DA Craig Watkins Insists Mortgage Processor Has Shorted Dallas County "Tens of Millions"

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A Reuters story from last month tells you everything you need to know about Mortgage Electronic Registration Systems, heretofore "a little-known institution in Reston, Virginia." Says the story, it's a 16-year-old entity created in 1995 by Fannie Mae, Freddie Mac and other Big Banks intended to "speed up the recording and transfer of mortgages," which, till then, were handled solely by county clerks' offices nationwide at a "glacial" pace. And for years, nobody seemed to mind. Until, that is, it was revealed in court docs in '09 that MERS's 50 employees didn't do much except maintain the company's computer databases, and that for fees of around $25 a pop and up, "the real work was done by loan servicers -- banks and other companies that do routine work for trusts that own the mortgages, including collecting and tracking payments from homeowners and filing to foreclose when a borrower defaults."

Which is why, late last month, Massachusetts Attorney General Martha Coakley said she was going after MERS for foreclosure fraud. According to a Boston Globe story, "She is concerned that MERS failed to pay government fees as well as 'impaired the integrity' of the state recording system by failing to document loan transfers." Seems Coakley is a trend-setter: This morning, Dallas County District Attorney Craig Watkins will ask the commissioners court for permission to investigate whether MERS is responsible for "the possible loss of millions in revenues to Dallas County," per a release just sent out by his office. MERS veep Janis Smith tell The Dallas Morning News in a pay-walled piece that the company's done nothing wrong: ""This is a nonissue -- counties aren't entitled to fees for work they didn't do or that the law didn't even require them to do." But Watkins is pressing ahead.

"While the DA's office is traditionally only thought of as the prosecuting authority for crimes against individuals, in addition to handling those types of cases, we are also responsible for providing legal representation in civil matters such as this issue with MERS where Dallas County is the victim," Watkins says in a statement issued this morning. "When I learned about this issue, my first reaction was we needed to explore possible remedies for getting MERS to reimburse the estimated tens of millions in uncollected filing fees that are potentially owed to Dallas County. These possible remedies are in the process of being explored. This is yet another issue that has gone unaddressed for years that we have discovered, are taking action to correct and put measures in place to prevent it from happening in the future."

The DA makes his case on the other side.
Dallas County District Attorney Craig Watkins to Explore Possible Claims against Mortgage Electronic Registration Systems, Inc., to Potentially Recoup Millions for Dallas County

(DALLAS, TX - August 9, 2011) - Today Dallas County District Attorney (DA) Craig Watkins announced that the DA's office is considering asserting claims against Mortgage Electronic Registration Systems, Inc. (MERS) for the possible loss of millions in revenues to Dallas County. MERS, a subsidiary of MERSCORP, Inc., was established and is owned by banks and members of the mortgage finance industry. MERS was established to act as a shadow recording system for the millions of mortgages in the United States and facilitate the buying and selling of mortgage rights as commodities. There are currently approximately 31 million active residential mortgage loans registered on the MERS System. Since its inception, MERS has attempted to track more than 60 million mortgages nationwide and more than 250,000 in Dallas County alone. However, due to the fact that reporting is not always required, the MERS electronic records of mortgages may or may not accurately reflect the millions of transfers of mortgage rights that have occurred over the past several years.

"While the DA's office is traditionally only thought of as the prosecuting authority for crimes against individuals, in addition to handling those types of cases, we are also responsible for providing legal representation in civil matters such as this issue with MERS where Dallas County is the victim," said District Attorney Craig Watkins. "When I learned about this issue, my first reaction was we needed to explore possible remedies for getting MERS to reimburse the estimated tens of millions in uncollected filing fees that are potentially owed to Dallas County. These possible remedies are in the process of being explored. This is yet another issue that has gone unaddressed for years that we have discovered, are taking action to correct and put measures in place to prevent it from happening in the future."

Lenders ordinarily file a record of their rights in the deed records of the county where the property is located. The county clerk maintains those records as notice to the public of the identity of persons who loaned money for the purchase of the property and who have rights to foreclose upon the property if the loan is not repaid.

For a fee, MERS allows lenders to show MERS as the "beneficiary" of the lender's rights to the property if the loan is not repaid, even though MERS is not actually the beneficiary. MERS acts as a placeholder for the lender as to the lender's mortgage rights, but not the lender's rights to receive the loan payments. In that way, the lender is able to sell its rights to receive the loan payments and MERS agrees to protect the purchaser of the loan by remaining on the deed records as the "beneficiary" of the mortgage. So long as MERS remains on the deed records as the beneficiary, subsequent purchasers can avoid having to file their acquisition of the rights to the loan payments and pay the associated filing fees.

After extensive research on the issue of whether MERS and others acting with it improperly recorded hundreds of thousands of real estate records in Dallas County, and were thereby able to avoid paying filing fees on subsequent transfers of the properties that were involved, it was concluded that MERS and those acting with it have engaged in conduct which wrongfully deprived the citizens of millions of dollars in filing fees on property located in Dallas County. MERS operates a national electronic registry that tracks beneficial ownership interests and servicing rights associated with residential mortgage loans and any transfer of or changes in those interests or rights. There are approximately 5,000 participating members of MERS, of which 3,000 are residential mortgage servicers. Members register loans and may report transfers, foreclosures, and other changes to the status of residential mortgage loans on the MERS System. However, there is no requirement that all changes or transfers be reported to MERS.


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7 comments
eastdallasgirl
eastdallasgirl

What ever happened to that dependable phrase, "truth in lending"  ?

Danandcharlene
Danandcharlene

I find the derogatory comments to this article laughable.  At a time when local county governments in every state of our nation are struggling to find money to provide services to citizens, this "overlooked" source of "stolen revenue" should be stringently investigated. 

The "easiest alternative" is for local government to impose higher taxation on local real estate!  Just sit back and watch your millage rates increase while property values are plunging. All parties to this scheme should be criminally investigated, indicted for "theft by process" and/or "theft by deception," publicly tried, fined, and given lengthy prison terms.  If the criminal and civil suits extend to Wall Street, the ivory towers in academia, the corridors of Congress, or even to the past and present occupants of the White House, so be it.

Massive corruption and "payoffs" at local, state, and national levels has kept this issue from being properly investigated by dedicated, honest public servants.  Hopefully, this will change very soon! If  there are those who are willing to look to other states to see the involvement of "Rocket Docket Foreclosure Judges," "Fraudclosure Mills," and even political shenanigans in the state assembly and/or the Attorney General's office, they need to look no further than Florida. Any State AG's who are supposedly "investigating" the activities of the Banksters and their "mortgage servicers" had better be sure they've acted with "clean hands" scoured completely of any stench of Banks-connected political contributions. 

"Following the money" will be what brings down this house of cards that enables Banks to get "Free Houses" and stiffs institutional investors and pensions plans.  (Has your retirment plan been "revised" lately? 

Maybe it's time to have a "spirited discussion with that 'wise and prudent' advisor"  who recommends and acquires your plan's assets?  Use the terms "due diligence" and "liability for losses" during your conversation. And Oh, yes.  Back to the local level... Even the largest Real Estate Title companies are now refusing to insure any homes affected by this mess.... that action has an effect on the market value of every homeowner not just those behind on mortgage payments....  The reason they won't insure titles to homes?  ...MERS has effectively "infected" the chain of title of more than 80 Million properties in our nation.  How do you think that will work out at your next Home Owners Meeting? Kudos to your DA, your Register of Deeds, and your local Sheriff for "sniffing under the covers" on this local and national Ponzi scheme!

replay
replay

Is this anything like the millions and millions and millions of dollars owed to the County in forfeited Bail Bonds that turned out to be two dollars and 38 cents on a good day?

DR
DR

This story adds fact the DMN didn't have. Some on else thought of this. If it works great but lets be honest.

Mike
Mike

That he discovered?  After reading about it in NY Times 6 months ago?  Big, smart dogs with razor teeth are wading in that pool.  He better have it together before we step in.  If he thinks he's just going to ride along on the efforts of AG's that know their business, he best extend that "considering" time. 

Anonymous
Anonymous

The fees that MERS did or did not pay to Dallas County (and other govt entities) are not the story. Their operations could have been scrutinized long ago, and changed, if the government was concerned about what they were up to. The problem is that public servants hate to admit that they were just as happy with the system as long as the party kept going. And they have to look back on what was taking place with the benefit of hindsight and act disgusted; they have to pretend that ignorance is an acceptable excuse (which it often is, because their electorate is also usually pretty ignorant). There's a case to be made against MERS, but this specific one is not it, and Watkins is not the one to make it.

Wylie H.
Wylie H.

Watkins is an idiot.... there's no case here.

But I guess it is a good way to distract the media from his current difficulties.  Watkins should focus on doing his core job better before wasting the County's money testing novel legal theories.

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