view. Consider this statement by AFX Title:

As the number of real estate foreclosures skyrockets, the odds are higher that a home you live in today, or at some point in the future may have had a foreclosure in its history. Even if the foreclosure has long since passed, a loophole in the way mortgages are recorded can create a serious title defect for future owners. Title analysis performed this month by AFX Title has detected this error to be common in random samples of properties it reviewed. “This could affect the property ownership of millions of homes nationwide” said David Pelligrinelli, of AFX Title. “The mortgage recording method which created this title flaw did not exist until recently. As title abstractors are just seeing this problem emerge now but a wave of title claims is coming over the next year or so.”….

The problem is created through a break in the chain of mortgage ownership….The company who originally appeared to make the loan was normally a retail lending company such as Countrywide or Lending Tree, who typically acted as a sales company, and sometimes remained contracted to service the loan.

In the event that the loan goes into foreclosure at a later date, the then-current owner of the loan files the foreclosure and sells the property to a new owner, often at auction. The land records would show a deed of transfer from the investment bank to the new owner. This creates a break in the chain of ownership of the mortgage rights. In many cases, the transfer of ownership of the mortgage loan has gone from the original lender, through several owners, and then to the foreclosing bank, none of which is recorded on the property title history. Technically, the foreclosing bank has no recorded title rights to foreclose in the first place

There are reports that some title insurers are indicating that they will not insure for this title defect.

The next troubling bit from the MERS general counsel:

You go to our website, and maybe our website is not the most user-friendly website, but we’re a very transparent company.

This is misleading at best. The idea that you can find out who owns the note via MERS is simply not true.

As a borrower, you can go to MERS’s website, enter your property address, from that obtain the so-called MIN (MERS identification number) and then find out who MERS has listed as the holder. But guess what? In the vast majority of cases, it’s wrong.

MERS will list the investor (which ought to be a trust for a securitized first mortgage) as, say, “Countrywide” which is anything but Countrywide and should instead be the name of a specific trust, likeCWALT-2005-6J. As a result, MERS information does not match that of the parties in the foreclosure

MERS never admits to this major deficiency, as you can piece together from their discussion. Their position boils down to that the borrower can find out who is servicer is from MERS if he needs to, and by implication can find out who holds the note by making a so-called qualified written request under RESPA.

This is also not as hunky dory as MERS would like you to believe. First, many borrowers lack the sophistication to know their rights under RESPA. Second, the responses under RESPA are often inaccurate. The borrower is supposed to be able to find out who owns his note, which for a securitization would be a specific trust, but instead he is often given the name of the trustee, so he still does not know who owns his note. By contrast, with a mortgage recorded in a county office, anyone can go to the office and see who the current holder is. MERS claims that it updates for transfers of servicing, but that isn’t the issue. The issue is who will be foreclosing, and that’s the trust, not the servicer.

The net result is that a system that was open and easy to access by the public has now become difficult and time-consuming for non-insiders to navigate and does not always provide reliable answers.

The next dubious bit from the transcript:

The fact that the instrument and the borrower agrees in the deed of trust that if the investor or servicer so desires, MERS may actually conduct the foreclosure process in the states. And there is no state that has said that we’re doing anything in contravention to state law in any of the 50 states so far.

As indicated earlier, there are state Supreme Court decisions ruling against MERS’s contention that it can be the real party of interest and is instead a mere agent. That means in those states it CANNOT conduct a foreclosure in the name of MERS. Similarly, there are Federal bankruptcy court decisions in multiple states against MERS acting as the plaintiff in foreclosure cases (as in filing for relief from stay) which are significant precedents in those states., such as Sheridan v. MERS in Idaho. The widely-cited Supreme Court ruling in Kansas, Kessler, found the relationship of MERS to that of mortgage purchasers to be “akin to that of a straw man”.

In additiion, see this 2006 (!) Federal bankruptcy court case in New York, Lamy:

However, this court and others have repeatedly said that a nominee of the of owner of the note and mortgage, such Mortgage Electronic Registry System (MERS), may not prosecute a mortgage foreclosure action in its own name as nominee because it lacks ownership of the note and mortgage at the time of prosecution of the action.

Another proof comes in this section of MERS v. Chong, a Federal bankruptcy court case in Nevada. This court consolidated 27 similar cases in this ruling. Consider:

In the majority of the cases, including the present case [Chong], Appellant [MERS] attempted to withdraw the Motion but was procedurally unable to do so because the Trustee would not consent. Particularly in this case, MERS was unable to show that a MERS Certifying Officer was in physical possession of the Note at the time the Motion was filed.

Since MERS has per admission made foreclosures in their own name (and there are tons of court cases to confirm that) and some states have said they are a mere agent, they can’t legally “conduct” a foreclosure, as in make filings in their own name. Yet Hulzman makes this assertion:

And you’ve heard about cases where they say MERS got kicked out of court. 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 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.

An attorney familiar with some of the decisions against MERS commented:

Pure BULLSHIT on the highest degree – we get kicked out of court is a misrepresentation, it really is because who ever was prosecuting the case got the paperwork wrong, and we get dismissed with prejudice so we just come back and refile?

“They get kicked out of court pursuant to Federal Rules 17 and 19 of Civil Procedure, which in short says, fine to be an agent, but you must bring the action in the name of the REAL PARTY IN INTEREST, not MERS. And you must JOIN the real party in interest, which is not MERS. In short, you fucked up the pleadings (I guess you could call that the paperwork) and didn’t name the real party in interest. So then they have to go back and plead the case in the name of the real party in interest, and say we are “XYZ trust”‘s agent. Of course, you know what problems that brings – they can’t, so the case never gets filed again, because XYZ trust never perfected with regards to the PSA.

This last inaccuracy is comparatively minor but telling:

Those loan files are with the servicers who are collecting the payments every day. So they’re really the only party who is into the land record — or, excuse me, in position to actually understand what the loan is and how — and what’s the payments that the borrower could make given their current circumstances. They know how to judge credit.

Anyone who understands banking knows servicers know bupkis re credit. And the loan files on private label deals are generally incomplete and/or thin as to be useless to someone who did understand credit.

So here we have the MERS’s general counsel offering testimony to elected officials that is a tissue of readily verifiable falsehoods and distortions. Why should we continue to allow a company so lacking in integrity and per our related post today, basic operational competence, continue to act as an important keeper of records of the single most important asset to the vast majority of American households?

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  1. attempter

    If history shows anything, adding additional requirements to record documents with a county or clerk will result in more problems, not less problems. It adds costs. People will forget to do it, because people are human, and then there’s a question about what happens if we don’t file it, what impact does it have on the process other than just trying to foreclose.

    I figured we’d be seeing the old “patchwork of state/local regulation” lie.

    The screen shots in part one tell the opposite story. Classic recording law is simple and elegant for all human purposes. MERS fabricates pointless complexification to the point of insanity for no reason at all other than to cover up crimes.

    (BTW click-to-enlarge doesn’t work with them, although I was able to make out the first one.)

    The whole testimony takes it as given that mortgage securitization should exist at all. But since it’s a practice which has been proven to be nothing but worthless and destructive, it should not exist, period. So if we just did away with it, that would solve all of Hultman’s alleged problems, wouldn’t it? After all, he’s just a kind of innocent scribe, right? That’s what he says. All his arguments depend upon the gratuitous existence of a practice which has proven that it should not exist. So the solution is simple, and it doesn’t head in the direction of further entrenching MERS. (Or any government version of MERS, which seems to be the latest big government fad among corporate liberals.)

  2. Bob

    I would love to hear a more detailed explanation from the attorney familiar with decisions againts MERS – specifically, what he/she meant by “XYZ trust never perfected with regards to the PSA”. Thanks.

  3. jake chase


    Are you suggesting that holders of RMBS have no legal rights in the mortgaged properties; that homeowners with mortgages which have been securitized should simply stop paying because no one has legal power to foreclose, or are you hiding a solution somewhere up your sleeve?

  4. danw

    We are a nation in which dishonest monetary policies make trillions of dollars readily available to the richest among us, while these very same monetary policies precipitate huge increases in commodities prices and thus skyrocketing food costs for hundreds of millions of poor people worldwide; a nation whose government presses its citizens to go further and further into debt, because economic growth, even if it is based upon gluttonous consumption and legalized accounting fraud, must remain our creed; a nation in which an individual who has quit looking for a job is not counted (by the Bureau of Labor Statistics) as being one of the country’s millions of unemployed citizens. Mohandas Gandhi once said, “…there is no god higher than truth…”. In America, there is no god higher than wealth. And in pursuit of the almighty, the truth be damned.

  5. Gentlemutt

    Two questions:

    1) Did the MERS general counsel commit perjury?

    2) If so, why is not some politically ambitious prosecutor wiping the floor with this guy?

    IF he did commit perjury and gets away with it then that would suggest the political marketplace is more broken than the mortgage marketplace.

    1. sgt_doom

      Yes, and politically ambitious prosecutors are in the pockets of big biz.

      The vast majority of affadavits submitted by the banksters fall into the felony committed category, which was EXACTLY why the US Senate, back in December, had a UNANIMOUS voice vote to grant an exemption to the banksters for their continuing fraud — the one time Obama actually vetoed something on “ethical grounds” — amazing!

      And finally Obama did something the moral and ethical Americans could agree with — but then he did receive the greatest outpouring of vitriolic citizen response that day — should he NOT veto it!

      An instead West Wing source confided to me that Obama received over 1 million death threats that day, should he pass the vile senate’s proposal.

      And I believe that source.

      1. sgt_doom

        That should be “inside” not “instead” something wrong with the packets there…..must be Narused?

      2. sid_finster

        I disbelieve.

        1. Why were not 100 US Senators receiving millions of death threats for voting for this thing?

        2. The White House switchboards, email servers, etc. would not hold up to a traffic spike of that magnitude.

        1. attempter

          I don’t know about the original story or #2.

          But as for #1, the reason is that the senators didn’t vote for it. They let it pass by unvoted acclamation or something, because they wanted it but were too cowardly to vote for it. That’s why nobody heard of it until after they did it.

          1. sgt_doom

            Thanks for replying for me, I was otherwise occupied.

            A voice vote was taken, and when they are “unanimous” no record is taken of what senator voted in favor of it.

    2. readerOfTeaLeaves

      Now consider the implications of Citizens United. That corrupt financial system is able to throw endless amounts of unlimited money into electing governors, AGs, judges, legislators, county execs, Congressional races.

      We are in deep, deep trouble.
      Then think who some of the ‘trusts’ might be: some are probably US based, others are not. But any and all of them can toss money into the electoral process — unlimited, unaccounted for — in order to further pervert the rule of law.

  6. Marc

    “XYZ trust never perfected with regards to the PSA”

    What this is saying is that the Bankruptcy-Remote Tax-Exempt Special Purpose Investment Vehicle, the ‘XYZ trust’, is not holding the Note and/or Title to the property. Mortgage Backed Securities are ownership shares of ‘XYZ trust’, a special form of shell corporation that passes out the home owners mortgage payments to holders of these shares without having to pay a corporate income tax.

    There are special rules which must be followed when erecting one of these ‘shell corporations’, and this is what I believe “…never perfected with regards to the PSA” is referencing. One of these rules is that ‘XYZ Trust’ is in fact holding the Notes and Titles to the properties in the securitization pool. Purchases of Mortgage Backed Securities come with Representations and Warranties that guarantee ‘XYZ Trust’ is actually holding the Notes and Deeds to the properties in the pool. The truly remarkable part, that if these shell corporations were never erected properly, any purchaser of the corresponding Mortgage Backed Securities can demand that the investment bank that incorrectly created the shell corporation, ‘XYZ Trust’, buy back these securities at par!

    IANAL, and some statements may not be completely accurate.

  7. f247

    Good post. Thanks for including the AFX Title stuff. Answered some questions I asked in another post. Wonder who is writing a lot of default/REO title coverage?

  8. Jim the Skeptic

    Yves Post: “First, there are already breaks in title. MERS effectively separates the note (the borrower IOU) from the lien (confusingly called a mortgage or in some states, a deed of trust, but the property rights of a deed of trust are stronger than those of a mortgage). “

    This really has become a word game hasn’t it. The evidence of my borrowing and obligation to repay is the NOTE. The lender files a LIEN on my home to provide public notice that they have a SECURITY INTEREST in the property which I can not abrogate. I believe that any potential buyer is getting public notice that the lender can pursue it’s claim against any future owner of the property. (In addition to, the original borrower.) This is referred to as perfecting the lien according to the Wikipedia article on liens.

    In title states the LIEN is a deed of trust, in the other states it is a mortgage. As you point out they are both LIENs. I live in a lien state and so I held the actual deed to the property and a mortgage was filed at the court house. I probably could have sold the property if I could find someone silly enough not to do a title search and discover the mortgage.

    MERS is claiming that it has the SECURITY INTEREST in the home without ownership of the NOTE.

    If that were possible, then the original NOTE Holder would be left with an unsecured loan. Does anyone believe that the NOTE Holder legally transferred the SECURITY INTEREST to MERS? I don’t think so! Where does MERS store these assignments of the SECURITY INTEREST? If MERS went bankrupt, could their creditors seize those valuable SECURITY INTERESTS? Their claim is just nonsense as more than a few courts have already decided.

    Warning: I am not an attorney, just trying to apply a little logic to the problem!

  9. indio007

    This is how the testimony should have went….

    Mr. Hultman : We are an agent for the lender.

    Committee Member: So the lender appointed you their agent?

    Mr. Hultman : Not exactly.

    Committee Member: Well who made you their agent?

    Mr. Hultman: Well the appointment is in the Deed of trust.

    Committee Member: Wouldn’t that mean the borrower appointed you considering it is the Mortgagor that created the trust?

    Mr. Hultman: Uhmm ermm…

    Committee Member: Under what legal theory does the Mortgagor/ borrower have the authority to appoint the agent of the lender?

    Mr. Hultman: ???? I’m not sure….

    Committee Member: Me neither. Ok How about another line of questioning? How does MERS determine Who has the actual benefit of the Deed of Trust? In other words How does MERS determine who has the pecuniary interest in the Promissory Note?

    Mr. Hultman: We consider the representations of MERS members that they own the note.

    Committee Member: Are those in writing?

    Mr. Hultman: I plead the 5th…

    1. mannfm11

      These bastards know how the business is supposed to be done because it has been done this way for 100 year in most states. The idea that mortgage lawyers could actually be this stupid smells of something else besides stupidity. Did these guys think they would be retired before this stuff blew up and miles away from the rotting garbage?

      The first time I looked at one of these deeds of trust, where robo signers were signing for everything under the sun, I noticed there were FHA and FNMA promulgated forms used for this. You would have to assume they were legit. Then I looked at the paper work. When a mortgage is done, the attorney that draws the papers generally puts themselves down as the Trustee. They know that there is usually a substitute trustee if needed. The document to substitute trustees through MERS (never need a trustee save for foreclosure)was to transfer from one trustee to one of three people, who were probably with the law firm running the foreclosure mill. The transferring agent on a few of these I saw for a particular mortgage company was one of the names to be one of the new trustees. That is an abomination of law. A trustee is an independent party for one thing, but the idea that someone could change trustees for a party from one trustee to potentially themselves is totally amazing. It is clear the signing party was clueless as to trust law or they were not too interested in following any rule of law and thus doing what they were told to do.

      Reading just a little bit, it was clear MERS was nothing but a straw man. I know a guy who is not a lawyer, but should be and he talks about how the government uses strawmen all the time. Sometimes you are the straw man in court, a party that actually isn’t you. He also says that the agent has to disclose their principal, something he does in cases arising in traffic law. The point is a beneficiary can’t be an agent of the trust in which they are the beneficiary and the trustee has nothing in their possession showing they party they claim to represent is the true principal involved in the controversy.

  10. indio007

    My post is not theory . There is actually a pending suit against MERS in which other parties claimed the interest in the note upon the representations of other MERS members. When the Actual note holder queried what MERS relied on, MERS stopped all correspondence. So they are suing. I’m trying to dig up the complaint . I will post a link when I find it.

    1. Justicia

      No, they are paid to represent the interests of their clients “zealously, within the bounds of the law.”

      As Yves points out, MERS counsel has made statements that are outside the bounds of the law — and he should be sanctioned.

    1. mannfm11

      You think it is that easy don’t you? For one, Congress has no power over the land in the states. Read the Constitution, where it states that only land ceded to the Federal government by an act of the legislature of the state does the Fed have any power or jurisdiction. Second, the original 13 created the Feds, not the other way around and for that matter, the Feds never had possession or any kind of authority over the land titles of any of those 13 or the state of Texas. Third, to twist trust law totally destroys the structure of law in general and thus there isn’t any law. Then you can count on only 3 things, chaos, revolt and the end of the United States.

  11. sgt_doom

    Thanks for outstanding blog posts on MERS — the continuing scam.

    From the statistics I’ve seen on the subprime meltdown (and a very small subset of the entire securitization/credit derivatives Ponzi-Tontine scams):

    One-third of the subprime market was composed of housing speculators — both wealthy individuals and corporation speculators.

    Of the remaining two-thirds of that market, two-thirds of that two-third (the majority, that is) was comprised of house flippers, both individuals and corporate house flippers.

    Ergo, the majority of the subprime category had little to do with the individual residential market, but everything to do with the speculators.

    Very interesting…..

  12. readerOfTeaLeaves

    One point that has not been made yet on the thread is about the conflicting claims of the general counsel regarding the ‘user friendliness’ of the MERS website.

    The next troubling bit from the MERS general counsel:

    You go to our website, and maybe our website is not the most user-friendly website, but we’re a very transparent company.

    This is misleading at best.

    The idea that you can find out who owns the note via MERS is simply not true.

    He’s probably going to weasel out of his statement by pointing out that he said ‘maybe’ with respect to the MERS website user-friendliness.
    I’m sure that he’s counting on ‘maybe’ to cover his legal ass, but I’m not so sure.
    There are metrics and experts on the topic of ‘user friendliness’ (i.e. ‘usability’). Indeed, it’s a significant subfield of software design.
    Which means that if he’s defending a database system accessed via the web, he should at least be familiar with the term ‘usability’, and he certainly shouldn’t be using his ‘maybe’ to deflect from a conversation about why he is now claiming that a system designed to be **easy** for novices to access and use might be ‘non-user friendly’.

    He does not get to have it both ways.
    Given the people accessing this MERS database are doing so on fairly thin credentials, the system had to be designed to be ‘usable’, which means his statement doesn’t hold water.

    In the previous post, Richard Smith pointed to IT flaws with MERS security — in allowing just about anyone to access the database using very thin access criteria. If the MERS website is ‘not user friendly’, it would not have been possible to don a ‘MERS management’ identify (for all of 5 minutes), enter the system the way that Richard Smith has described, and alter data.

    In other words, for that general counsel to make a statement about the usability of the MERS website points to a pretty big chink in the MERS legal armor.

    The GC fails to define what he means by “transparent” or “user friendly”. He’s flailing; there’s no way he can defend the MERS on either criteria.

    (This statement is around 10:45 in the Odiego audio version of this post, and worth listening to fairly carefully for anyone interested. I’ll bet some of the commenters who were so eloquent on your “Outsourcing to India” thread of some months back could make a complete mockery of this part of the MERS GC’s testimony.)

  13. Justin G.

    I have to say, the education I get on this site is bananas! As a new homeowner (<1 year), I wish I had found your site earlier. It is now a daily must-read, please continue "dropping knowledge."

  14. Jane

    Did Hultman basically say that to fix the system you need to get the Investor involved even though the Investor doesn’t have the means to make loan modifications so he will send the borrower back to the servicer who doesn’t have the authority to make loan modifications? His statements were so convoluted they are almost impossible to follow.

    1. Yves Smith Post author

      That is what he seemed to be saying, agreed, I didn’t go after that. Both he and Arnold in depositions have made remarks that reveal considerable ignorance about how securitization works.

  15. Ginger

    It is troubling to me that MERS uses one of the foreclosure law firm’s attorneys or employees (changing hats for a moment to act as a “certifying officer”) to execute an assignment of mortgage to the servicer. In many cases, MERS is also listed as a defendant. Is it acceptable to the court for attorneys from the same firm to represent both the plaintiff and the defendant in the SAME lawsuit? In these cases, the plaintiff can’t sue unless Defendant MERS first makes it possible. Is this not an egregious conflict of interest for the foreclosure firm to do this?

    One other issue nags me all the time: MERS claims, and Hultman confirmed in this testimony, it is a nominee or agent for the originating lender. However, only the borrower signs the mortgage. A borrower has no authority to create agency between two other, non-signing, parties.

    And even if the originating lender had given MERS written and recorded limited power of attorney, what happens to that authority when the originating lender no longer exists? In other words, that lender is effectively DEAD. In other matters of power of attorney, if the principal dies, then any existing power of attorney is of no effect from the moment of death. In these cases of defunct originating lenders, it is incontrovertible, MERS has no authority to act as an agent and assign the mortgage.

    Why are the courts not throwing out all cases involving MERS!

  16. India


    Your observation is directly on point and should be addressed in depth by defending attorneys as well as some who opine on this debacle.

    In many cases (use Greenpoint as an example) the originating lender is defunct as are the settlement or title companies that effected the “table funded” loans. The Deed of Trust or “lien” has the Trustee named who is or was an employee of Greenpoint and no one other than the borrower(s) has signed the D.O.T.

    Also, in this same situation, the files referring to settlement/title issues are not to be found. Lenders First Choice who provided the “closings by phone” for table-funded loans went bankrupt more than a year ago. No one is certain where or if the records of these mortgage settlements are. This fubar in concert with an incorrectly prepared D.O.T. should essentially void the obligation. Add to this, the fact that MERS is named “nominee” on this same D.O.T. thus we have a non-existent lender, a bankrupt and inaccessible title company and an incomprehensible “system” of recordation updated by temporary “officers” of a corporation that is “bankruptcy remote”. Essentially, there’s only one remaining “party” now identifiable, the borrower; and they’re the only ones being held responsible.

  17. OregonChris

    “MERS does not input any of the information found on the MERS® System, but rather the MERS Members have that responsibility regarding mortgage loans in which they hold an interest.”
    I guess that means MERS is like Wikipedia for real estate transactions. Do teachers recognize Wikipedia as a valid source these days…?

      1. Nathanael

        Wikipedia has a reliable record of changes in its system, complete with tracking who made them. :-P Not MERS.

  18. John

    I sit here and wonder….
    My landlords applied for a mortgage mod on my rental property and were turned down because it is a rental property. They did a Deed-in-Lieu in July, 2010. An assignment was recorded by an agent of MERS on behalf of BNY Mellon as trustee for BofA. I haven’t heard anything from BofA. The county assessors still has the property in the name of the landlord, who is responsible for the taxes, however the servicer is paying the taxes, unbeknownst to the landlord. BofA doesn’t want to take ownership of the property since they are collecting phantom income on the mortgage note. I see myself living here for free for about two years. Who loses? The investors. However, it is creating a savings windfall for myself. Perhaps this is the reason the economy is still sputtering along — discretionary income from folks not making their mortgage payments. lolol.

  19. Lindsay Hollendonner

    You actually make it seem so easy with your presentation but I find this matter to be really something which I think I would never understand. It seems too complex and very broad for me. I’m looking forward for your next post, I’ll try to get the hang of it!

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