Chronic mortgage assignments by lenders put properties in legal limbo

From 1999 – 2006, the volume of mortgage origination and refinancing exceeded historical numbers. At the same time, the securities market for mortgage instruments became more fluid and accessible to traders and brokers at all levels. The reality of mortgage securities trading is now widely recognized, and is often blamed as a cause of the current economic downturn.

Chronic mortgage refinancing and trading of mortgages among lenders has also created a serious property records issue, which is just now making itself apparent. Individual mortgages often changes hands between lenders many times. In addition, each mortgage may be owned my multiple lenders, each with a different ownership interest, and division of responsibilities. One lender, for example may handle processing the payments, while another gets the interest, etc.

The complex ownership of mortgage instruments, and their frequent ownership transfers allows for the potential of questionable property rights. In one example of this, a woman in Atlanta owns a home where the exact mortgage holder can not be identified. Multiple lenders have argued about this in court, and she claims some of her payments have not been credited to her account. Her property is now in foreclosure.

Zella Mae Green

Whether or not she has financial problems separate from the mortgage records issue, the fact remains that this situation highlights a scenario we have seen increase for a few years. We first noticed this in 2005, but very few of these situations were apparent at that time. Last year, there were more news stories about this problem, as more homeowners were having difficulty determining who actually owns their mortgage.

Another part of this problem are mortgage servicing entities such as MERS. (Mortgage Electronic Registration System). They describe themself as follows:

• 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.

MERS allows lenders to record their mortgage or Deed of Trust in favor of MERS as trustee. Once this is done, all subsequent transfers of rights for that instrument can be done within MERS, without requiring the lender to record an assignment in the land records each time. In theory, this is an efficient way for lenders to lower expenses and consolidate internal management of loan instruments.

The obscured nature of the true mortgage owner can make it difficult for property owners and title abstractors to dig deeper into mortgage records. However, technically MERS is the actual mortgagee, so as long as they respond to the inquires from the homeowner, that should be all the information needed.

There has been some difficulty getting information from MERS in the past, but they now have a dedicated page for homeowners, which should make this process easier.