How MERS Grew from a Solution Into a Problem

MERS, the Mortgage Electronic Registry System, is a legal fiction that—on paper—owns about half the mortgages in the United States. It was created in 1995 as a solution to the problem of slow-moving county property records offices. Banks and investors needed mortgages to move faster, so they registered once with the county in the name of MERS . . . and then basically lost track of the paperwork.

The New York Times explains why, but here’s the gist of it.

MERS has thousands of “vice presidents” and “assistant secretaries,” each of which is authorized by MERS to file loan transfers and foreclosures in its name. With no real oversight and a made-up legal framework, it’s no surprise that all those VPs and secretaries screwed up the paperwork royally. MERS says they violated procedures, but the former CEO of MERS says that dotting is and crossing ts was not part of the job, even when it came to maintaining MERS itself: “writing was not one of the characteristics of our meetings.”

So it should come as no surprise that, as law professor Alan White found when he started comparing public records to MERS records, most of the records kept by MERS were inaccurate.

This feeds right into the robo-signing fiasco. In order to get foreclosures moving more quickly servicers started taking shortcuts, some downright illegal. Like signing thousands of foreclosure affidavits without looking at them. When you get right down to it, looking at the documents probably wouldn’t have helped, as Alan White discovered, but saying you know something when you don’t is definitely illegal, regardless.

All of this adds up to a recent note MERS distributed to its members, telling them to stop foreclosing in its name, and to go back to registering titles with county recording offices, just in case.

Which leads me to wonder if we’re seeing the last of MERS. If we are, that is probably a good thing. But on the other hand, going back to swamped county property recorders probably isn’t going to work, either. If MERS goes, the economy will need a replacement.