There are legitimate, substantial concerns about the legal foundation of MERS– I think most folks who have followed the foreclosure mess can agree on that.  But there is also a lot of blatant misinformation out there coming from MERS critics, and some of it is coming from folks who are presenting themselves as experts on the issue.

For example, University of Missouri Kansas City professor of economics and frequent mortgage crisis blogger/pundit L. Randall Wray, a frequent and vocal critic of the banks and of MERS, just flat out makes stuff up regarding the recent Ibanez decision in Massachusetts in his article, Requiem for MERS (and the Banks That Created the Frankenstein Monster), which appeared yesterday on the Huffington Post. Wray claims that the Massachusetts Supreme Court decision in U.S. Bank v. Ibanez is one of several “recent developments that put the final nails in MERS’s coffin,” but from his writeup of the case, it is hard to fathom that he even read the case or has any familiarity with it whatsoever.

Slade Smith’s Blog ::

Professor Wray wrote:

Ibanez decision in Massachusetts.  Courts continue to chip away at the arguments made by banks and their Frankenstein creation, MERS, to justify foreclosure without proper documentation. MERS was manufactured by the industry to evade proper recording of property sales in county recorder’s offices. This not only cheated the recorders out of fees and Uncle Sam out of federal taxes, but it also broke the chain of title. The fiction perpetrated by MERS is that it is simultaneously a nominee of the true owner of the mortgage debt and at the same time it is the beneficiary of the security instrument. (You cannot simultaneously be the party of interest and the nominee, of course.) It also disclaims any financial interest in the mortgage and has no claim on the mortgage payments. But it claims that it can operate as the agent of unnamed owners of the mortgage instrument, unknown owners who–since they are unknown — have never designated MERS as agent. The Massachusetts Supreme Court ruled decisively against MERS’s claims, and a growing number of other state supreme courts (Nevada, New York, Kansas, Idaho) have agreed that MERS is only a nominee or “straw man” (as Kansas put it) with no standing to foreclose.

Here’s the facts: MERS had no “claim” in the Ibanez case– Ibanez’s mortgage was not even a MERS mortgage!

Furthermore, according to the land court case which the Massachusetts Supreme Court upheld, U.S. Bank might have been better off it his mortgage had been a MERS mortgage!  The reason that the land court judge threw out the Ibanez foreclosure was because U.S. Bank had not been properly assigned the mortgage at the time of the foreclosure sale, according to the financial entities’ own rules.  One of the possible ways that they could have been properly assigned the mortgage, according to the securitization agreements that the judge relied on in his decision, would have been if they had received an assignment of the mortgage in recordable form from the entity they claimed transferred the mortgage to them.  But for MERS mortgages, these agreements waived the requirement of an assignment in recordable form. 

As far as the Massachusetts Supreme Court decision?  Well, MERS is not even mentioned in that– not once.  Why would it?  Again, the mortgages at issue were not MERS mortgages!

So when Wray says that “[t]he Massachusetts Supreme Court ruled decisively against MERS’s claims” in the Ibanez case, he is just making stuff up out of thin air. The Ibanez decision had next to nothing to do with MERS at all.

Furthermore, Ibanez was not about “proper recording of property sales in county recorder’s offices” either, despite Wray’s claims.   The Massachusetts Supreme Judicial Court decision states just the opposite in clear black and white letters:

We do not suggest that an assignment must be in recordable form at the time of the notice of sale or the subsequent foreclosure sale, although recording is likely the better practice. Where a pool of mortgages is assigned to a securitized trust, the executed agreement that assigns the pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder.

What is laughable in his piece is that Wray whines in his piece about his critics.  “Whenever those who are critical of MERS and the banksters post blogs about the multiple frauds, we are attacked by commentators — presumably industry hacks — who try to obfuscate the issues,” he says.  As someone who battled it out on the political blogs for years, I couldn’t help but notice that the bloggers who played fast and loose with the truth were often the same ones who thought that anyone who criticized them was an industry shill or had some other ulterior motive.  I guess the same holds true for professors!  If this Huffington Post piece is any indication of the quality of the professor’s work, Wray deserves critics and probably ought to have a few more of them. 

I understand that there are many thoughtful and knowledgeable people who have legitimate and substantial criticisms of MERS, and I agree with many of those criticisms. Many of these folks want to see and end to MERS in one fashion or another, for good and well considered reasons.  It may be tempting for otherwise thoughtful people to find common cause with folks like Wray who are outspoken opponents of MERS and the banks and want to see them destroyed. 

But I think it’s important to recognize that some folks are just interested grinding axes.  I think some of MERS’s critics are more interested in cultivating the choir they are preaching to than solving the many serious problems that we face– and that in their eagerness to pump themselves up in the eyes of their readers by piling on the deservedly unpopular banks, they actually end up standing in the way of progress by failing to talk about solutions in a meaningful way. Wray doesn’t seem really interested in solutions to the problems that MERS has posed, or integrity in land recording systems, or clean land titles out of foreclosure.  For example, check out how he casually tosses aside the entirety of the traditional land title system in one sentence when discussing Marcy Kaptur’s recent MERS bill:

In response to this mess, Representative Marcy Kaptur (Ohio) is going to introduce legislation to prohibit Fannie and Freddie from buying new mortgages that are registered in MERS. Since there is virtually no activity in mortgage markets save what Fannie and Freddie are doing, this would effectively take away all new business from MERS.

Further, her legislation would direct HUD to study the creation of a federal land title system to replace MERS while protecting rights of state and local governments. This is a sensible solution that would modernize the recording and tracking of property ownership. At the same time it would put out of business the hopelessly incompetent MERS, which has partnered with the banksters to perpetrate foreclosure fraud. Bye bye fraudsters.

I’m a big proponent of reform of land title recordation systems, but pseudo-reformers like Wray who throw out “solutions” like this just to pretend that they have the answers are the unwitting allies of those who would like to keep MERS as-is, such as ALTA, which failed to mention to its members in an alert that the only binding part of the Kaptur bill is not about creating a federal land title system, but rather about prohibiting federal insurance and guarantees on MERS mortgages.  ALTA apparently would like its membership to advocate for MERS without knowing that they are doing so. With statements like this, Wray and his ilk may help ALTA play up the minimal threat of a federal land title system.