This is brilliant – rather than regulate or bailout MERS, these three are pushing to cut them off. If lenders want to sell loans to Fannie/Freddie/FHA, they’ll have to find another way to track them other than MERS, and pay recording fees every time they sell or transfer the loan. From HW:
Three congressional representatives recently introduced a bill into the House that would gradually phase out the use of Mortgage Electronic Registration Systems, commonly called MERS, within the government-sponsored enterprises as well as Ginnie Mae.
The Transparency and Security in Mortgage Registration Act of 2010, also known as H.R. 6460, would prohibit Fannie Mae and Freddie Mac from purchasing or acquiring any new MERS mortgage deal of six months after its enactment.
MERS allows lenders to track individual mortgages through an electronic tracking and holding system. According to MERS, the firm holds legal title to a mortgage as the loan owner’s agent and is sometimes granted the authority to enforce foreclosure. The firm has been at the epicenter of foreclosure-gate and under scrutiny for wrongful foreclosure.
Under the bill, Fannie and Freddie would also be prohibited from new lending or investing in securities consisting of MERS mortgages for six months.
After the six-month time period expires, “MERS shall not be the named mortgagee or mortgagee of record on any mortgage owned, guaranteed, or securitized” by the GSEs. If at the six-month deadline, Fannie and Freddie still hold loans with a connection to MERS, the agencies will assign those loans to a servicer or holder, the bill states.
Ginnie Mae would be subject to the same timelines and similar terms as Fannie and Freddie under Transparency and Security in Mortgage Registration Act of 2010.
“[T]he association may not newly guarantee the payment of principal of or interest on any trust certificate or other security based or back by a trust or pool that contains, or purchase or acquire, any MERS mortgage,” the bill states.
Marcy Kaptur (D-Ohio), Raul Grijalva (D-Ariz.) and Carolyn Kilpatrick (D-Mich.) introduced the bill, which would amend the National Housing Act.
MERS said it has been reviewing the bill and analyzing its impact on the mortgage and housing markets.
“MERS brings considerable value and clarity to homeowners, regulators and the mortgage industry, and we hope to emphasize those contributions in our conversations with Rep. Kaptur, her staff, and others involved with this legislation,” the company said in a statement.
Patton Boggs commented that banning the use of MERS from the government agencies is remarkable since Ginnie Mae just adopted the Uniform Loan Delivery Dataset by MISMO, which is a owned subsidiary of the Mortgage Bankers Association, but used and managed by MERS. Fannie and Freddie also use the MISMO system.
The Transparency and Security in Mortgage Registration Act calls for a study to be conducted on the impacts of the lack of electronic mortgage record keeping. It would note any progress states have made in developing electronic land title recordation systems for their localities that contain uniform standards, and any findings and conclusions and best practices resulting from such development. It would also study the feasibility of creating a federal land title recording system.
MERS said it is pleased the subject will be researched and the firm “is ready and well-positioned to provide this service to the federal and state governments, county recorders, and the American homeowner.”
The study is mandated to the secretary of Housing and Urban Development and the Comptroller General of the United States.