Certain states — including California and Virginia — are contemplating changing their real estate laws to require any mortgage firm pursuing a foreclosure to recreate all the transfers and assignments of a loan, according to real estate attorneys.
Such a change would negate MERS' assignments and pave the way for states and local jurisdictions to collect millions of dollars of recordation fees, according to Larry Platt, a partner at K&L Gates in Washington.
"They are arguing you must have recorded assignments showing intermediate assignments, that MERS doesn't show, as a condition to foreclose," said Platt, speaking at a recent Mortgage Bankers Association servicing conference.
"Many state legislatures are trying to jump on the foreclosure reform bandwagon. All kinds of ideas are being floated," said Donald Lampe, a real estate attorney at Womble Carlyle Sandridge & Rice, in Charlotte, N.C.
However, at this time, it's unclear which ideas will be acted upon by the legislatures, he told National Mortgage News. However, "It is difficult to redo the entire chain of title," he said, noting that in some cases, previous assignees have gone out of business.
"It is the type of proposal that could severally impair people's ability to foreclose," Lampe said. "Therefore, you have to question whether the intent of the legislation is to simply impair, slow down, or even prevent foreclosures."
Georgetown University associate law professor Adam Levitin told MBA members there are many problems with MERS, including its accuracy in identifying the current investor. (This past weekend MERSCORP CEO R.K. Arnold announced his retirement from the firm. He had been with the company since its inception.)
In addition, state legislators are looking for a political solution to the foreclosure problem by trying to get servicers to approve more loan modifications. "The perception is that loan workouts that should be happening are not happening," Levitin said.
