on Facebook?

Where they could become friends of each other, and perhaps fans of entertainers like Ben Bernanke?

Even before MERS, the employees of a certain energy company leaked that it was paying its executives with lake front property in this way. It turns out that in a certain state, deed transfers are not registered as long as the property is flipped in less than a year.

The average seems to be $500. There are so many technicalities to the process that I am sure from county to county the fees differ.

I would think if $10 was all it took to register an assignment, the banks would never have bothered to set up MERS in the first place.

Something I don't understand is why the banks didn't bother to go to the big states at least and get them to legislate legal standing for MERS. Perhaps this was too politically daunting; the objections of so many county governments would have been too difficult to overcome. But if it were possible it would have been well worth it.

Maybe the banks were blinded by the belief that this was such a minuscule risk. After all, everyone knew real estate prices never went down, and there would never be a need to bring large numbers of foreclosures to the courts.

And the title companies have the process down to a efficient science.

The Banks could negotiate a good bulk rate from note and mortgage assignment with the title companies.

I believe the issue is that notes are not assigned to one tranche of the RBMS stream, they are moved dynamically if they fall into arrears or default.

MERS exists because the trustee must be passive, or suffer tax consequences, and this lack of dynamic reassignment (by "MERS") would make the RBMS Trustee not passive.

I understand that these trusts must maintain the original mortgages at the time of the securitization or IRS tax benefits disappear. I think you are saying, then, that MERS exists because it can operate independently of the trust and move the mortgages about from security to security, or at least allow multiple securities to claim the same mortgage. The trust can act as if nothing has happened, keeping its tax benefits in the process, while MERS can go about foreclosing and selling properties in default. Is this the right interpretation of your last paragraph? If so, wouldn't the IRS have had an issue with MERS all along?

Here's what I understand
1. A set of RBMS securities are built from a pool of notes.
2. The grade of the securities runs from AAA through C- (as an illustration)
3. There is a promise that the default rate in the AAA mortgages is very low. ( >0.01% for example)
4. If a mortgage in the AAA security falls into arrears and default, it is swapped with another mortgage from a lower grade security that is performing well.

One of the objectives of MERS is to facilitate the swap of mortgages between securities to maintain the promised revenue stream for a specific RBMS.

The entity that performs the swap is the loan servicer. The trustee cannot perform this swap because that would imply the trustee is actively (not passively) involved withe the mortgage security.

I don't know this for fact, I imply it from what I've read on the subject.

I am certain RBMS (or RMBS) do not work the way you described.
1. A special trust is created and buys a pool of loans.
2. The trust issues securities which pay interest and principle from the cash flow generated by the p&i payments from the pool of loans.
3. The RMB securities are rated AAA through C- and a non-rated equity layer (usually 3-5% of the issue) based on the priority of the securities claim on the cash flow from the loan pool. AAA securities are paid first, then the AA securities, then the A securities, etc., through C- securities and the equity layer is paid last. And losses from defaults and foreclosures are absorbed first by equity, then by the C- securities, etc.
4. The individual loans are not assigned to the classes of securities issued by the RMBS trust. The RMBS trust, not the securities issued by the trust, owns the loans. MERS would not have facilitated the swap of mortgages between securities because the securities did not "own" the mortgages, the trust did, so the loans were not "swapped".
5. A RMBS trust is governed by Federal tax law and state (usually New York) trust law which is incorporated a pooling and servicing agreement. This agreement describes the trust in detail including the loans owned by the trust, and the duties and responsibilities of the trustee and the loan servicing agent. One of the key requirements of Fed tax law and state trust law is that the RMBS trust must own the loan notes and have true and enforceable property liens (mortgages or deed of trust) at the closing of the trust.

MERS was setup to handle the transfer to the mortgage loans from the originators to the RMBS trusts. A loan originated by say Countrywide could be sold 2-5 times before it was bought by say a Goldman Sachs RMBS trust. With MERS Countrywide could close the mortgage loan and have it recorded with the county recorder of deeds and then assign the loan to MERS and sell it to another MERS member, who could sell it to another MERS member, etc., until Goldman Sachs bought it for the RMBS trust.

The MERS system of selling and assigning the mortgage loans enabled its members to get around the cost of recording the sale of loans, as required, in about 45 states. Now they will have to go back and record these transfers to actually move the loans from the originators to the RMBS trust. The problem is that Federal and state law requires to RMBS trusts to clear up any documentation problems with their loans within 45 days of the closing of the trust and after that loans cannot be transferred into or out of the trust. It could be that many of the private label RMBS trust do not actually own any loans and the investors in the securities are due their money back. This could be a really big train wreck.

The back end was always somewhat opaque to me.

If the trusts act as you describe, they own the loans, then who is doing the accounting and making the payments for the money flowing through the trust?

The servicers are paying into the trust. Is it the trust doing to accounting? How do the payments work when there are defaults (failure to pay) in the payments from the servicers to the trusts? How does the trust decide how to handle the default?

This is the web address of a NY Fed Staff Report on private label RMBS: http://www.ny.frb.org/research/staff_reports/sr318.html . This report has a very good overview of RMBS and goes into the detail of one deal.

The trustee is responsible accounting for the income and expense of the trust. A servicer is usually given a lot of discretion on how to handle collections. Usually if a loan is delinquent but collectable (less than 90 days delinquent) the servicer is required to advance to the trust the interest and principle due but not paid. Loans more than 90 days delinquent are normally declared in default and the servicer decides how to proceed with collection - foreclosure, loan modification, or just harassing the borrower. If the trustee is dissatisfied with the performance of the servicer he can request corrective actions be take and ultimately replace the servicer with another.

If the income from loan p&i payment and funds recovered from the sale of foreclosures is insufficient to pay the expenses of the trust (including interest on the securities issued) then the trust will stop making interest payments to the securities starting the lowest grades (equity and C-).

The blogosphere is the only place where people wonder why there have been zero prosecutions of Wall Street executives. Now we are beginning to see columnists in major newspapers ask questions about this, and Taibbi has a broad audience that may actually stir up some pressure. While the revolving door problem he cites is the main reason the Justice Department and the SEC have done nothing about these frauds, the fact is that Eric Holder and Barack Obama don't give a shit about justice.

Given that they will look for the lowest person the food chain they can to toss to the angry hordes, who do you think that will be?

Taibbi paints Cassano as a major bad guy, and he admittedly is a large fish, but not large on the scale of Bernanke, Summers, or Rubin.

Who do you think they'll use to cover their asses with?

Affect = (usually a verb/gerund) - to change or influence something, often has an emotional context.
Effect = usually a noun referring to a result or, as here, an adverb implying or suggesting a result.

Therefore ...legal problems affecting the securitization of home mortgages... is correct as is ...uncertainty affecting tens of millions of mortgages... and so is MERS is effectively admitting that these securities are uncollateralized,...

"Through affecting superior fire power the king effectively silenced the mob."

I'm effectively admitting that I'm not going to lose any sleep over the effect/affect conundrum.

Let the grammar chips fall where they may.

_{Real men don't buy sex. ~ Dallas Cowboy Jay Ratliff}

No your or you're was harmed in the making of this post nor in the comments.

The country Recorders lost, as I recall.

Don't count yer humans before they is hatched...

"A credible debate could be held (on this site) whether it would be preferable to do financial Nuremberg scenes or whether it would be best to move as quickly as possible away from energy thus expended and instead toward economic recovery."

There is alternative beyond dunking chairs, as appealing as that image is. We could have a rational national discussion about the willful and intentional avoidance of federal and state law in the conduct of MERS and the broader participants in the foreclosure process. The lenders knew that their construct violated the law from the start. This was their industry and they changed the rules. That's a given. There is highly credible evidence (which I'll present at some point soon) to show that nearly half of the foreclosures filed in federal court over a year plus sample period were deficient in essential documents and thus invalid. Hence, the industry set up an illegal operation and engaged in deception in its foreclosure court filings (How could they not know that they had deficient paper work?)

The economy can't return to normal with the current incumbents in charge. While a Nuremberg (or my preference, Grand Guignol) would be gratifying, telling the truth is the first essential public event preceded by whatever mechanism is necessary to avoid a precipitate crash in real estate values. That antecedent to the truth cannot involve the very nihilists who perpetrated this fraud in the first place. That's what happened with the bailouts just after the a closed session of the House of Representatives was threatened with the alternative - martial law required to restore order were the bailouts to be rejected again.
http://www.youtube.com/watch?v=HaG9d_4zij8

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The Money Party RSS

But inflated appraisals did not happen. The appraisals I saw, and I saw a lot, were market based valuations.

The fault was the SISA and NINA loan programs, and the lax underwriting standards.

"Here breathe on this mirror"
"Ok, IT FOGS UP!"
"You can borrow $500,000, sign here"

We've had 21 people arrested for this kind of thing. Check this out. A number of appraisers are among those arrested for helping inflate prices involved in loan fraud.