Quiet riot brewing

A fascinating read in the Harper's Jan. 2012 issue features the story of foreclosed homeowners challenging lenders in courts across the country. Among organizations that have taken shape to push back against banks is the National Homeowners Cooperative.

As Harper's writer Christopher Ketcham reveals in his report, "Stop Payment", the NHC teaches homeowners how to counteract a bank's foreclosing efforts. Suing for "quiet title" compels a bank to produce evidence of an unbroken chain of title (documenting ownership going back to the time property was first parceled and recorded). If the foreclosing institution cannot prove it owns the loan, then the title in question is considered "clouded".

Enter the Mortgage Electronic Registry Systems, what Ketcham calls "the heart of the clouded title problem." The purpose of the MERS--going back to the mid 1990s when Fannie Mae, Freddie Mac and a handful of major banks launched it--has been to keep an electronic record of the sale of mortgages between lenders. In doing so it became the 'in-name-only' owner of the loan for the public record. This allowed mortgage companies an alternative to the time-consuming and costly recording process handled through the county clerk's office.

Ketcham's piece does not mention the specifics of the county clerk's office role after the advent of MERS, except to state that the electronic registry "had single handedly unraveled centuries of precedent in property titling and mortgage recordation...".

A very telling quote from University of Utah law professor Christopher Peterson captures the meaning of MERS's 'achievement' on a wider scope: "What's happened is that, almost overnight, we've switched from democracy in real-property recording to oligarchy real property recording.... There was no court case behind this, no statute from Congress or the state legislatures. It was accompished in a private corporate decision. The banks just did it."

Professor Peterson also considers it no coincidence that as more Americans face foreclosure than at any other time since the Great Depression, it happens as the records of home ownership and mortgages shift to a private database.

An estimate of the number of mortgages held by MERS stands at around 62 million.