What Is MERS and What Role Does It Have in the Foreclosure Mess? (Hint: It Holds 60% of All Mortgages, But Has ZERO Employees)
Posted By Guest Author On October 25, 2010 @ 3:00 pm
Washington’s Blog [1] strives to provide real-time, well-researched and actionable information. George – the head writer at Washington’s Blog [1] – is a busy professional and a former adjunct professor.
You’ve heard the name Mortgage Electronic Registration Systems or “MERS” mentioned in relation to the foreclosure problems in the residential real estate market.
But what is MERS?
It is the company created and owned [2] by all of the big banks to process title to property in the U.S. Approximately 60% of the nation’s residential mortgages are recorded in the name of MERS.
MERS is a shell corporation with no employees, but thousands of officers.
As the treasurer and secretary of MERS admitted [3] in a deposition:
Q Does MERS have any salaried employees?
A No.
Q Does MERS have any employees?
A Did they ever have any? I couldn’t hear you.
Q Does MERS have any employees currently?
A No.
Q In the last five years has MERS had any
employees?
A No.
Q To whom do the officers of MERS report?
A The Board of Directors.
***A That’s correct.
Q And in what capacity would they report to you?
A As a corporate officer. I’m the secretary.
Q As a corporate officer of what?
Of MERS.
Q So you are the secretary of MERS, but are not
an employee of MERS?
A That’s correct.***
Q How many assistant secretaries have you appointed pursuant to the April 9, 1998 resolution; how many assistant secretaries of MERS have you appointed?
A I don’t know that number.
Q Approximately?
A I wouldn’t even begin to be able to tell you right now.
Q Is it in the thousands?
A Yes.
Q Have you been doing this all around the country in every state in the country?
A Yes.
Q And all these officers I understand are unpaid officers of MERS?
A Yes.
Q And there’s no live person who is an employee of MERS that they report to, is that correct, who is anemployee?
[Objection]
A There are no employees of MERS.(page 70, line 1 through page 72, line 8)
In another deposition, a legal assistant at a law firm initiating 4000 to 7000 foreclosures per month in Florida held herself out as “vice president” and “assistant secretary” of MERS. She testified [4]:
Q: The question was you have no job duties as an assistant secretary of MERS, correct?
A: I do not have any job duties other than signing the assignments and mortgage. Does that help?
Q: Yes. Here, I’ll try to rephrase this. Do you attend any board meetings at MERS?
A: No, sir.
Q: Do you attend any meetings at all at MERS?
A: No, sir.
Q: Do you report to the secretary of MERS?
A: No, sir.
Q: Who is the secretary of MERS?
A: I have no idea.***Q: Where are the MERS offices located?
A: I can’t remember.
Q: How many offices do they have?
A: I have no idea.
Q: Do you know where their headquarters are?
A: Nope.
Q: Have you ever been there?
A: No.
Q: How many employees do they have?
A: I have no idea.(pages 11 & 12)
She further testified that her signatures on “these assignments,” which from all indications were and are at least several thousand in number, were in no way attestations that the statements contained therein were accurate or truthful. She further testified that she was the person with the most knowledge about the subject assignment.
For example, she testified:
Q: It says, ‘but effective as of the 19th day of February, 2008.” Do you see that?
A: Yes.
Q: Where did you get that date from?
A: I did not pick that date. That date was put in by the processor that prepared the assignment.
Q: And who was that?
A: Off the top-of-my-head, I do not know who actually typed this assignment.
Q: Okay. But you are signing on behalf of MERS, and you are stating here that it is effective as of the 19th day of February, 2008, correct?
A: Correct.
Q: At the time you signed this, what reason did you have, as agent for MERS, to make it effective as of the 19th day of February, 2008?
A: I did not pick that date. And I do not recall this document.
Q: Sitting here today, you have no idea why it is that it says, “effective as of the 19th day of February, 2008.” Is that correct?
A: Looking at this one particular piece of paper, I do not recall or know the answer to that question, no.
Q: Is there some general practice, of which you are aware, that would give us information as to why this particular date was inserted?
A: That information was determined by the people that review the file prior to me.
Q: And what would they base that on, as a general practice?
A: I do not know.
Q: You don’t know? Were, to your knowledge, any physical documents transferred on February 19, 2008?
A: I do not know.
Q: To your knowledge, does the 19th day of February, 2008 have any significance?
A: I do not know.
Q: Ma’am, if you signed this document on behalf of MERS, picking this date, this effective date – -
A: I did not pick the effective date.
Q: But you ratified it by signing this; didn’t you?
[objection]
Q: Didn’t you attest to the accuracy of that date by signing this document?
[objection]
A: I would say, no.
Q: Did you attest to this document, as a whole, by signing it?
[objection]
A: I do not think that in my capacity of signing these assignments, it was my position to attest. My role was to be given a document that had been reviewed by an attorney, had been reviewed by a title examiner, had instructions from the client, and I was to sign the assignment as secretary on behalf of MERS.
Q: Right. And when you signed it as secretary on behalf of MERS, were you approving and agreeing with the terms contained therein for MERS?
A: I believe I was approving and agreeing to the fact that the mortgage needed to be assigned from MERS to another entity.
(pages 13 and 14)
In other words, assignments of title were never actually created, notarized and recorded, as required by state law. The “vice president” and “assistant secretary” MERS signing sworn statements under penalty perjury was simply making it up and doing what she was told.
In that light, Yves Smith’s report [5] that “no one in the industry transferred the paper” makes perfect sense.
Why MERS?
But why was MERS created in the first place?
MERS, the banks and the mainstream financial press [6] all say that it was simply to save fees by digitizing mortgage electronic.
But as Ellen Brown notes [7], there is in reality a very different reason that the big banks created MERS:
The rating agencies required that the conduit be “bankruptcy remote,” which meant it could hold title to nothing ….
Indeed, the secretary and treasurer of MERS admitted [3] this in a deposition, stating:
As a requirement for mortgages that were securing loans or promissory notes that were sold to securitize trust, the rating agencies would only allow mortgages MERS — well let me step back. They required that a bankruptcy remote single purpose entity be created in order for transactions holding loans secured by MERS, by mortgages MERS served as mortgagee to be in those pools and receive a rating, an investment grade rating without any changes to the credit enhancement. They required that to be a bankruptcy remote single purpose subsidiary of MERS, of Merscorp.
(page 32, lines 9-20)
Indeed, many commercial mortgages may be held by MERS as well [8], and for the same reason [9].
And as a a forthcoming article in the Real Property, Trust and Estate Law Journal notes [10], saving fees was another motivation for the giant banks in running mortgages through MERS, but in a way which is shadier than routine cost-cutting efforts.
You can find the rest of the post here.
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