MERS Blocking Prevention of Repo Homes

by on Foreclosure Crisis

Until lately, the average American homeowner has never heard about MERS. But as hundreds of thousands of houses become repo homes, homeowners are now coming into contact with MERS.

In Florida in 2005, County Judge Walt Logan was faced with 28 pending cases of bank foreclosure in which borrowers claimed that a company called MERS they never borrowed money from was turning their houses into repo homes.

When Judge Logan called a MERS attorney to explain why and how MERS was holding the mortgage documents issued by lenders, the MERS lawyer replied that it was almost impossible to explain why and how.

Since then, Judge Logan started rejecting MERS foreclosure cases because of his concerns about MERS.

MERS, which stands for Mortgage Electronic Registration Systems, is an enterprise that holds the mortgages of 60 million American homes. It was created by the Mortgage Bankers Association in the 1990s to run a computer registry that records mortgage loan trading activities. It was primarily set up to cut costs on paperwork and publication requirements.

But while lenders claim MERS has saved them over $1 billion in office costs over the past several years, housing advocates claim that MERS has worsened the lives of borrowers struggling to prevent their houses from becoming repo homes.

MERS has essentially blocked homeowners from preventing their houses from becoming repo homes and has stopped foreclosure fraud victims from pursuing their cases in court because they could not identify the companies holding their mortgage notes.

In response to criticisms of MERS, its president R.K. Arnold claimed that MERS not only helped banks save costs, but also helped borrowers indirectly through cost-saving mortgage paperwork.

MERS, which receives annual fees from mortgage firms, is owned by 24 of the country’s largest banks, including JPMorgan Chase, Citigroup, and Wells Fargo and was set up in the 1990s by the Mortgage Bankers Association, with help from mortgage giants Freddie Mac, Fannie Mae and Ginnie Mae.

Courts later upheld the legality of MERS, but housing advocates condemn how it has been blocking loan modifications that could have helped homeowners save their houses from becoming repo homes.

Avi Shenkar, head of GMA Modification Corporation in Florida, described how he is unable to pursue loan modification on behalf of some distressed homeowners because loan servicers were always talking about investors that they refuse to name.

In Delaware, homeowners have filed a class-action case against MERS for foreclosure fees charged by lenders that turn houses into repo homes using the name of MERS.