The Wrongologist

What’s
Wrong Today:

In January
2012, the Wrongologist wrote about MERS:

Instead of
individual banks or lenders registering with counties each time a loan was sold
or re-sold, MERS handled the initial registration and then became the
“nominal” note-holder. Then, each time the note was passed on, MERS
would record the transaction in its computers — but no matter who the actual owner of the note
was, MERS remained the legally registered assignee of the note with the county.
Without MERS, the mortgage bubble
would not have been physically possible. By using MERS,
lenders/buyers of mortgages no longer had to document their transactions with
county clerks, or pay the courthouse registration and processing fees. And MERS
holds the liens on behalf of all the players in the game.

The Wrongologist
concluded:

Well, here’s
what’s next. Dave Dayden reports:

Although
the MERS system has been subject to many lawsuits throughout the country, initially
for the “Robo-signing” mess, according to this bill’s text, any document
arising from this repository would be legal on its face, pre-empting state and federal laws on foreclosure.

Rep. Jeb
Hensarling (R-TX), chair of the House Financial Services Committee, introduced
the bill, called the “Protecting American Taxpayers and Homeowners (PATH)
Act” on July 11th. It’s the House Republican response to a series of
bills and initiatives to deal with Fannie Mae and Freddie Mac, and set a course
for the future of mortgage finance. Most of the bill deals with that: in Hensarling’s
vision, Fannie and Freddie should be dismantled within five years, and
private financial services firms take up the slack with virtually no government
guarantee.

But Title III
of the proposed PATH Act directs the Federal Housing Finance Agency to provide
a charter for the National Mortgage Market Utility (NMMU). The utility would
create standard practices for origination, servicing, pooling and
securitization of mortgages, and operate a platform for holding and bundling
mortgages just like MERS.

But, the
bill also allows the big banks to wrap up the documentation failures of the
bubble years under the cover of a new federal regulation. That should sound a
few alarms throughout America.

The bill
proposes that the National Mortgage Market Utility would exempt mortgage backed
securities from SEC oversight under the Securities Act of 1933. This would
allow the mortgage and derivatives bubble of 2007-2008 to come back with a vengeance.
From the proposed bill, the repository’s defined purpose is to: (emphasis by
the Wrongologist)

This is an
elegant solution for the Banks. It takes all the questions arising from whether
MERS has the legal right to foreclose, all the myriad problems with mortgage
documentation, and buries them with a brand-new private database that pre-empts
all those questions and concerns. All the losses
MERS has suffered in state courts? Gone. All those problems servicers are
having foreclosing in states like Nevada
and California
and elsewhere? Also gone.

States
have always controlled property law, but this Republican bill would remove state
control, putting it not in the hands of the federal government, but in a private entity. The banks would be able to
foreclose because a repository, in all likelihood owned by the banks, said they
had that legal right.

The PATH Act is unlikely to become law. But, it represents the
opening negotiating position of the banks regarding how they want to insulate
themselves from foreclosure fraud in the future: Just make it impossible to
challenge fraudulent documents by using one’s personal private property and due
process rights.

“Protecting
American Taxpayers and Homeowners (PATH) Act.” How Orwellian: No consumer will
be protected, this bill only protects the banks.

Why are
Republicans, who are so devoted to rugged individualism, states rights, the 10th
Amendment, and smaller government, so comfortable with grabbing this power from
individuals and the states?