What many perceive as two major announcements today from Washington are little more than gimmicks. The least significant of the two was passage in the House of the STOCK Act. Honestly, we are 1 trillion in the red this year and 16 trillion overall and this strikes someone as important? Yea, members of congress shouldn't profit from information they receive as a result of their office or committee assignment. Yea, Nancy Pelosi shouldn't be such a lying hypocrite and enrich herself and husband Paul by getting preferential IPOs. I agree, it would be preferable that they didn't engage in this conduct. Sure, attempt to prohibit it. But to pretend this addresses a major national issue - when there are so many - is insulting. Really upsetting is how much this issue is distracting congress from ignoring the really important stuff.
So it's passed and they will reconcile with the Senate quickly. Will any unemployed person in America be less unemployed because of this? Will our debt be reduced, will manufacturing jobs return to the U.S.? Will Iran not be one day closer to having a nuclear weapon? But hey, given that the U.S. Senate is now 1100+ days without a budget this bread and circus is what passes for priority legislation in that chamber. At least House Republicans have proved themselves capable of walking and chewing gum at the same time.
But STOCK is just fluff. What isn't fluff was NY and California's capitulation to the feds and other states on a settlement with major mortgage lending banks regarding foreclosure abuses. Here's the missing piece in that settlement that NY Attorney General Eric Schneiderman sort of addressed last week in his own suit against the banks. The states in unison need to abolish MERS. That's what's missing from the settlement and without that the agreed penalties are meaningless.
MERS is the electronic mortgage system that now holds title to a majority of homes with mortgages initiated in the last ten years. A computer cannot be the filer of a foreclosure. A computer cannot be the registered holder of a mortgage. A computer cannot substitute for the filing of title with a state's records office. And on and on and on. Going back centuries to english common law it has been accepted as basic legal concept that title for property must be in someone's name and the transaction between the two parties properly registered and documented. MERS does away with all that and saves the banking industry billions. It also is completely illegal. The problem is that lax state banking officials failed to realize this and allowed the industry to write so many mortgages - 2/3 since 2007 - that no one knows who legally owns all that property. Everyone but MERS shareholders agrees it can't be a computer server.
What's needed - it's happened sporadically around the country - is for judges to continue to throw out any foreclosure that emanates from a MERS mortgage. Further, every state needs to pass legislation banning MERS as a holder of mortgages. If one state took this action alone mortgage generating banks might say - as insurance companies often do when threatened - they will simply stop writing mortgages in that state. If all the states do this that threat is eliminated.
Eric Schneiderman outlined very clearly that MERS is nothing more than an illegal attempt by banks to avoid recording fees. He does not however take the next step and ask a judge to stop future MERS recorded mortgages. Gov. Cuomo needs to take the bold step of doing this and the legislature needs to pass that quickly. If New York, home to most major banks, took this step MERS would die fast. Robots and hard drives can't own your home. Only people and banks can do that. It's way past time to remind the banks of this.
Today's settlement does nothing to address this and that's the big scandal. Fees and fine are great. But that will do nothing to stop this from happening in the future. Eliminating MERS and restoring the procedures used for 10 centuries to record property ownership will. Today's settlement would be akin in 1865 to cutting reparation checks to black slaves but not passing the 13th Amendment. This settlement without an elimination of MERS is a big win for the banks. Just what the feds always wanted.
Russell Harding
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