MERS (Mortgage Electronic Registration Systems), the ubiquitous foreclosure management agent to the banks, is the legal will behind almost every foreclosure action in the nation, operating under the cover of an obscure and highly criticized business model.
MERS was introduced to the mortgage industry as a solution to electronically track the nation’s home loans in replacement for traditional land records. But its capacity in tracking loans quickly morphed making the giant a vested entity in the mortgages it helped to originate and in the nation’s foreclosure process it promised to streamline.
MERS plays a changing role in the foreclosure process, making conflicting appearances on the foreclosure scene as both the agent to the foreclosing bank and as a defendant. In a large number of foreclosure actions, homeowners are baffled to see the mortgagee giant named in the foreclosure action as their co-defendant.
But MERS’ appearance as a defendant can ultimately have an undesired effect of aiding the homeowner. This peculiar alignment can potentially change the dynamics of how foreclosure lawsuits are challenged, since MERS, [as mortgagee], can be compelled to defend the mortgagor-mortgagee covenant which it is in fact a party to with the homeowner.
A defense by MERS of the mortgagor-mortgagee covenant adds up to a legal defense for the homeowner until that covenant is dissolved by the court. Furthermore, and perhaps most confounding is that its assumption of the position of defendant can result in MERS being pitted against itself, since MERS is nominated by the bank to effectuate the foreclosure.
MERS can also alter its corporate anatomy to bypass critical laws requiring high ranking banking officers to acknowledge new mortgage assignments. MERS has reputedly assigned the role of Vice President to arbitrary members of its corporate body for a nominal fee of $25 in order to expedite the growing number of foreclosures it processes for fees.
The MERS model of doing business fueled a national opposition which charges MERS with widespread fraud, such a robo-signing by its fictitious VP’s which wrongfully document the transfer of hundreds of thousands of home loans within MERS’ proprietary distribution list of investors.
The allegations of fraud culminated in [some] weakening of the MERS infrastructure and an $8.5 billion dollar national settlement with the federal government and 14 of the largest banks by assets. Foreclosures in many states did decrease, partly due to the increase in homeowner friendly foreclosure rules arising from the MERS controversy.
The MERS business model, which splits and dices home loans before pouring the mix into a complex asset pot known as a securitization pool, remains in large part a mystery to a wide number of state and local courts which preside over the fate of millions of homeowners in foreclosure.
The obscurity of the MERS business model becomes most evident when it's challenged by the homeowner. Such obscurity enables MERS to deceitfully make itself a defendant and camouflage a highly leveraged position against the homeowner.
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