Do you really know what happens to a loan after your client signs?

You’ve heard of the robo-signing debacle in the mortgage industry and you know the big banks have been the target of much speculation for their role in improper foreclosures and the like.

Your client signs their mortgage loan and get the keys and your next concern is to drip market to them to make sure that you’re top of mind and happy and will use you again. But are you really aware of what happens to your client’s loan once you’ve all left the table?

Many of them, especially loans through the larger banks, are funneled through the Mortgage Electronic Registrations Systems (MERS) which is owned by Freddie Mac and Fannie Mae in conjunction with most major banks. MERS has been under fire for being flawed in numerous cases.

Here is how MERS works:

Click to enlarge.

MERS under investigation

According to News & Record’s Joe Killian, North Carolina’s Guilford County Register of Deeds, Jeff Thigpen has announced he desires an investigation into the MERS system which has allegedly “made false statements to avoid fees that cost the county $1.3 million in lost revenue.”

Killian states, “According to Thigpen, the Mortgage Electronic Registration System (MERS), a system established by mortgage lending heavy hitters like Wells Fargo, Countrywide Home Loans, Inc. and Bank of America, has allowed these companies to re-package and sell loans without filing with offices like his to maintain a publicly available chain of ownership. Thigpen said $1.3 million is a “conservative estimate” of what his office may have lost in recording fees since 2005.”

Thigpen says he is “conferring with County Attorney Mark Payne, the NC Attorney General and the Secretary of State to see what can be done about recovering these fees and making information on who owns what available to the public at large.”

More investigations to come

The system has been the cause of a stream of bad press for the lending industry and should definitely be better understood by the boots on the ground that refer clients into this system. This will not be the last investigation launched.

Economist Barry Ritholtz opined, “I am tempted to laugh, but instead, I can see how this ends: Bankruptcy for MERS, with the counties getting nothing, followed by very friendly enabling legislation in the Corrupt US Congress.”

Ritholtz continued, “Why have the people in the Middle East risen up to throw off their corrupt oppressors — but not us. . . ?”