MERS "The Veiled Man Wielding The Home Foreclosure Ax" & "A Tax Evasion Broker"?

In Salt Lake County, Utah, The Salt Lake Tribune recently spotlighted Mortgage Electronic Registration Systems (MERS), a loan registry designed to save the home loan industry millions of dollars on paperwork and recording fees, and the role it plays in foreclosure actions:

• Here and nationally, the company's legal status as a party in these actions is increasingly being challenged. "This is one of the buried, yet-to-emerge bombs in the whole mortgage crisis," said Christopher Peterson, a University of Utah law professor and author of the first scholarly analysis of MERS and its legal underpinnings, to be published this spring in the University of Cincinnati Law Review. "This has the potential to fundamentally affect the trajectory of our recovery."

• MERS officials vigorously disagree, but Peterson contends the MERS system has violated a deep-seated principle of American law -- transparency in land-ownership transactions -- by effectively removing much of that information from the public record. In so doing, Peterson says, MERS also has served as "a tax evasion broker," denying counties millions of dollars in recording fees -- revenue that might otherwise have funded essential public services.

• And now, by allowing actual lenders to pursue foreclosures under MERS' name instead of their own, Peterson says the company is acting as a "foreclosure doppelganger." "Throughout history, executioners have always worn masks," the U. professor writes in his article, Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System. "In the American mortgage lending industry, MERS has become the veiled man wielding the home foreclosure ax."

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• Amid the current explosion in foreclosure actions across the country, courts in Nevada, Florida, Minnesota and elsewhere have upheld MERS standing as a foreclosing party. MERS also points to a 2009 federal case in Utah that affirmed its authority to exercise certain legal powers accorded to the lender, including the right to foreclose.

• But several MERS foreclosures have bogged down when parties could not produce the original loan or "blue-ink'' documents on judicial demand. In September, the Kansas Supreme Court ruling took a dim view of the idea of a "nominee'' of the lender filing foreclosures(1) -- a position that some observers see as hostile to the MERS approach.

For more, see Loan registry raises legal questions (Foreclosures: Courts, legal scholars question company's role).

(1) Landmark Nat'l Bank v. Kesler, 289 Kan. 528; 216 P.3d 158, 2009 Kan. LEXIS 834 (2009), affirming Kansas Court of Appeals in Landmark Nat'l Bank v. Kesler, 40 Kan. App. 2d 325, 192 P.3d 177, 2008 Kan. App. LEXIS 138 (2008).