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Some foreclosures continue to stall

by Kim Cooper
| November 28, 2010 8:00 PM

Several weeks ago, we told you about foreclosures being halted by major banks due to confusion about the true ownership of the mortgages. Regular readers will remember that shortly after that article appeared, some banks reversed their positions and began pursing foreclosures again. They will remember too, that Idaho and Washington were two of the 23 states that remained in limbo.

It appears that the culprit in this case of confusion is a private company, Mortgage Electronic Registry Systems (MERS). According to their website; "MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans." Interestingly, the owners of MERS are the largest banks in the country.

As many of you know when you finance a home the mortgage is often sold, sometimes as soon as your transaction is recorded. This recording is what MERS is supposed to excel at, saving time and money by tracking these loan purchases electronically. The problem is that although the transactions are tracked electronically, the deeds of trust are not physically recorded in the counties that are home to the property. These deeds of course are the security or title to the property that must be paid off before you truly own it. The problem is that these loans are sold as many as a dozen times before they are paid off.

MERS is under fire, accused of sloppy tracking and failure to provide a clear chain of title. Each time the loan is sold another link in the chain is created and new documents must be recorded in the county by the recorder's office. Failure to properly record - and pay the associated fees - presents two problems. First, the company buying the loan cannot prove ownership to pursue a foreclosure if the deeds have not been recorded. Second, there are fines associated with failure to pay the fees to the county to record the transaction. By any estimate then, counties can lose millions of dollars by not collecting fees on these transfers, since they are only recorded in the MERS system.

According to the accusers, MERS, with its 40 employees, has failed to record or to pay recording fees on thousands of transactions leaving the states short of fees they are legally due. Also, since the county cannot follow the chain of title they cannot accurately identify the party entitled to foreclose.

This has caused delays in many states as litigation moves forward against MERS for unpaid recording fees. Although some are predicting Congressional intervention to clear up the mess, there have been no credible reports of a MERS bailout to date.

As for now, foreclosures will wait in some states as MERS and the banks that own it try to clean up their mess and prove ownership of the mortgages in default.

For a safe trip home call a Realtor. To find a Realtor to represent you visit the Coeur d'Alene Association of Realtors website at www.cdarealtors.com. There you can also search available properties in the Multiple Listing Service.

Kim Cooper is a Realtor broker and the spokesman for the Coeur d'Alene Association of Realtors. Kim and the association invite your commentary and feedback. You may contact them by calling 667-0664 or by writing to them at 409 W. Neider, Coeur d'Alene.

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