Wednesday, October 13, 2010

Foreclosure Gate: Fixing It, Systemic Risk, & MERS

Mike Konczal has published his fifth piece on Mortgage Fraud for Dummies, entitled "The Necessity of Government Action and Ways Out of the Crisis".  Mortgage servicers are not federally regulated and are subject to a hodge-podge of state regulations.  The servicers need to be taken out of the driver's seat and no excuses allowed.  He holds that it is time for banks and corporations to obey the law and cease profiting from fraud.  The time for the weak and poor, and increasing the middle class, to have a fair say and be protected from the bulldozer of the rich and powerful.  The program needs to be government run, involuntary, and standardized on both the modification and foreclosure end.  He also says it is time to reconsider the investor tax break of REMIC's and disallow them if the loan holding entity forecloses above a set percentage of its mortgages.

Later, Konczal writes on the chain of documentation and the act of foreclosure as delineated by Barry Ritholtz as well as several of posts by other bloggers which he uses to show how serious and well understood the problem is.

In yet another subsequent post, Konczal expands on the systemic risk posed by foreclosure frauds in that the electronic processing may place into question whether there were any properly documented "true sales", which could create a Lehman weekend crisis.  He then briefly mentions MERS which is an electronic processing and tracking service of mortgages and which is deeply involved in the mortgage fraud controversy.

MERS is a company which has NO employees, only officers.  Of these officers, there are an unknown number of corporate Assistant Secretaries (some estimate are in the hundreds, maybe thousands) who sit in their homes scattered across the country attesting to documents by signing them as they are presented to them by MERS without question.  MERS services approximately 60% of U.S. mortgages.  The Washington's Blog post linked in this paragraph goes into the MERS process and the lack of any attempt by the signers to know the facts behind the attestation they make.  MERS is a keystone in the Foreclosure Gate.

Here is an in depth paper written by an attorney, Christopher Peterson, who teaches law at the University of Utah which provides a detailed analysis of MERS and how it operates and ends by questioning whether the democratic governance of the nation's real property recording system has been subverted.  This paper will tell you more than you want to know about MERS.

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