November 11, 2010
Thank you for the opportunity to comment to the Securities and Exchange Commission the (SEC or Commission) on the proposed rule changes to Regulation AB (Proposal).
Why would the SEC even consider restructuring, redesigning or legitimizing a system like MERS until there has been a complete and total investigation of this company and its membership? At the present time there are billions of dollars at stake in complaints filed against MERS and many of its individual members – just as there has been billions of dollars ($$) spent to quietly settle issues as disconcerting as fraud against the same.
I. There are 65 million reasons why MERS should not be legitimized. #1 - TOP OF THE LIST the potential for TAX FRAUD - where is all the revenue, tax money and income from the numerous $3.95 - $6.95 transactions that have floated through MERS since its inception? Congress doesn't even have a handle on the amount of unknown assignments within MERS (each at $3.95 - $6.95) that didn't make it into the state recordation books - let alone the 120+ million that did. The States have lost money due to the internal trading conducted by the banks and MERS. At first glance, MERS and its membership appear to be just one big anti-trust machine splitting a ton of money among themselves at the borrowers and investors expense. Some entity has to take the ultimate responsibility in the event of a failure when "legitimizing" and condoning a known problematic corporation.
II. Real property doesn't move between states. Promissory Notes do – if they are negotiable but if they're not attached to a property, and Congress encumbers an unencumbered property, it's clearly a taking.
The SEC and Congressional leaders who are contemplating this should consider the following:
a) Real property is not, even by the wildest stretch of the imagination, interstate Congress has no jurisdiction. Should Congress have jurisdiction? There's no point arguing that without a change to the Constitution, which is unlikely to happen quickly, if at all. Congress has no jurisdiction and legislation like that described will make an already murky and dangerous legal situation even murkier and more dangerous their time would be better spent looking for a real solution,
b) Even if Congress were able to do this would be a "taking" of unprecedented scale, scope, and size so large it would bust the Treasury encumbering property with debt has been and always will be defined as a taking, and
c) The bailout for incompetence wasn't well received by the American public the attempted bailout for fraud will be even less well received.
MERS is just a bridge to moving real property not only interstate but international. While like the SEC, Congress doesnt directly control private corporations like MERS, Congress does have the jurisdiction to force behavioral changes for MERS member banks. Banks are dependent on all manner of federal perks. Make these perks dependent on behavioral changes that fix this solution and the problem will be quickly resolved. In short, Congress and the SEC only have the ability to strong-arm one side of the equation if they want to solve the problem they should focus on the only party that they have any control over.
III. MERS could never be a holder in due course. If you are a "holder" you have liability issues, costs and concerns. For example, who pays to insure the safety of the original records (vault, human error, fire, theft, act of God, terrorism, etc.)? Who handles and pays for the staff to track and monitor forensic examinations? During a foreclosure how would MERS cover the expenses of unpaid property taxes, tax liens, homeowner property and liability insurance, homeowner association dues, maintenance, etc.?
These are all legitimate liability expenses that a "holder" in due course is responsible for - and that are actually being ignored in the wonderful world of MERS and bank transactions. Somehow these liability costs appear to be just "forgotten" during the discussion of how we move notes and mortgages in and around amongst the banks. Let's estimate the liability costs conservatively at $150 a month per home = $1800 a year (say, insurance to cover which should have to be maintained - another accounting payment liability) X 65 million mortgages (MERS)... simple math will tell you that's why there will never be a "full agreement" reached by MERS or the banks - neither wants the liability of a holder in due course... they'll "hold it" like holding a hot potato - but they won't be responsible for it. Simply semantics and mathematics, MERS alone cannot afford it.
The states want to know what do we need MERS for? – all they do is eliminate our revenue and have clouded our titles. Homeowners and securities investors blame MERS for the fraud stemming from the transactions over the last dozen years.
With all of this said, its much too soon to discuss the continuation of MERS. It may likely be, given the 50 state AG investigation(s), that MERS, like Fannie and Freddie, is also placed under a receivership at some time in the near future.