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TWO FACES: DEMYSTIFYING THE MORTGAGE ELECTRONIC REGISTRATION SYSTEM’S LAND TITLE THEORY
Christopher L. Peterson
"The name of MERS, a company that does not actually own any interests in land, increasingly inserts inert gaps in county recorder grantor-grantee indexes that disseminate the chain of title to millions of homes. This growing separation between actual ownership and legally recognized public notice is likely to significantly undermine the usefulness of real property recording systems over the long term. Moreover, courts have held traditionally held that a security agreement that fails to name a mortgagee is void. Because MERS is not really a mortgagee, financial institutions are, in effect, asking that courts treat lenders and their assigns as mortgagees even though their own security agreements do not. Even if courts reform void security agreements into equitable mortgages, the resulting litigation is likely to pose significant challenges for financial institutions seeking to foreclose, obtain deficiency judgments, and petition of relief from the bankruptcy law’s automatic stay. Furthermore, this inconsistent position taken by financial institutions in order to avoid paying modest fees to county recorders has the potential to be challenged. Many counties rely on fees from mortgage and deed of trust assignments to fund the vital services they provide to their communities. Courts that take offense at this use of tens of thousands of uncompensated “vice presidents” could equitably estopp financial institutions from denying liability for unpaid recording fees. Looking toward the future of American mortgage finance, counsel for financial institutions need advise their clients on the real and growing risks associated with using the MERS system. County recorders, state legislatures, and the judiciary each need to do their part to restore confidence, stability, and transparency in public land title records."
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"While the MERS system may reflect Janus in its two-faced land title theory, a demystified narrative of the company is actually more penetrably simple. Hubris was the essential theme in Greco-Roman mythic tragedies and was the vital sin of figures like Icarus, Narcissus, Andromeda, Niobe, Arachne, and Ulysses. Each found tragedy after their overweening pride showed disrespect to deity and the basic values those deities embodied. MERS and its members believed that they could rewrite property law without a democratic mandate. Although our myths have changed, many of our court houses and capital buildings continue to this day to bear resemblance to Greek and Roman temples as homage to the values of humility and respect for the rule of law. The unfolding drama of the MERS system will tell us much about whether those values endure."
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This is a great paper by Peterson. He digs down to the root of the Mortgage Electronic Registration System. It is clear that the banks have been playing fast and loose with the law, completely disregarding chain of title law and precedent. The issue now is whether the the government has the political will to hold the banks accountable. Even though it is becoming more evident that Mers is a shell company put in place to avoid the payment of registration and title fees, it appears that congress is more interested in burying these violations. The congress and many involved in the government have the misconception that quickly brushing this under the rug will lead to a economic recovery. But the truth is that there are too many laws that have been broken and the trust of the public has been jeopardized. People will not want to buy property if they can not get clear record of title. The laws will have to be changed or ignored to get the banks out of this situation.
