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County Registers Seek Recording Fees From Mortgage Industry

Guilford County Register of Deeds Jeff Thigpen.

There's an effort in some courthouses to still cash in on the once-booming real estate market. You see, some county registers contend the mortgage industry skipped out on paying several million-dollars in fees. Jeff Thigpen works in the basement of the Guilford County Courthouse. He's the register of deeds - not exactly a high-profile office. But these days, more people are paying attention. "People pay more attention to the register of deeds now." That's because Thigpen is going after an organization called Mortgage Electronic Registration Systems, or MERS. He has a teammate of sorts in John O'Brien, the register of deeds in Salem, Massachusetts. Both want their attorneys general to file lawsuits against MERS, and together they're urging registers and county recorders across the country to do the same. They say the mortgage industry has used MERS to avoid paying local recording fees when mortgages are sold to investors. About 60 percent of the mortgages closed today are owned by MERS, and O'Brien says its' muddled the land records system. "I can't honestly look people in the eye who has a MERS mortgage and tell them who owns their mortgage, and that troubles me," O'Brien says. He says he can't track these types of mortgages. MERS takes over once the deed is filed at the courthouse. All future transactions are tracked in the private MERS database instead of the courthouse. It's been that way since the mid-90s. "That was time when securitization was starting up in a meaningful way and mortgage volume was increasing," says Kurt Pfotenhauer, CEO of the American Land Title Association. In fact, Pfotenhauer says the volume was increasing so much that courthouse technology couldn't keep up. So his group and other major players in the mortgage industry joined the big banks to create MERS. "The primary motivator was to keep up with the volume, but that does have a financial element to it." Like no more recording fees when mortgages are sold to investors. In Guildford County, the cost averages about $20 per filing. Register Thigpen estimates it's added up to a loss of $3 to $5 million over the years. In Salem, the filing fee is $75 a pop. O'Brien estimates his county has lost at least $48 million dollars. But, even more important, both say that MERS is an enabler. It's run by the country's biggest banks, and O'Brien says it allows them to keep risky transactions secret - the type of deals that got us in the trouble we're in today. "I think this was a scheme put together to hide from the public and not pay fees. It's as simple as that," O'Brien says. Some states, like Massachusetts, require that all assignments be filed at the courthouse. North Carolina does not, although assignments were filed at courthouses before MERS to document the chain of title. MERS officials declined an interview request, but maintain it's not necessary to record assignments at the courthouse because MERS remains the mortgage owner no matter how many times a loan is sold to investors. That claim of ownership is now the subject of several court cases in different states. At the very least, Thigpen believes MERS and its members need to pay up and record assignments at courthouses if they want to document ownership. He and O'Brien sent a letter this week to Iowa Attorney General Tom Miller, who is heading up negotiations with banks for a national settlement in the robo-signing foreclosure scandal. They want the settlement to require that all past and present MERS assignments of deeds be filed at local courthouses. In Mecklenburg County, register of deeds David Granberry isn't sure if legal challenges to MERS will be successful, but says "all this has done everybody a favor because it put pressure on MERS." Granberry says a little bit of MERS assignment-fee revenue is beginning to trickle in, at least when foreclosures are taking place. That's because in February, MERS announced it will no longer let members foreclose in its name. Before foreclosures proceed, MERS members must assign the deed to another entity, such as the servicer of the loan. And MERS now requires that these assignments be filed at the local courthouse.