Mortgage Electronic Registration Systems
is disputing claims made by a Virginian delegate that the company's mortgage registration system violates state law. In an official statement given to HousingWire Wednesday, MERS said it "does not eliminate, omit or otherwise fail to report land ownership information from public records."
The firm said when MERS becomes the mortgagee of record for a lender, it notifies parties involved of the transfer. Mortgages and deeds of trust still get recorded in the land records, MERS said.
On Oct. 26, Republican state delegate of Virginia, Bob Marshall, asked his state's attorney general to investigate the practices of property title transfer in Virginia. More specifically, with regard to Mortgage Electronic Registration System, which has been in at the epicenter of scrutiny since foreclosures started being recalled.
In a letter to Attorney General Ken Cuccinelli, Marshall asked whether the fact that MERS did not pay a fee when transferring the property title into the parent company's ownership was a violation of state law.
MERS allows lenders to track individual mortgages through an electronic tracking and holding system. According to MERS, the firm holds legal title to a mortgage as the loan owner's agent and is sometimes granted the authority to enforce foreclosure.
In Marshall's opinion, paying the title registration fee is a validation of creditability; a security made by the state to guarantee ownership of a loan. However, lenders are not required by by state or federal law to pay the fee.
"If you have any brains at all and you are the person who is the note holder, you want an official record that says you're the person to do the transfer," Marshall told HousingWire in an interview.
The reason Marshall said he is bringing this issue to light is to restore the U.S. property laws that have been developed and sustained over centuries. He believes the people on Wall Street are taking advantage of consumers to make a quick buck.
"The law signed in December that makes credit default swaps exempt from state gambling laws, coupled with MERS have basically unleashed a system of complete chaos in the authoritative transfer of ownership of real property," Marshall said. "To undo the system so a few people on Wall Street can make some money is an insult to the constitution."
As originally reported by The Wall Street Journal, Marshall is currently working with other law makers to draft a bill that would require lenders to pay a fee to be allowed to proceed with a foreclosure. He calls it "a practical way to address the issue and say, if no one files here (Virginia), the the courts aren't going to recognize your right to file on the property."
Marshall was elected as a Virginia delegate in 1991 and is an active lawmaker. However, he said he sought official comment from the state AG on the subject because he is not authorized to make distinctive judgment on whether MERS has violated the law. But Marshall makes his message clear.
"There are rules that Wall Street needs to play by," he said. "MERS, unaddressed, will completely eviscerate trust among real estate buyers, homes, land and possibly commercial real estate. And nothing, I mean nothing, the Fed will do can change that uncertainty."
Write to Christine Ricciardi