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Highlight Updates Sloppy Transfers of Mortgage Loans

Another significant result of the lending frenzy and the subsequent high volume of foreclosures was the failure of foreclosing lenders and trustees to comply with the legal rules governing the transfer of mortgage loans. This problem was widespread and has been reported in court rulings, by state attorney general and city recorder investigations, in studies by law professors, and in news articles, congressional testimony, and shareholder lawsuits.206 Consequently, large numbers of homeowners all over the country have faced the risk of losing their homes to the wrong party (leaving the risk that the correct party may try to sue them later). Some foreclosing parties or their agents resorted to forging indorsements or submitting fraudulent affidavits to courts in order to manufacture standing.207 These behaviors potentially threaten the integrity of the legal system and the clear title to foreclosed properties.208

Moreover, the use of the Mortgage Electronic Registration System (MERS) by about sixty percent of all residential mortgagees to track transfers of mortgages, as an alternative to public recordation systems, caused turmoil due to the serious questions about the integrity of MERS and its system. A full discussion of MERS is beyond the scope of this subsection.209 Suffice it to say that the mere presence of MERS in a mortgage loan chain of title increased the likelihood of legal challenges to the authority to foreclose and, potentially, to the clear title to real property throughout the United States.210


  • 206 {206} Elizabeth Renuart, Property Title Trouble in Non-Judicial Foreclosure States: The Ibanez Time Bomb?, 4 Wm. & Mary Bus. L. Rev. 111, 119–128 (2013) (detailing the scope of this problem).

  • 207 {207} Elizabeth Renuart, Uneasy Intersections: The Right to Foreclose and the U.C.C., 48 Wake Forest L. Rev. 1205, 1206–1207 (2013).

  • 208 {208} Elizabeth Renuart, Property Title Trouble in Non-Judicial Foreclosure States: The Ibanez Time Bomb?, 4 Wm. & Mary Bus. L. Rev. 111, 171–180 (2013).

  • 209 {209} MERS is described in detail in National Consumer Law Center, Home Foreclosures §§ 4.3–4.9 (2019), updated at

  • 210 {210} For a few of the many articles identifying the issues raised by the use of MERS in mortgages, see generally Donald J. Kochan, Certainty of Title: Perspectives After the Mortgage Foreclosure Crisis on the Essential Role of Effective Recording Systems, 66 Ark. L. Rev. 267, 284–296 (2013); Christopher L. Peterson, Two Faces: Demystifying the Mortgage Electronic Registration System’s Land Title Theory, 53 Wm. & Mary L. Rev. 111 (2011) (discussing whether naming MERS as a mortgagee satisfies traditional conveyance requirements); David E. Woolley & Lisa D. Herzog, MERS: The Unreported Effects of Lost Chain of Title on Real Property Owners, 8 Hastings Bus. L.J. 365 (2012) (analyzing the effects of MERS’s electronic recording system on traditional recorded property rights in the United States).