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Yes, MERS Lobbyists Want to Whitewash MERS; But Is It Legal?

It’s pretty clear to me at this point that when financial lobbyists want to launder their preferred outcomes, they leak them to Brady Dennis and Ariana Eunjung Cha at the Washington Post. Earlier this week they ran an article claiming there would be a quick settlement to the 50 state AG investigation, based on unnamed sources. The substance of the article was quickly refuted by the New York Times.

Now, Eunjung Cha and Dennis are back with an article about lobbyists seeking to give retroactive immunity to MERS. It’s useful to know what the lobbyists seek, but Eunjung Cha and Dennis clearly have the mindset that whatever the lobbyists want is what’s best for the country.

The financial services industry has launched an aggressive campaign on Capitol Hill to bolster the legality of the way companies have turned mortgages into securities and traded them across the globe in recent years.

The companies have opened wide their wallets for lobbying and are flying top executives to Washington for one-on-one meetings with lawmakers. They are holding briefings for key staffers, including an event last week that drew more than 60 aides. And they are blanketing Congress with white papers, memos and other documents that lay out their arguments […]

The industry is seeking legislation that would effectively affirm MERS’s legality and block any bill that would call into question what MERS does. MERS has spent more than $1 million in lobbying since fall 2008, when lower courts around the country began to rule against it. But MERS had kept its name under the radar until the recent uproar over foreclosures revealed broad problems in mortgage paperwork.

One million dollars! Oh noes!

Of course financial lobbyists are working to indemnify financial fraud. This is a story with all the richness of “Breaking: Water Wet.” What Eunjung Cha and Dennis fail to tell their readers is whether the Congress has the power to do what the lobbyists want: grant retroactive immunity for MERS.

I don’t see it. Foreclosure actions are governed by state courts; that’s who has the jurisdiction, not Congress. In addition, municipalities who have basically been deprived recorder fees from the MERS system, totaling billions of dollars, would simply not go away if MERS somehow was indemnified as legal through Congressional action. They could still recoup their losses for the recorder fees when MERS’ legality was in doubt.

There’s no question that making MERS legal would solve a lot of problems for the industry. The question is, can they do it? Here’s who Eunjung Cha and Dennis talk to about that:

• The CEO of MERS, R.K. Arnold;
• The deputy executive director of the American Securitization Forum, an industry group who just put out a white paper that claimed MERS was valid and legal (one which Adam Levitin said in Congressional testimony focused on the wrong issues entirely);
• Ira Rheingold of the National Association of the Consumer Advocates, but only to get a quote on why it would be a bad thing if this happened.

You can argue about whether creating a federal land title system would be viable, as Rep. Marcy Kaptur and John Taylor of the National Community Reinvestment Coalition wrestle with in the article. You need to argue over whether it’s legal to take away the land title system that has existed in this country for over two centuries. Eunjung Cha and Dennis don’t bother to do that, because, well, I guess some lobbyist said it was legal.

I do find it interesting who’s doing the lobbying for MERS:

Lobbyists working for MERS include people who were prominent legislators or federal officials: former U.S. representative Bob Livingston and his former chief of staff, Allen Martin; John M. Duncan, assistant secretary of the Treasury for legislative affairs in the George W. Bush administration; and Arnold Havens, a former general counsel at Treasury.


I eagerly await the next article from Eunjung Cha and Dennis, when they mention that there’s dubious Constitutional claim for the federal government to take control of the state land title system, that the pooling and servicing agreements have standards above that of state or federal law and would not be affected by this ruling, that securitization is governed by New York state trust law and that foreclosures by a patchwork of state laws, and that the entire scheme by the lobbyist class is completely unworkable.

I’ll be waiting a long time.

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David Dayen

David Dayen