What is MERS and why is it on my title?
“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people
ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up
homeless on the continent their fathers conquered.” -Thomas Jefferson, 1802.
As most of us already know, the economic tsunami that hit this country has reverberated around the globe. Capitalism was put down without even so much as a whimper and out national debt is hovering somewhere just shy of 13 TRILLION dollars. I do not believe the financial crisis happened on accident. So why are banks rewarded for poor loan underwriting decisions while everyone else gets to pick up the bill? Why do corporate executives receive such hefty bonuses for making such a mess of things?
If I screw up on my job I get fired. When you work on Wall Street and have friends on Capitol Hill making that kind of money seems easy, but it does come with a price.
It was not until I researched my own chain of title in the Clerk of Courts office that I discovered a company called MERS was on my mortgage. This was a total surprise because I never dealt with MERS and had no clue as to who they were and what they did. Surely there must be an explanation I thought. After gathering copies of everything that was in public record I called the title company that closed our loan to get a copy of our title policy. Unfortunately they went out of business but I did manage to retrieve a copy of my policy directly from Chicago Title Insurance Company (CTIC), the underwriter. What I found was amazing!
Our loan servicer had not been too helpful up to this point. I had lost my job in the housing industry and moreover, in Florida, the industry just evaporated. I knew we were in for hard times. I kept seeing government figureheads on the cable news channels talking about programs designed to “help homeowners stay in their homes.” This was great news… so I thought.
The first thing our loan servicer told us was “you need to be at least three month behind in your payments before we can assist you”. This must have been the most absurd comment I had ever heard in mylife. I am being honest and upfront, not wanting to shirk my responsibilities but looking for information on the program that then Treasury Secretary Paulson and President Bush were mentioning. After all, if the President of the United States and the Treasury Secretary say there is a program to help homeowners it must be available, right?
Since we paid for an appraisal (a requirement of the lender) and we had not been privy to anything regarding the
appraisal process, I questioned the fitness of the appraisal and suspected there may have been bias, or appraisal fraud which amounts to usury. I spoke with a gentleman in the executive resolution group who told me they had not yet
heard of any such “help for homeowners” program out there. I was stunned! I sent him an email with a link to the video… surely this guy has an internet connection right?
I was ready and willing to pay for the home, but I wanted the house re-appraised as I did not want to pay a penny more than what the home was worth. At the peak of the market the largest home in our community (about 3,000 sq. ft. under air) sold for about $300,000 or $100 per square foot. At the time of purchase the home did not have a pool. That same home recently sold for $140,000 or $46 per square foot with a new in ground concrete heated pool. How am I going to compete with that?
The servicer’s idea of a solution was to take the house and sell it for pennies on the dollar on the courthouse steps. Heck no, if anyone was getting that kind of a deal it sure as heck was going to be me!
I was told by the loan servicer that they did not have the authority to modify the principal balance (as I had heard
about on the news) because the investor would not allow it. When I asked my loan servicer “who is the investor of our loan” they replied Freddie Mac (FHLMC). I called Freddie Mac and they told me to call my loan servicer. After
weeks of trying to figure out who actually owned my loan and why it was so terribly difficult for me to find them I started researching the internet for clues. Lucky for me I found Neil Garfield and his Living Lies website (www.livinglies.wordpress.com).
Up to this point my beef was with my lender requiring me to pay for a bogus real estate appraisal. It is ironic because you sign a stack of papers a mile high when you get financing to buy a home and again at settlement but there is nary a peep about the appraisal. Why is that?
Since information regarding home sales and valuations are captured in public record (deeds, mortgages, property appraiser valuations and tax roll valuations) why are consumers required to pay for it while simultaneously propping up the companies that are reaping such huge profits from vandalizing our appraisal and title industry. Remember, we are talking about public record.
At the time I thought the greatest injustice was being required to pay for a product (an appraisal) that contained no warranties, no representations, no disclosures… no nothing. I was wrong, there was something greater. It just took
time to notice it. I still believe appraisal regulation is as important as making sure our food supply does not become tainted and that lead is not put into our children’s toys. Just like the S&L crisis and FIRREA that followed,
congress can put up the “façade” (appearance) of regulation while leaving loopholes for their banking constituents where nobody else will ever find them.
Politicians closest to the action are privy to crafting the rules, unless they are subject to an emergency closed session of Congress whereby they are instructed to sign a complex bill without having ample time to read it OR there
will be upheaval and riots and martial law.
The E-AppraiseIT/WAMU debacle is a great example. In short New York’s attorney general accused Washington Mutual of pressuring a rather large AMC (Appraisal Management Company) to deliver inflated home values in order to justify making loans, a practice that tens of thousands of appraisers have complained and petitioned about increasingly over the years. The suit was filed by Attorney General Andrew Cuomo and did not name WaMu as a defendant. Instead, Attorney General Cuomo cited First American Corp. and E-AppraiseIT (a subsidiary of First American) as having engaging in “deceptive, fraudulent and illegal business practices.”
The back story is this; the non-profit appraisal institute is selling out its own members to a for profit subsidiary that they own that creates or mimics information straight out of public record. Let me repeat – Public Record. This of course is in addition to other large AMC’s that are selling out the American people from our own public record. Appraisal regulation is so flaccid that state regulators have basically all but ignored the tens of thousand of “honest” appraisers that were literally run out of the industry because of the AMC (appraisal management company) loophole.
In essence (literally), the housing market just went up, up, up and away!
Seasoned appraisers with many years experience were being replaced with “compliant” less seasoned appraisers
(mostly rookies) who accept valuation assignments for half the fee. The AMC takes the other half. AMC’s, data portals and AVM’s (automated valuation models – or in other words artificially generated computer junk) share some of the
blame in the housing crisis but they have received very little attention for their instrumental role in the current financial maelstrom.
Congress has now enacted the HVCC and IVPI. Those are the Home Valuation Code of Conduct and the Independent Valuation Protection Institute. Some would argue that this just more of the same old tired legislation that gets put forth and subsequently gutted like FIRREA.
I submit there will never be any meaningful change in legislation until we first examine the new regulations regarding real estate appraisals and examining carefully the inner-workings of AMC’s, data portals, AVM’s and find
out whether or not any of the aforementioned have caused adverse effects on housing prices via biased appraisals and “cascading values,” thus making it easier for banks and lenders to shop for appraisers (comp checks) that played
ball to get whatever was needed regardless of whether or not they had to rig the system of accomplishing this feat.
If you find one of the top banking institutions like WaMu engaging in practices such as this – chances are
more than a handful of others were too. Now instead of hand-picking their favorite appraisers (wink wink), lenders are supposed to stay “arms length” from the appraiser. This means no comp checks, no partial submits, no shopping for your number, no unlocking secure digitally signed appraisal docs to change numbers… no more games. The question to ask is how can we trust that our elected officials will enact meaningful legislation regarding appraisal regulation
after they neutered FIRREA? Many experts in the appraisal industry suggest that if FIRREA had been left alone “as is” this crisis would not have happened. FIRREA stands for the Financial Institution Reform Recovery Enforcement Act,
sounds grand doesn’t it?
Often times a bona fide appraisal was not even necessary. A lender could pay a waiver fee and be done with it or
rely on an AVM (computer generated algorithm – trash, not the same as a bona fide appraisal) to project the price you needed. Works great on the way up. On the way down, not so bueno.
So why are consumers required to pay and upfront fee of $300 for a biased and rigged appraisal? Seems like a
very self-serving interest to me. This is not even considering the fact that AVM’s and data portals are simply a compilation of public record. Property value information is stripped from local property appraiser’s office and tax
collector’s office websites and inserted into a fancy data model and voila’ AVM.
Combine this practice with tight zoning, land-use, lack of adequate supply of “workforce” housing, development
impact fees, wetlands fees, this fee that fee & other fees and its no wonder why “affordable” used to mean $250,000. Was there not enough land left in America to supply homes for working people at working people prices?
It only takes one house in the neighborhood to set the new Guinness Book world record for highest sales price
and there goes the neighborhood (and city and county) comps. The Appraisal Management Companies have literally hijacked the appraisal industry and what’s worse… no mention of the 10,000+ appraisers that have signed petitions to express concern about pressure to “hit the number” or risk losing work. A lot of people were displaced in that business, for being honest about property values. Many in the appraisal industry say that the cure (HVCC) is worse than the disease of the previous system.
After spending more than 12 months looking back at appraisal regulation I did however, find something even
more appalling. MERS (the Mortgage Electronic Registration System) has been recorded on over 60 Million mortgages in the US. The company does not and has not ever owned, transferred or conveyed any “beneficial interest” whatsoever in the notes or mortgages that are recorded in their name. They are considered to have only the
interest of a “straw man” in many states.
In a nutshell, mortgages are the security instruments (where you pledge your home as collateral) and notes are
the promise to repay the loan. Either one is not much good without the other. So instead of vaulting the original note like they did before the advent of MERS, notes were re-packaged and over insured (sometimes up to as much as thirty
times the value of the asset/home) so that they could reap compensation well above the normal remuneration that is required to be disclosed on the settlement HUD-1 statement and Truth In Lending disclosures. MERS is listed on
record as a way to hide the real parties of interest.
Enormous profits were made by swapping notes dozens of times and when the asset no longer performs and the
owner defaults, the credit default swap insurance kicks in and there is yet more insane profit to be retrieved from the foreclosed property.
So it seems that in an effort to cash in on the once booming business of home mortgage lending, some major banks
and lenders were willing to intentionally turn a blind eye towards (or commit outright fraud) in what is supposed to be an “unbiased” appraisal and allowed appraisal regulation to suffer (amongst other things) so that Wall Street could package and sell much larger pools of investments to unsuspecting chumps all over the world under the guise of AAA rated investments and avoid disclosing who the “real” lender or “holder in due course” is on the transaction. Not to mention the fact that MERS has created “toxic titles” on more than 60 Million homes in the United States.
I recommend that everyone tell their friends and family to check their local clerk of courts office and obtain
copies of their recorded mortgage and inspect the document in paragraph C or D to see if the words MERS appears. If yes, try obtaining a copy of your title insurance policy to see if MERS was insured as your lender. If yes, know your
rights, do your research and challenge everything.