Prior to 1997 it was easy to learn who owned real property and the identity of those with liens or other interests on a particular property. You could go to the county clerk/recorder’s office and look up the history of a property. All of  the information regarding any real property was public and anyone could research it at a county office. This system was designed to protect the interests of everyone, whether they be the owners, lenders, or potential buyers of real property. For hundreds of years this was a system that worked. Everyone had legal notice of any and all past or present claims, and all of the entities, with potential interests that might cloud the title of a property.

This was a great system when mortgages were owned by the local savings and loan, and securitization of loans was unheard of. If the local bank sold the Note, which was a rare event,  the sale was recorded at the county by filing an assignment of the mortgage or deed of trust. When securitization of mortgages came into play, the old system was seen by Wall Street and others as an obstruction to the process that would slow down the selling of mortgages on the secondary market. Mortgage Electronic Registration Systems (“MERS”) was set up and started operating in 1997 to eliminate any impediment to the process of selling notes and their associated mortgages. Unfortunately, MERS real property records are not public. MERS became the place where some, but not all, property ownership records were kept, not the clerk/recorder’s office for the county in which a property is located. MERS was needed to speed the process that often involved several assignments of the mortgage that often occurred within the first couple of months after the mortgage documents were signed.

Our Note and Deed of Trust might be held by a securitized trust set up by Lehman Brothers Holdings, Inc. (“Lehman”) in 2005. The original “lender” (they were really a front for others), still shown in Alameda County files was Najarian Loans, Inc. The MERS Milestones for our Note show Najarian (n/k/a NL, Inc.) was the original lender and they transferred the servicing and beneficial rights to Bank of America (“BOA”) on May 27, 2005, just 15 days after we signed the loan documents were signed and 10 days after the Deed of Trust was recorded at the county. At the time, the note was actually sold to Countrywide, but because BOA purchased them it is now shown on the MERS Milestones as BOA. If our Note is in the Trust, then it was sold to Lehman on June 30, 2005. There should also have been a transfer to Wells Fargo as trustee of the Trust on June 30, 2005. MERS does not show the transfer to Wells Fargo until September 12, 2012. The point to this being that at a minimum, there might have been  three transfers of the note and deed of trust in the first two months after signing. In the old days this would have required three filings of recorded assignments of the deed of trust: Najarian to Countrywide; Countrywide to Lehman; and Lehman to Wells Fargo.With MERS, the banks, servicers, and lenders save not only on filing fees, but on the preparation of needless, pesky paperwork, like assignments. If we assume a cost of $100 to prepare and record each assignment for each mortgage, and the trust that supposedly owns our mortgage has over 3,000 mortgages, that is a savings to the mortgage industry of around $1 million just related to this one trust, because of MERS.

Jon Stewart recently explained how MERS operates:

Beaufort County, South Carolina recently sued MERS over the problems in the system. “At the end of day,” county attorney Josh Gruber said, “a Beaufort County citizen cannot walk into the Register of Deeds Office and know without a shadow of doubt who owns or services their mortgage.” (See the article here, and the lawsuit here.)

The MERS system leads to the clouding of the title to property. There is an easy fix to this problem. Make MERS records publicly available just as land records have been for centuries. There should be no doubt as to who has an interest in real property. Congress and the states should pass laws requiring MERS data be made available to anyone needing to research the ownership of property.

Force MERS to provide borrowers with the information regarding who owns the note, thereby revealing who should ultimately receive the mortgage payments for their homes. The current situation is absurd. Many borrowers are left with a contract requiring them to pay on a note, but not knowing who they owe the money to.

I am sure the banks and servicers will claim making MERS records public will cause some great harm to the process. Unless the MERS records are publicly accessible, the transparency and accuracy of real property records will remain in question. No one should be left not knowing if there is a cloud on the title to their home.