Robert Rinehart asked:




September and October of 2010 have ushered in a new era of home loan modification and loan reduction possibilities for homeowners. Major revelations in the mortgage industry have rocked the financial landscape of America. In only two months, widespread instances of improper and even fraudulent foreclosure paperwork filings have come to light. Major lenders have suspended foreclosure proceedings in twenty-three states and Attorneys General in all fifty states have announced investigations into improper foreclosure practices.

This is only the tip of the iceberg, though. The biggest revelation of all, the “MERS” loan registration charade, has yet to get much publicity. The MERS charade promises to be the biggest-ever opportunity for homeowners to successfully negotiate with their lender to lower their principal balance and get lower payments and regain lost equity. Once you understand the MERS Charade, you’ll understand why.

MERS, or the “Mortgage Electronic Registration System” is a database used by lenders to track the sale of mortgages in the secondary mortgage market. Realizing they were going to pay possibly billions of dollars tracking multiple sales of mortgages (called an “assignment”), the lenders developed MERS to track mortgage sales and avoid having to file assignments at the county recorder’s office each time a loan was sold. With over sixty million loans being sold, some more than one time, this represents a huge cost savings and dramatic gain in efficiency. The only problem is that it’s illegal!

You see, the law states that maintaining a proper chain of ownership for loans secured by real property is a vital and important necessity. But MERS completely bypasses this requirement. Lenders thought they could appoint MERS as their “nominee” and if a homeowner defaulted on their loan, MERS would be the foreclosing authority. This is the MERS charade. But here’s where the charade breaks down. Because MERS is only the nominee, MERS doesn’t actually own the loan! And, legally, only the actual owner of the loan can foreclose. It’s as simple as that.

What does this mean for the homeowner? Well, because the originating lender doesn’t own the loan and MERS doesn’t own the loan, neither of them can foreclose! And, the loans have been sliced and diced so much that it’s impossible to piece the actual ownership of the loan together. This means that if you default, no one can foreclose on you. Your loan is no longer secured by your home and it cannot be taken away from you through a foreclosure.

The lenders have realized their mistake and are now capitulating to homeowner negotiations for loan reductions. They have no other choice. Faced with having to write off 100% of the loan vs. getting a new loan with a much lower loan balance, lenders are taking what they can. They’ll give you a loan reduction without putting up much resistance or forcing you to jump through excessive hoops.

All you have to do is find out whether your loan was registered in MERS, which you can do by clicking the following link and reviewing the list of participating lenders, most of which are happy to give you a bank loan modification resulting in a nice loan reduction.

Alvin

Kristin Abouelata – Home Loans asked:


As you’re sitting across from your mortgage lender who is going over, line by line, the charges and fees associated with your loan, he/she mentions MERS.  It’s only costing you $4.95, so you don’t pay particular attention to it.  I mean after all, $4.95 is nothing compared to the state tax stamp fee or other line items you see.  But, aren’t you curious as to exactly what MERS is?  At face value it sounds like something you should get an inoculation to avoid.  But in actuality, it’s a little system that has revolutionized the mortgage industry.

 

MERS is kind of like a microwave.  You never knew how much you depended upon it until you consider taking it away.  Seriously.  Our microwave was broken for a short period of time, and I couldn’t believe how much we used it or how much it simplified our lives.  Half the food I cooked became a real trial to prepare the old fashioned way. Not to mention heating up leftovers. Ironically, it’s a very similar situation for the mortgage industry if they had to do away with MERS all of a sudden.  It would be perplexing, annoying and time consuming.

 

MERS stands for Mortgage Electronic Registration System. If you visit the MERS website (www.mersinc.org), you can read their overview: “MERS was created by the mortgage banking industry to streamline the mortgage process by using electronic commerce to eliminate paper.  Our mission is to register every mortgage loan in the United States on the MERS (registered trademark) System.”  Nice.  Everyone likes paperless systems these days.

 

In the old days, if you sold a loan on the secondary market, you had to assign the mortgage to the new buyer.  You created a paper assignment and recorded it at the courthouse.  If there was an error on the assignment, you had to correct it (have it initialed by the appropriate parties) and re-record it.  Then you sent this original recorded document to the new buyer for them to keep.  If they in turn sold the loan, they had to prepare another assignment, record it and forward it, along with the first recorded assignment, onto the new buyer.  And so on and so forth.  Lots of paper being printed, recorded, regenerated and reconstituted.  MERS came up with a fabulous system to eliminate this nightmare.  Now, when you sign a mortgage, MERS assigns a unique identifying number to that mortgage.  The lender, upon closing, registers the loan with MERS to show it exists.  Then, any transfers can be done electronically.  The mortgage servicing and mortgagees can also be tracked electronically, which allows for title searches to be streamlined.  It’s a beautiful thing.  This system has saved a lot of time and energy for the industry.

 

However, if you were to tell a mortgage operations person that MERS was going away, and they were going back to paper assignments, it wouldn’t go over well.  They would probably be at a total loss.  Sort of like tossing someone a bag of popcorn and telling them to cook it without a microwave.



RUDY