MERS is part of a scheme to make it easier for mortgage servicers to foreclosure.
MERS has destabilized our existing land title system and put title at issue.
MERS “clouds title” on every property where a MERS mortgage is recorded.
What is MERS?
The “MERS” acronym refers to Mortgage Electronic Registration Systems Inc. and its parent company MERSCORP Holdings, Inc. which are collectively known in the mortgage industry as “MERS.” The mortgage bankers that created, MERS are the same mortgage bankers that have profited from the explosive increase in subprime lending and the resulting foreclosure crisis. MERS is part of a successful scheme by these mortgage bankers to make it as easy as possible to drive as many homeowners as possible into foreclosure.
What does MERS do?
The MERS scheme includes a MERS mortgage or deed of trust that names MERS as a beneficiary even though they have no beneficial interest in the promissory note. Based on this fictional naming of MERS as beneficiary, the actual beneficiaries will then hide behind the MERS shell company to avoid recording ASSIGNMENTS with the local county recorder as required by statute as they sell your loan multiple times without recording it so you never know who your beneficiary is. The mortgage bankers that own MERS claim the right to avoid recording ASSIGNMENTS between actual beneficiaries because they claim that MERS remains “beneficiary of record” due to being falsely named as a beneficiary on your mortgage.
The MERS scheme also includes the MERS computer database which the mortgage bankers created to track their servicing rights. In a self-serving manner, MERS’ public relations have pedaled this to politicians and to the public as “a database designed to track the ownership of mortgages,” but tracking servicing rights is something completely different. The MERS computer claims to replace a transparent public system that traces ownership and title for the public benefit with a clandestine private system that traces servicer rights for the benefit of servicers. The MERS database is no substitute for the county recorder because it does not track ownership for the benefit of the public. The MERS computer tracks servicing rights for the benefit of the servicers that own MERS, the most important of these rights being the right to foreclose. The bankers that own MERS use this intentionally deceptive language to disguise the fact that they are not tracking ownership because they are servicers, not beneficiaries, and the only right they are tracking, the only right they care about, is their own right to foreclosure.
Who Owns MERS?
The board of directors and owners of MERS are mortgage servicers, including some who used to be the traditional lenders in mortgage banking, namely CitiMortgage, Wells Fargo, Bank of America, and Chase, but all that has changed. We continue to (mistakenly) call these bankers “lenders” even though they long ago switched their business model away from lending to originating and servicing as the money for lending began to flood in from Wall Street Investment banks and their stock offerings after the 1999 repeal of the 1933 Glass Steagall Act which had separated investment and retail banking.
Traditional banks still do create those old-fashioned loans which they hold in their portfolio and service themselves, but only for those borrowers that specifically demand that type of loan. Otherwise, even if you walk into one of these banks to get your mortgage, the bank will be using a pre-existing table-fund which is a pool of Wall Street money to finance your mortgage. What the bank will do is originate your loan and flip it for a fee into a securitized trust that the Wall Street Bank has created to sell securities backed by many mortgages including yours.
These lender-originators at first retained their servicing rights as “lenders/ servicers” and they created the MERS scheme around 1995 to facilitate this new business model to track their servicing rights. The MERS scheme makes it easier and cheaper for these lenders (now servicers) to know which of them has the right to foreclose.
This business model switch by the servicers that own MERS has led to millions of mortgages and deeds of trust where the named beneficiaries are fly-by-night lending companies that appeared on millions of deeds of trust and then promptly disappeared. These “pretender-lenders” used table funding and Wall Street money and they threw out traditional underwriting standards of risk and reward because they had no financial investment in the millions of predatory subprime loans that they wrote. This new scheme enabled bad actors to pass the risk of a loan on to borrowers and investors while they kept the reward for themselves through, origination fees and servicing rights which they then sold to other servicers through the MERS database shortly before going bankrupt or disappearing. While the crisis is over, the beneficiary of this system is the greedy servicer that capitalizes on this split risk and reward structure with risk to the beneficiaries and reward to the servicers and continues to profit from foreclosure. Meanwhile the public is penalized by having our public recording system defunded and replaced by a database that serves only these same greedy servicers while we are left with clouded title and corruption.
MERS’ Role in Unfair Lending Practices and the Downfall of the Housing Market
How Does MERS Make Money?
The bankers that own MERS intentionally profited from the foreclosure crisis and continue to profit from predatory subprime loans that are designed to fail. These originators talk borrowers into accepting risky terms and borrowing more than they can reasonably pay back while they kept the true facts of subprime loans hidden from borrowers and investors. Sub-prime loans are loans designed to fail, but failure and weakness is always what a predator wants.
The servicers that own MERS are not beneficiaries, and they actually have an opposite interest from the beneficiary that owns your loan. Servicers only own servicing rights which means they benefit from penalties, late fees, and foreclosure and not by timely repayment. This conflict of interest remains hidden from most borrowers until they miss a payment and wonder why their “lender” is trying so hard to trick them into foreclosure.
MERS Clouds Title
A Quiet Title is an action to establish title against any “adverse claims” or financial interest in a borrower’s property. A Quiet Title has been traditionally used to remove outdated claims from the county records or to settle claims between family members so that owners can have clear title enabling them to sell or refinance. A borrower seeking to quiet title must name the original lender and any later beneficiaries or purchasers of the debt on their property as defendants. If MERS is not named in a Quiet Title action and provided NOTICE of that action, MERS has effectively used the fact that they are erroneously named as “beneficiary” on a borrower’s mortgage or Deed of Trust to claim the rights of a beneficiary to sue borrowers in federal court. See: Mortgage Electronic Registration Systems, Inc., et al. v. Daniel Robinson et. al, 2:13-cv-07142-PSG-AS where MERS sued the Robinsons after they obtained a Quiet Title without NOTICE to MERS.
You can read more on our Quiet Title page and on the MERS mass-joinder page.
MERS’ Role in Unfair Lending Practices and the Downfall of the Housing Market
MERS is a shell corporation created by the mortgage banking institutions that used to be lenders and are now servicers – the “pretender-lenders.” The owners of MERS don’t care if you repay your loan, in fact they would rather you don’t because then they’ll make more money. The bankers that own MERS have engaged in countless unfair lending practices, and thus, have played a role in several elements of the downfall of the housing market:
Securitization. Securitization is the process by which mortgage debt is turned into stock to be sold on the “secondary” market to investors that become the beneficiaries of your mortgage. Because of the multiple sales required for securitization, the servicers sought to avoid the cost of recording these sales which was why they created MERS. The mortgage bankers that own MERS name MERS as “beneficiary” on your mortgage and claim MERS is “beneficiary of record” to avoid the multiple recorded assignments that occur with securitization and just as importantly to avoid the county recording fees. This system claims to replace the county recording system, but the lack of transparency and oversight, as well as failure to track actual ownership, has resulted in millions of failed securitizations and thousands of lawsuits by borrowers flooding the court system.
Robo-signing. When a borrower defaults and it comes time to foreclose the servicers that own MERS must now re-create a chain of title and they do this by robo-signing millions of recorded documents. These robo-signed documents are recorded after-the-fact representing sales that actually happened years before making them inherently fraudulent and VOID. This practice is called robo-signing because the bank employees that sign these documents have no idea what they are signing and simply sign automatically like robots.
Creaming the Debt. Servicers make money based on the principal balance of the loan pool they service on behalf of a beneficiary and if a borrower defaults the missed payments, along with penalties and fees, are added (like cream) to that principle balance. Servicers are reluctant to modify more loans because they make so much more money from foreclosure because of advances and fees. Advances occur when a borrower defaults and the servicers must advance interest and principal payments to the beneficiary but once the foreclosure begins these advances stop. The modification also cuts into the servicers fees because the servicer might have to forgive their fees in order to make a modification feasible. Servicers make more money in foreclosure because they get to “cream the debt” which means the servicer gets paid first before the beneficiary and all their fees are included. “Creaming the debt” is when the loan servicer gets paid “off the top” for all their advances as well as costs and penalties at the foreclosure sale.
Contact Advocate Legal for Personalized Help Today with MERS-related issues
With over a decade of litigation experience that includes foreclosure, mortgage fraud and title issues, our lawyers at Advocate Legal have the knowledge and skill to help you with MERS-related issues and with freeing yourself from a MERS mortgage.