In the 1990's MERS was started as a short cut and a cost savings alternative for lenders and investors to the long accepted County Register of Deeds (ROD) systems that are set up all over the United States. The authors state that the creators of MERS “intended it to simplify and centralize the tracking of rights regarding each mortgage-like instrument”. They fail to include that the system was also intended to avoid paying the filing fees required by public recording in the county ROD, which would, in turn, allow for cheaper and faster turnover of the securitized mortgages.
The county systems are based on an open and public record of who owns "an interest" in real estate situated within that particular county. Those county systems are also uniquely keyed to the laws, especially those for foreclosure, of the State within which they reside. The authors admit that this local county system has been used since the 1600's. While this system is not without its faults, it has worked admirably for millions of documents for over 400 years. The system currently in place for centuries has been secure. Those who hold an interest in real estate who choose to avail themselves of the proper recording process are then afforded the protections of the State Law that comes along with it.
The contention that this system is "hopelessly behind the needs....of the 21st century" is a complete overstatement. Indeed, lenders and investors who make this argument come to it with unclean hands since the financial industry created the alleged need for instantaneous recording on such a massive scale through its securitization of mortgages. The loose lending of the early and mid- 2000's, predatory revolving refinancing, and lack of mortgage origination oversight contributed heavily to the increase in recordings at county offices and thus the reason counties fell behind in recording documents that were presented. Shockingly enough, the authors state that in order "to sustain the kind of vibrant mortgage market seen during the housing boom, classical recording methods have to speed up...." I am not sure why, or if, we would want to do that. We are all learning that the "vibrant mortgage market" that the authors extol was and is in reality a mortgage and real estate bubble based mostly on smoke and mirrors.
Even after creating MERS “to simplify and centralize the tracking of rights” many users did not bother to update transfers and assignments within the MERS system which has led to more confusion of who owns what interests in real estate. The authors point out that MERS is a private system that does not share information publicly. They even contend that as a result of these errors and failings within MERS “the homeowner has no way of determining who actually has the superior right without resorting to the court system”, if a mortgage is simultaneously assigned to more than one financial institution. I see a problem here with a burden and expense shifted onto homeowners that they did not have to previously bear and should not have to bear now. The ROD recording systems were originally designed to further public policy that real estate interests be available and open to the general public to put people on notice of an interest in the property and who holds that interest. MERS is not a better replacement for this public policy need, but an obfuscation of it.
Recognizing a need to have the public records available online and with the introduction of digital scanning, county ROD offices have not only been scanning and indexing new, incoming documents, but also scanning and indexing previously recorded documents going back decades. This is not an easy or instantaneous process. Time and money are needed to complete the process and money for County projects has been scarce in this economic downturn. The need to record deeds and mortgages is only one aspect of the slow recording problem for the authors' purposes. They seem to focus more heavily on the need to increase the speed of recording of mortgage assignments. To me, this need for speed appears to serve only the financial industry and those who securitize mortgages and is not a need of the general public. ROD offices are designed to and should serve the needs and interests of the general public.
The authors state that there is a need for ease and efficiency in performing computer searches remotely. I agree. Local RODs are working on their systems to update records and bring them online. However, the authors touch on the possibility that increased access to digitized records would make forgery and fraud of public documents more prevalent. As a former member of a Deed Fraud and Mortgage Fraud Unit, I can say that scanning documents and making them available for the general public does not lead to an increase in fraud or forgery. Making the system national or private will not make it more secure either.
States traditionally have had the purview of family law and real property law. The authors put forth that there should be National uniform systems for real property title registration and foreclosure processes. They concede that a National System would be over the horizon. But, each state has unique laws based on their own sovereignty that govern all real property rights within their jurisdictions that may be infringed by a National System. Many states would not like to make this drastic a change.
Furthermore, the authors suggest that foreclosure laws should be streamline for ease of global financial institutions to protect their rights. They claim it is difficult for financial institutions to keep track of 50 separate sets of state laws and procedures. They also claim that this difficulty would create more of a cost to customers if not changed. I do not agree. Lenders and Investors have always had to contend with 50 sets of state laws for mortgages and for other consumer debts. I have not heard a cry for a national consumer debt collection procedure from the financial industry.
Besides, the states have created laws and procedures to protect the rights of all parties with an interest in real estate. The laws and procedures create a balance based on public policy between the owner and the lender. The owner is afforded protections, such as notice and a hearing and a timeframe to move out before losing possession and control of a home. The lender is afforded protections, such as an ability to gain possession and control of the property and possibly recoup any losses on the loan. Both are expected to follow the law and procedures to get the benefit and protection of the law and procedures. The recent “problems” with foreclosure laws appear to be self-inflicted by an industry that has tried to avoid the proper procedure. The proper party filing the proper paperwork in the proper timeframe at the proper place is the hallmark of a secured transaction. Without this, the party should not be allowed to avail itself if the benefits of the law and procedure nor should it be allowed to cry for changes in the rules.
In conclusion, the state systems of foreclosure and
document recording may need updating to accommodate new technology, but they do
not need to be overhauled for a particular industry user. The original purpose
of registration of title for real property is to protect the rights of those
persons with "an interest" in the property. It is not to be
"profitable". Nor is it the responsibility of the ROD to create a
less expensive system for those who have overused, abused, ignored, or
overloaded the current system.
