After a defeat in the U.S. District Court in Oregon, MERS seeks to cleanse years of allegedly improper foreclosure practices in Oregon through amendment to SB 519.  NAILTA opposes this effort.  Click above for details.

May 31, 2011

 

The Honorable Representative Jeff Barker

Oregon House of Representatives

Co-Chair, House Committee on the Judiciary

900 Court St. NE, H-491

Salem, OR 97301

 

The Honorable Representative Wayne Krieger

Oregon House of Representatives

Co-Chair, House Committee on the Judiciary

900 Court St. NE., H-381

Salem, OR 97301

 

Re:       Objection to Amending Proposed Senate Bill 519

 

Dear Honorable Sirs:

 

On behalf of independent title insurance agents, independent regional title insurance underwriters and interested title insurance industry stakeholders across the United States who are members of our organization, please allow me to formally introduce you to the National Association of Independent Land Title Agents (NAILTA) (www.nailta.org).  NAILTA was formed in November, 2008 by concerned independent title insurance agents who are determined to foster transparency, promote education and understanding and preserve the value of the land title process.  We urge your committee to table or otherwise reject the house amendment to S.B. 519 that would greatly undermine the historical recording requirements under O.R.S. 86.735(1).

 

On May 25, 2011, we received a copy of Judge Owen M. Panner’s decision in the matter styled Hooker v. Northwest Trustee Services, Inc., et al., United States District Court, District of Oregon, Case No. 10-3111-PA.  A copy of that decision is enclosed with this correspondence.  By now, you and your colleagues are no doubt familiar with the legal issues raised by Judge Panner’s decision and the fact that Oregon law has traditionally required adherence to the recording statutes prior to prosecution of Oregon’s non-judicial foreclosure procedure.

 

The problems highlighted by Judge Panner relate to the mortgage, banking and title insurance industry’s creation known as Mortgage Electronic Registration Systems, Inc. or MERS.  MERS was created in the late 1990’s as a means to hasten the packaging of mortgage-backed securities and, in turn, helped to facilitate the process that led directly to the Great Recession of 2008 and the continuing struggles of the housing market.  MERS is co-owned by the largest banks in the United States, the trade associations of the mortgage, banking and title insurance industries, and government sponsored enterprises such as Fannie Mae and Freddie Mac.[1]

 

Shortly after Judge Panner’s decision, we became aware of efforts by proponents of the MERS registry system to include a house amendment into S.B. 519 that would eliminate the historical safeguards for document recording in Oregon.  In Oregon, a trustee may conduct a non-judicial foreclosure only if “the trust deed, any assignments of the trust by the trustee or the beneficiary and any appointment of a successor trustee are recorded in the mortgage records in the counties in which the property described in the deed is situated…” O.R.S. 86.735(1) (Emphasis added).  The purpose of this provision is to prevent fraud in the chain of title and to allow a defendant in a foreclosure action to be afforded with the knowledge of who is the holder of the legal interest against that defendant’s property.  Judge Panner determined in Hooker that MERS did not clearly document its interest in the subject foreclosure action and thus ran afoul of the Oregon Trust Deed Act.[2]

 

Amendments sought by proponents of the MERS registry system seek to retroactively amend the Oregon Trust Deed Act by allowing beneficiaries such as MERS to record mortgage assignments in any order and in any condition without regard to existing law as a means of “waving the magic wand” over the inconsistencies and outright failures of MERS to comply with state law.  The opposed language from the amendment reads as follows:

 

“(3) An instrument that a beneficiary executes is prima facie evidence in any court that the beneficiary has authorization to execute the instrument from the person that owns or holds the debt or other obligation that the trust deed secures, but the instrument is conclusive in favor of a purchaser for value in good faith that relies on the instrument.”

 

MERS has been the repeated subject of foreclosure irregularity cases across the United States.  In many instances, it is the construction of MERS itself that becomes the focal point of the scrutiny.  MERS utilizes a complex web of non-employee, corporate signing officers to execute assignment documents for courts across the country.  These individuals have no tangible relation to MERS as they are not compensated for their services, do not regularly attend corporate meetings at MERS’ Reston, Virginia offices or have any daily contact with MERS officials.  In other words, the process of document execution at MERS is nothing more than an elaborate ruse to give the impression that documents are being reviewed and authorized when, in essence, these documents are being executed by individuals with no real relation to MERS at all.

 

Further, the MERS system provides no incentive for participants to provide accurate information into the registry system.  At any given moment, who the holder of a registered mortgage can vary as widely as the identity of who the person is entering that information into the registry.  After all, there is no independent public official entrusted with oversight over the system.  Under MERS, there is no disinterested party to ensure that a homeowner can investigate who the holder of the promissory note and mortgage is on that homeowner’s property.  Thus, even if the MERS system could convince legislators that it could fix the omissions in its registry, there is no penalty to subscribers for not doing so.  MERS was never created to improve the land title recording system.  It was created to speed up the process of mortgage securitization.  Clearly, the drafters of this proposed amendment seek to cure the ruse without penalty.  Rather than, fix the system, they wish to perpetuate the fault.  NAILTA opposes this effort.

 

NAILTA is a public supporter of legislation that would greatly restrict the current form of MERS and has advocated for legislation that would limit MERS’ contact with the land title records.  NAILTA authored the enclosed white paper regarding MERS several months ago.  We believe that MERS functions much the same way that anti-competitive businesses in the title insurance industry function – as a conduit to produce revenue streams without any attendant benefit to the general public.  NAILTA has joined with the National Association of Land Title Examiners and Abstractors (NALTEA) to oppose the current form of MERS and to seek legislation across the United States that would curtail its use and create a more transparent and reliable land record system in its place.

 

Our goal is to be part of a broader effort to improve and to preserve the land title record system.  Supporting important policy decisions at the local, state and national level is the key to that effort.  Again, on behalf of NAILTA, we ask that you reject the proposed amendment to S.B. 519 as it would undermine Oregon’s Trust Deed Act, make it more likely to harm Oregon homeowners in the process of foreclosure and patronize fraudulent conduct already occurring around the country.

 

Please let us know if there is any additional information that your require on this matter.  We look forward to hearing from you.

 

Yours truly,

 

 

Robert B. Holman, Esq.

Co-Chairman,

NAILTA Policy and Legal Affairs Committee

 

 

John Novarina

Co-Chairman

NAILTA Policy and Legal Affairs Committee

Cc:       NAILTA Board

NAILTA Policy and Legal Affairs Committee


[2] Hooker v. Northwest Trustee Services, Inc., et al., United States District Court, District of Oregon, Case No. 10-3111-PA at 10.