County Clerk speaks out against MERS ruling

Travis County isn’t hiding its displeasure with a recent ruling by the U.S. 5th Circuit Court of Appeals.

Though the ruling on Dallas County, Texas, et al. v. MERSCORP Inc., et al. came down this summer, it was last week that the Travis County Commissioners Court and Travis County Clerk Dana DeBeauvoir issued a statement explaining their continued concern about the practices of MERSCORP Holdings Inc.

According to DeBeauvoir, “The whole integrity of a public deed indexing system got poured out” by this decision, which allowed the corporation to create its own private registry, which she has dubbed a “secret substitute recording system.”

DeBeauvoir spoke to the Austin Monitor and said that she wanted people to understand: “Travis County did everything it could to stop MERS.”

“When this bad decision came down, we protested it, and we advised the public that this was not right,” said DeBeavoir. “We tried to fight this case, and we didn’t even get a chance to put up a fight.”

In short, the U.S 5th Circuit Court of Appeals issued an opinion that allows MERS to continue its private registry system.

“We were not able to present our case in court, now or ever,” said DeBeauvoir. “We may never present it. … We’ve been badly, badly treated. It’s one thing to lose a case. It’s another thing to lose a case and never have a chance to utter a word of argument and have no appeal or other recourse. That is the position that Travis County is in.”

Though the lawsuit was filed by Harris County, it was expanded to include the Travis County Clerk’s case. In a response to a request for comment from the Monitor, MERS corporate communications Vice President Janis Smith clarified, “Travis County came into the Neuces County, TX lawsuit as an intervenor, and agreed to a stipulation of dismissal without prejudice.”

DeBeauvoir explained that in recent years “a lot of odd and seemingly unfair practices started happening” to people, who then notified their county clerks. The problems they reported included a lack of proper records and not being able to find liens against their own property.

“Because, normally, the place you would look for that was in the county clerk’s records,” said DeBeauvoir.

Though (many) other jurisdictions have taken MERS to court based on lost revenue, Travis County did not take that tack. Instead, the county argued that MERSCORP’s tactics violated state law – “a very good law,” according to DeBeauvoir. That law said that if a document on a property is filed, every subsequent document must be filed in the public registry as well.

That is no longer the case. With the recent ruling, the once “very good law” is now silent. The ruling also said that county clerks no longer have the right to request that the public record be brought up to date.

When asked for a comment on DeBeauvoir’s concerns, as articulated in last week’s statement co-signed by the Travis County Commissioners Court, a representative from MERSCORP furnished a brochure titled, “Myths vs. Facts,” which addresses some of the concerns about allowing private record keeping in lieu of the public county record.

According to the document, when a MERS System member sells a loan to another MERS System member, legal title to the mortgage remains within the MERS System, and those switches are not really transfers of mortgage loans. It continues, “The MERS System is not a legal system of record nor a replacement for the public land records. MERS’ objective is not to replace county recorders; in fact we rely on the public land records to facilitate our business.”

When she spoke to the Monitor, DeBeauvoir broke down the potential ramifications of the ruling. For one thing, she explained that title insurance covers only what is in the public record. And, because the court has ruled that the county clerk is not entitled to what was once public record, property owners must now bear the legal expenses and cost of pursuing that title information for things like boundary disputes, title disputes, chain-of-title or even liens on their property.

Once again, the MERS ephemera disputes this assertion, in a response to the “myth” that MERS “makes it harder for borrowers to identify the servicer and owner of their mortgage loans.”

The response: “MERS actually makes this EASIER. We have a toll-free number … and a website … that the public can access to find the current servicer – and where borrowers can find the owner – of any loan registered on the MERS System. The MERS System is the only national database with this information free and available to the public. In addition, under federal law, borrowers are entitled to receive notification when the ownership of their loan changes. Servicers are also required under the Truth In Lending Act to respond to written borrower inquiries as to the ownership of their loans.”

DeBeauvoir acknowledged that this statement was true, at least in theory.

“They have a 1-800 number. Over the last 12 years, I have tried to call that number many times. I got through once, a year-and-a-half ago,” said DeBeauvoir, who added that her impression was that, even if property owners were able to get through, information on properties was not readily available, and it required foreknowledge of the information that callers were seeking in the first place.

“It is a hostile world to property owners,” said DeBeauvoir.

At their meeting last week, the Travis County Commissioners had similarly strong words on the topic, with DeBeauvoir’s statement receiving unanimous support.

Commissioner Brigid Shea deemed the system “patently wrong” and reminded those in attendance that, during the subprime mortgage crisis, it was this very system that thwarted homeowners who were facing foreclosure and couldn’t figure out who held the titles to their homes.

Travis County Judge Sarah Eckhardt said, “This is a very concerning turn of events with regard to the – the public record becoming actually a private registry held by a corporate entity for whom there is clear financial interest.”

As of now, DeBeauvoir can only offer Travis County residents her warning about the ruling: “Its damage is vague and in the future. That doesn’t mean it isn’t real and it won’t happen.”

“MERS has triumphed in every place and every court,” DeVeauvoir told the Monitor. “They have beat everybody at every game. They are huge, they are monied, they are well-connected. We have been done-in by a huge corporation.”

According to a July statement from MERS, the Texas court ruling “joins the dismissals of similar lawsuits brought by county recorders throughout the country in Minnesota, North Carolina, Rhode Island, Michigan, Oklahoma, Iowa, Florida, Arkansas, Illinois, Missouri, Massachusetts, West Virginia and Kentucky.”

“053107-5thCircuit” Photo by Bobak Ha’Eri – Own work. Licensed under CC BY 3.0 via Commons.