The Mortgage Electronic Registry System (MERS)

Posted on November 14, 2011 by markinaustin

This investigative report points to a secondary crisis.

Here’s how MERS works: A lender that holds a mortgage can sell that loan to another lender. MERS does not make loans or service them, but only tracks the loan information.  No problem.


Here’s how the registration of real property ownership and liens work:   our entire real estate ownership system is based on public notice and the proper recording of documents.  No problem.


Title companies and lenders, investors, builders, sellers and buyers, and taxing entities depend on this county clerk based public filing system of land and mortgage transfers.  No problem.


Here’s how the two systems do not work together: MERS claims it is the agent for holding the loan regardless of which of its clients have bought and sold it, and in Travis County alone we now have hundreds of thousands of unrecorded mortgage transfers.  BIG PROBLEM.


MERS is said to have facilitated the financial system’s commoditization, packaging, securitization, and sale of tens of millions of mortgages.  That does not seem too likely to me.  But I do see the subversion of the filing process as taking years to correct, and many millions of dollars, and I see it as a brake on the return of a healthy real estate market until it is corrected.







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12 Responses

  1. okiegirl, on November 14, 2011 at 1:57 am said:

    Mark, somebody (I think jncp4) has been posting about this for some time at PL and has offered a number of links that I recall being to a series Taibbi at Rolling Stone did. I'll see if I can find some of them if you have not read them.Why does MERS involvement in "tens of millions of mortgages" seem unlikely to you?

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  2. okiegirl, on November 14, 2011 at 2:24 am said:

    Not one of the articles I was thinking of but you may find this of interest even though it is from Oct 2009.

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  3. Mark in Austin, on November 14, 2011 at 2:43 am said:

    Okiegirl, it is the facilitation that I doubt.MERS has recorded internally millions of transactions. That is the crisis that all the county clerks in the world and all the title companies will be suing about. read the link for details. But MERS did not facilitate all that activity, in my view. That would have happened even if MERS had bothered to record the transactions according to law.

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  4. Mark in Austin, on November 14, 2011 at 2:49 am said:

    Thanks for the Taibbi link. He notes that non-MERS transactions have a stink to them too. That underscores my point: the screwing up of mortgage securitization and transfers is not caused by MERS; the screwing up of American real estate records IS.

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  5. kevinwillis.net, on November 14, 2011 at 3:00 am said:

    Yay! Is there ever good news? Especially in the economy? OT: Just finished Stephen King's new novel, 11/22/63. Unlike his previous effort, Under the Dome, I highly recommend (to be clear, I don't recommend Under the Dome). A finely-detailed, substantial, satisfying time-travel tale. He also namechecks Jack Finney's excellent Time and Again in the afterword, and 11/22/63 is a worthy addition to the time-travel genre. I may do a more substantial review tomorrow.

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  6. okiegirl, on November 14, 2011 at 3:06 am said:

    Mark, from what I have read, the issues are intertwined. At least part of the argument is that due to sheer volume of transactions, the screwing up of mortgage securitization and transfers would not have been possible without MERS or equivalent. Also, as MERS was denied standing to bring foreclosures, it necessitated either the fraudulent robosignings or the bigs were going to have to eat an awful lot of losses.I think there is a lot to this issue and I'm glad you posted on at least a part of it.

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  7. Michigoose, on November 14, 2011 at 4:07 am said:

    From what I've read (prior to this post) MERS is a huge part of the overall problem with the mortgage crisis, so thanks for posting this, Mark. As okie said, I think there's a lot to this.Kevin–I just ordered 11/23/63 from amazon. I'm going to have to finish Thunderstuck first, along with my Book Group book, but I'm looking forward to it!

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  8. okiegirl, on November 14, 2011 at 4:41 am said:

    Did one more quick look-see before going to bed. This still is not the article I was thinking of, but this article at WaPo touches on how MERS facilitated the securitization fiasco and made it possible.Now I'm off to sleep. Goodnight all.

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  9. Mark in Austin, on November 14, 2011 at 12:05 pm said:

    Okiegirl, I see what hair I must seem to be splitting. Securitization precedes MERS in time and can develop independently [my point].However, making a mess of the real property records in America facilitates not only the third world type breakdown of property records, but widespread distrust of the secondary instruments that cannot be enforced. In other words, functionally destroying the recording system destroys more than my narrow lawyer's interest in researching title reliably, it destroys the trust in the security itself.So in practice, you have won me over.

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  10. okiegirl, on November 14, 2011 at 12:36 pm said:

    Good morning, Mark. At no point did I think you were splitting hairs. This is a complex issue that I have thought about for quite some time, and I would welcome a discussion on any or all aspects of it on this blog.My most immediate questions are mentioned in the WaPo article (sorry, didn't think about when I linked to the last page of it rather than the first 🙂 ). A huge problem to me that contributed mightily to the securitization mess is that nobody is/was doing due diligence. How do we rectify that? Maybe actually expanding the MERS concept is a good thing, but that certainly cannot be done with a total of 45 employees. Nobody paid attention to the red flags waved by the county clerks when MERS was conceived.You are right to be concerned about destroying our recording system. Can you devastate anything more basic?P.S. I've done some time in R/E title (more specifically, O&G) and actually loved it. I had some wonderful times going to architecturally interesting old, rural courthouses and pulling books for stand-ups, and the records told me stories that would never be in any TO. Sad in a way to see that end with the advent of an electronic system, although I can see the efficiency.

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  11. jnc4p, on November 14, 2011 at 2:57 pm said:

    MERS is separate, but related to the primary issue with the Mortgage Backed Securities (MBS) which is the ratings and also potential fraud in how they were marketed and sold. Among other things, this is why the banks won't sign on to a settlement deal that only resolves the MERS issues without also settling the other problems. MERS primarily came to light not because it was the most egregious violation, but because it was the easiest one to demonstrate in court (in those states with judicial foreclosure). "Your Honor, according to county records CitiBank doesn't actually own the mortgage on my clients house so they don't have standing to foreclose". It's sort of like nailing Al Capone on tax evasion as opposed to bootlegging and murder.Rolling Stone Coverage:An Extremely Long Metaphor to Explain Mortgage ChaosInvasion of the Home SnatchersBanks Challenged Over ForeclosuresThe Next Big Bank Bailout

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