POSTED: Thursday, November 10, 2011 - 11:45pm
UPDATED: Friday, November 11, 2011 - 10:20pm
EL PASO - Between record home foreclosures and devastating budget cuts, El Paso County has seen a rough couple of years recently. We usually think of these crises as separate, but some argue there's a common link between these challenges, that lies with a company known as Mortgage Electronic Registration Systems, or MERS.
El Paso County is in a foreclosure crisis. According to the real estate information company, CoreLogic, more than 5,000 homes have gone into foreclosure since the recession began in late 2007.
Attorney Richard Roman has represented dozens of homeowners in foreclosure cases; he argues the real problem is MERS (Mortgage Electronic Registration Systems).
"MERS has...single-handedly taken the American dream of home ownership and turned it into a nightmare,” said Roman.
MERS is a private company that was set up by big banks in the 90's. Its job is to keep track of home loans electronically, as mortgages are sold and re-sold through the stock market.
Before MERS was created, individual mortgage lenders like Wells Fargo or Bank of America were the named beneficiary on the deeds of trust; that meant the bank would become the owner of any home it foreclosed. However, under loans monitored by MERS---and that's 60 percent of all mortgage loans in the country, MERS is the beneficiary.
Richard Roman said that can be a problem in foreclosure cases; a homeowner with a loan under MERS might not be able to tell which bank owns their mortgage, if its been traded several times. Roman said MERS has confused and clouded millions of property titles, and caused people to lose their homes through a faster foreclosure process.
"The sake of expediting foreclosures, the sake of computerizing the whole system, for the sake of human interaction out of the whole process to make it expedited and quicker that's where this process has gone way wrong,” stated Roman.
On that point, a spokesperson with MERS told us: "This claim is false and entirely without merit or legal basis."
Roman also represents Carol Reeves, who is suing MERS in state court. The mortgage on her East El Paso home is with Wells Fargo, but MERS is listed as the beneficiary. Carol Reeves said MERS is benefiting by doing no work at all.
“MERS the beneficiary, that's a lie. They are not the beneficiary. They take in no money, they pay out no money,” said Reeves.
Reeves said she's not asking MERS for money. And, Unlike many other homeowners, she's not facing foreclosure, but she wants to inform El Paso County homeowners who may be on the brink of losing their homes.
"The lawsuit is to point out hopefully to the judges...recognize this...you've been rubber stamping fraudulent documents,” said Reeves.
Before MERS came along, banks had to record mortgage assignments within their respective counties. They also had to pay a fee, but MERS changed that.
The company's website claims, "Mers eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans."
However, that's a problem, because Texas law requires that county clerks, "…maintain a well-bound alphabetical index to all recorded deeds…mortgages and other instruments relating to real property."
MERS says it does not violate Texas law. In a statement to Newschannel 9, a representative with the company writes: "...the recording of an assignment is unnecessary when... beneficial ownership interest transfers between members."
For that reason, we requested an interview with County Clerk Delia Briones, but we were denied. We were told Briones isn't comfortable speaking about MERS, because she doesn't know anything about it.
Each time MERS doesn't record the transfer of a mortgage, it means the county doesn't collect a filing fee. That's why Dallas County is suing MERS. Attorney Stephen Malouf is handling that case. He said MERS could owe taxpayers in El Paso County millions of dollars over lost filing fees.
"It, first of all, makes the deed records inaccurate, and secondly, as it regards El Paso County, it means that the filing fees that El Paso County would otherwise receive, are not being received because the banks are not recording the subsequent assignments,” said Malouf.
In the last month alone, a number of other counties across the country have filed a lawsuit against MERS, claiming they're owed filing fees...
But, how involved is MERS in El Paso County? Turns out, very involved. According to the El Paso County website, since January 1st of this year, over 1,000 mortgages have gone to MERS.
El Paso County Judge Veronica Escobar said county leaders are looking into whether the county can also sue the electronic registry system.
"The county attorney will outline the county's options once the research is completed to determine whether we have a legal claim,” said Judge Escobar.
Roman hopes El Paso County will decide to take legal action against MERS and recover filing fees.
"Given everything that's been going on in this community, we cannot afford to ignore this anymore," said Roman.
Carol Reeves, the homeowner who's suing MERS, said that whatever happens in her lawsuit, she'll continue her fight to hold MERS accountable.
"I've been asked, why don't you just let this go? Why do you want to go through all this? And it's like, once your eyes are opened, you can't close them,” added Reeves.
The El Paso County Attorney's Office said it's still looking into MERS' actions in El Paso County. Ultimately, the commissioner's court will vote on whether to sue MERS. We're told that if they decide to take legal action against the company, they may join Dallas County's class-action lawsuit.