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COMMITTEE MEMBER: relation to that? MR. HULTMAN: agent of the lender. We're the
beneficiary, but we're an So instead of having two -- one party be Can you expla
in what you are in
both the payee on the note and the beneficiary in deed of trust, we're the benef
iciary as their agent. In other words,
we're holding title to the mortgage lien on their behalf. COMMITTEE MEMBER: nomi
nee? MR. HULTMAN: agent. COMMITTEE MEMBER: MR. HULTMAN: Okay. So the actual reco
rd -Well, nominee is just another word for Through this process called
And the mortgage gets recorded or the
deed of trust gets recorded so the world is on notice that there is a lien again
st the property, which is what the purpose of land records are. COMMITTEE MEMBER
: MR. HULTMAN: Right.
History, even before MERS, it was never
the role of the land records to tell anybody who the owner of the indebtedness w
as. COMMITTEE MEMBER: MR. HULTMAN: I don't disagree.
And -- I'm sorry? I don't disagree with that.
COMMITTEE MEMBER:
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MR. HULTMAN:
Oh, okay.
Fair enough.
Just in response to something else that I heard you ask the people from the Bank
er's Association. One of the other
reasons why I think some of the states have not gone down this path about having
the certificate of title for the indebtedness is because the federal law alread
y provides a lot of protection for the borrowers. Under RESPA, any borrower is e
ntitled to
write a letter to the servicer and the servicer is obligated under federal law i
n RESPA to give -- disclose the person who holds their note. Also, last year fro
m the federal legislation that got passed in May, and this is the (inaudible) am
endment, I forget the name, but the statute, but it amended the Truth and Lendin
g Act and added a section, 404, that requires now that every time the note is tr
ansferred, the transferee or the purchaser of the note is required under federal
law to give notice to the borrower that they now own the note. So this notion s
omehow that we have to put another record in the land record, and one of the rea
sons that MERS exists today is because prior to MERS all these assignments were
not getting recorded or they were being done improperly, they would get rejected
, and there would be breaks in the chain of title. MERS (inaudible) the title to
the mortgage lien in
MERS so that from the beginning to the end, the loan, period, is never going to
be a break of title because the assignments
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were recorded. COMMITTEE MEMBER: Let me ask this question. So as I
understand it, actually there never is an assignment made ever because you from
the beginning are the beneficiary -MR. HULTMAN: That's correct. So for purposes
of recording in
COMMITTEE MEMBER:
our courthouses, there is never an assignment that's ever made. The assignment,
if there is one, would be a change in the actual underlying promissory note. MR.
HULTMAN: And that's where I think some of the They
confusion comes up with people when they talk about MERS.
use the word assignment and mortgage and mortgage loan and note interchangeably
when there are two distinct instruments and -COMMITTEE MEMBER: there's a note. M
R. HULTMAN: When -- I use mortgage, deed of trust. (Inaudible.) (Inaudible) deed
of trust and
COMMITTEE MEMBER: MR. HULTMAN: perspective.
They're interchangeable from our
We're really a holder of the mortgage -Right, but in Virginia you have
COMMITTEE MEMBER:
deed of trust that deals with the ownership of the property, and then you have a
promissory note which is never recorded, which deals with the obligation on the
debt. MR. HULTMAN: That's correct. What you're saying is, is this
COMMITTEE MEMBER:
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language in this bill that talks about assignments really doesn't affect you any
way because -MR. HULTMAN: I think it would cause more confusion I mean, a lot of
what we see -Borrowers call me
than it solves any problems.
and frankly, I talk to borrowers everyday. up.
I mean, we heard the story from one of the lawyers here
about how these things went in wrong places and did things. Well, people make mi
stakes. You know, if somebody called me up and asked me, which they didn't, we w
ould have helped them sort out that problem. We would have gone to -- and I do t
his everyday.
Borrowers call us up and they say, I don't know who my noteholder is. Because if
they go on our website or if they go
into the toll-free number that they can call, we'll tell them the identity of th
e current servicer and we'll also -- for 97 percent of our members who haven't o
pted out, we'll give them the name of the noteholder, and sometimes I'll even gi
ve them the noteholder's name if they have a compelling reason for it even when
they -COMMITTEE MEMBER: MR. HULTMAN: And their contact information? I mean, we'l
l give
Contact in -- yeah.
that information up to the people.
Now, again, that's a more That was
-- the owner -- we always show who the servicer was. our purpose.
Now, since all of this activity has gone on,
we've been able to convince our members that, for most of them
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at least, that we'll be willing to disclose the -- who holds the note on their -
- who (inaudible.) COMMITTEE MEMBER: COMMITTEE MEMBER: Anything else? (Inaudible
.) This section
I have a question.
404 you were just talking about -MR. HULTMAN: Section 404. Yeah, section 404, it
requires
COMMITTEE MEMBER: what now? MR. HULTMAN:
When the note is transferred or sold,
the federal legislation requires a notice be delivered to the borrower from the
purchaser or the transferee of the note. whoever has acquired that note for what
ever reason, doesn't actually have to be a sale, but it could be -- as long as t
hey're the subsequent holder of the note or the owner of the loan, they're -COMM
ITTEE MEMBER: MR. HULTMAN: (Inaudible) company? They're required to deliver So
Right.
this notice to the borrower, and on it, it says who the owner of the note is. It
also tells the borrower who they have to So, for
contact to -- if they have questions about the note.
example, a bank is using a servicer or a trustee is using a servicer to collect
the payments for that, which is what most professional investors do today. So, f
or example, you know,
right now 98 percent of the loans are done by Freddie (inaudible) -- purchased b
y Freddie (inaudible). And, you
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know, they all use professional services because they're not in that business. T
hey're in the business of owning notes and So
making sure they get distributed to investors world-wide. they'll tell you who t
o contact and they'll give specific
contact information in that notice to let them know who they need to talk to if
they have problems with their loan. COMMITTEE MEMBER: This is just a follow-up.
So
you're saying that the recordation part here that's in this bill, it wouldn't af
fect you anyway? MR. HULTMAN: Well, I think it would cause confusion
and it would up end up -COMMITTEE MEMBER: it would not affect you -MR. HULTMAN:
Yeah, that's right. -- because you're on the original So it would be your positi
on that
COMMITTEE MEMBER: (inaudible). MR. HULTMAN: to us has not changed. COMMITTEE MEM
BER:
We're on the deed, and the conveyance
So in other words, where the
change is coming is in the promissory notes? MR. HULTMAN: Exactly. And then what
you're doing is
COMMITTEE MEMBER:
you're acting sort of after the -- you're acting as a clearing house for determi
ning -- I mean, that -- but you know that's not very well advertised. I mean, I
don't think there are a
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lot of people that know -MR. HULTMAN: I would say that there's a lot of -I --
COMMITTEE MEMBER: MR. HULTMAN:
-- misunderstanding about MERS in the You go to our
press and in the Internet stories about MERS.
website, and maybe our website is not the most user-friendly website, but we're
a very transparent company. Everything
about MERS is pretty much on our website, and as I said, we disclose who we're a
cting for. The fact that we're acting as this nominee or agent is disclosed in t
he instrument. The fact that the instrument
and the borrower agrees in the deed of trust that if the investor or servicer so
desires, MERS may actually conduct the foreclosure process in the states. And t
here is no state that
has said that we're doing anything in contravention to state law in any of the 5
0 states so far. There's a lot of noise.
And you've heard about cases where they say MERS got kicked out of court. Well,
that may be true, but it's not
because MERS is not legal or MERS is not within compliance with state law. It's
because there was a defect in the process, and
the party who is bringing the prosecution had not done all of the paperwork that
they needed to be done, and those cases are usually dismissed without prejudice
and they can go back and remedy those positions. But a lot of times that gets r
ecorded
as MERS got kicked out of court or MERS loses a case.
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COMMITTEE MEMBER: COMMITTEE MEMBER: COMMITTEE MEMBER:
Mr. Chairman -Any other questions? Mr. Chairman, I was going to ask a
question about how I find my mortgage on the website, but I went on their websit
e and I (inaudible) found my mortgage in about ten seconds (inaudible). MR. HULT
MAN: Now, I would say this, MERS only has 60 There are some people who chose not
They buy
percent of the mortgages.
to use MERS for -- because they don't sell the loan.
the loan and they hold the service and they hold the mortgage note or they secur
e -- so, you know, not everybody will find their mortgage on the system because
we don't have a hundred percent of the marketshare. COMMITTEE MEMBER: -MR. HULTM
AN: I think it was May 2009. Well, what I'm showing is that it Mr. Chair, when w
as this section
COMMITTEE MEMBER: was passed December 18, 2010. COMMITTEE MEMBER: MR. HULTMAN:
It was approved. I may be off.
Could have been. Yeah.
COMMITTEE MEMBER:
So, I guess, what your
position would be based on that is you now have to provide notice to everybody w
henever you transfer -MR. HULTMAN: If history shows anything, adding
additional requirements to record documents with a county or
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clerk will result in more problems, not less problems. costs.
It adds
People will forget to do it, because people are human,
and then there's a question about what happens if we don't file it, what impact
does it have on the process other than just trying to foreclose. Part of the pro
blem with the statute can also be looked at is it's only requiring the assignmen
ts and these transfer notices to be effective if it's only to prosecute the fore
closure. You know, I get a lot of people who call me up
and say, I can't find who has -- I want my lien released, and we'll sign the lie
n release if we're satisfied that the note has been paid off. We can go to the t
itle company and they'll
give us the information and we can actually do that on behalf of borrowers. We p
robably do this a dozen times where we help
borrowers release their liens when they're not there. If the statute, you know,
it doesn't -- it doesn't -it's not going to change human nature. make mistakes.
get filed. forward. People are going to
Assignments and these transfer notices will not
It will cause further problems for borrowers going (Inaudible) foreclosure proce
ss. COMMITTEE MEMBER: COMMITTEE MEMBER: COMMITTEE MEMBER: Mr. Chairman. (Inaudib
le). Thank you.
Sir, you've been here most of the afternoon; have you not?
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MR. HULTMAN: yes.
I have listened to the whole testimony,
COMMITTEE MEMBER:
And you heard a lot of the stories
where folks are saying they couldn't find out who owned the note or anything lik
e that. Do I understand that if their note
were, in fact, being held by your company, that they should have been able to fi
nd that out? MR. HULTMAN: If -- first of all, just -- just to be
clear, MERS doesn't hold the notes except in the limited sense that if they're f
oreclosing, our rules require us to have possession of the note to foreclose. Bu
t if the note had been registered on MERS, it would certainly have been easier f
or a borrower to find out who owned this loan, and one of the problems, and I'll
be frank with you, one of the problems is that, you know, I think that because
the investor community have -- they're not servicers and they're not mortgage co
mpanies. They're investors. They have
delegated the authority to modify loans and make deals with borrowers to their s
ervicer. And there's a lot of confusion
with the borrower community about who is the right person to talk to. You can ca
ll up the bank in New York if they're the trustee. But that's twelve guys in an
office in Washington or
New York City or Chicago who have delegated that authority to people who know ho
w to deal with mortgages, which are the
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mortgage companies, the servicers who are doing these things. So they can call u
p -- they can call the investors up, but the investors are just going to tell th
em they need to go back to the servicer because that's the party that they've em
powered to make those -COMMITTEE MEMBER: MR. HULTMAN: Who are the servicers? I m
ean,
They're mostly national banks.
the five biggest servicers hold probably 80 percent of the servicing in the coun
try today. COMMITTEE MEMBER: So your role is, is if they
contact MERS, you're the one who tells them who the servicer is to do their loan
modification for a -MR. HULTMAN: Exactly. -- short sale --
COMMITTEE MEMBER: MR. HULTMAN: Yes.
COMMITTEE MEMBER:
-- and in the event that loan
modification or short sale does not happen, you are the entity that acts as the
agent for the deed of trust beneficiary to foreclose on the deed of trust? MR. H
ULTMAN: If the investor chooses to do that. I think
Most people today do not foreclose in (inaudible).
they have decided because of a lot of the adverse publicity and a lot of the noi
se in the press and just in general and the uncertainty in their minds in the co
urts, they have chosen to not do that, in which case an assignment of the benefi
cial
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interest would be made and recorded in the land record. So if, for example, if w
e're serving the land records for Fannie Mae as the investor and Chase is the se
rvicer and they want to foreclose, typically today they will actually assign the
beneficial interest probably to Chase, and that assignment must be recorded, an
d our rules require that it get recorded before the assignment -- before the for
eclosure process is started. Because, you know, a lot of times, there
have been people who have not done that and done it after the fact and they've b
een kicked out of court and rightly so. So our rules actually require that if th
ey're going to foreclose in the servicer's name, they need to do the assignment
of the beneficial interest out of our -- out of the MERS name. COMMITTEE MEMBER:
witness? COMMITTEE MEMBER: COMMITTEE MEMBER: COMMITTEE MEMBER: Just one follow-
up, if I may? Go right ahead. Sir, you -- it sounds like you've Any other questi
ons for this
appreciated the fact that there is a problem here; is that right? MR. HULTMAN: c
alls every -COMMITTEE MEMBER: My question then is this: What I get -- like I sai
d, I get dozens of
could you tell this panel, I mean, this committee, that would
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help us understand -- help these people that have talked about these stories tha
t they've given us this afternoon? What would
you suggest we could do by way of legislation that would help? MR. HULTMAN: I'm
not -- I think anything that you
can do to help enhance the modification process is probably where the focus ough
t to be, because that's really what borrowers are looking for. They're calling m
e up and saying --
you know, I think you heard that theme throughout the borrowers. So it's really
focusing on the modification process, which means that you have to engage the in
vestor community because ultimately they're the ones who -- and servicers really
are limited and the banks are limited when their net capacity. Only when they o
wn the loan do they have the ability to make those modifications, because most o
f the modifications are -those provisions are already in -- baked into the servi
cing agreements that they have with the investors. So it's really the focus shou
ld be on the investor community, and know that in the federal level that's where
a lot of the activity is, trying to figure out programs that will enhance the a
bility for people to get modifications, and more importantly, be able to success
fully modify. I mean, one of the problems we see today is loans get modified and
they're still not able -- still unable to make payments. So I think focusing on
the underlying economics and
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not the structural procedural things is really where the focus of the legislatur
e ought to be. COMMITTEE MEMBER: COMMITTEE MEMBER: Mr. Chairman? I do want to ad
d one thing before
we move on to more questions, and that is, I think you're correct. May 2009 is w
hen the legislation went into place that
said that you have to provide notice to the homeowner about any (inaudible). MR.
HULTMAN: Thank you. You were right on that. (Inaudible). I want to build on a q
uestion that
COMMITTEE MEMBER: COMMITTEE MEMBER: COMMITTEE MEMBER:
Delegate Cleveland -- really, when we heard the testimony from these other folks
today, it seemed there were two things. One
is connecting the investor and the homeowner, which they would claim is not poss
ible given the lack of information that flows through the system. They don't kno
w who these people are, so So they can't modify, because they
they can't get to them. don't know.
And by the time they get to them, it's too late.
And that gets to the second point of the bill that they're trying to argue for,
and that is extended time, to give some more time for them to find the investors
. So I guess my question builds on his, and that is, what do you do if -- I'm he
aring you say, yeah, we've got to work with the investor community, and I'm hear
ing proponents of
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the bill saying, we can't find them and we don't have enough time to get to them
so we can work something out. the answer? MR. HULTMAN: Well, I think -- first o
f all, I think I think So what's
it's not correct to say that they can't find them.
sometimes what happens is, is that the investors will tell them you need to deal
with the servicer. And -- because I get this They'll call me up and I'll tell
conversation with borrowers every week.
say, can you tell me who the investor of my note is.
them and I'll say, but, you know, they're going to just refer you back to the se
rvicer. And the servicer is the one who
really has -- the infrastructure that is prepared to deal with these things. I m
ean, trustees are a small group of people who are really required to -- and inve
stors, are really -- all they're doing is transmitting the payments from the peo
ple who made -who take out these loans to the people who invested in them, who c
ould be doctors in Singapore, for all we know. They've delegated that to the mor
tgage companies because the mortgage companies admittedly are stressed with the
amount of work that they have to do given the extent of the prices here. But the
y're the ones that have the They're the ones who actually have the loan
infrastructure. files.
Investors typically do not have the loan files in their Those loan files are wit
h the servicers who are
possession.
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collecting the payments every day. So they're really the only party who is into
the land record -- or, excuse me, in position to actually understand what the lo
an is and how -- and what's the payments that the borrower could make given thei
r current circumstances. know how to judge credit. things. They know how to do a
ll those That's why They
The investors are not prepared to do that.
they delegated all of this to the servicer community to do all of that work. So,
and, again, you know, I don't have -- I'm not really -- I don't really have an
opinion on whether 45 days or 12 days or 15 days, but there's -- that's not the
only part where they have a chance to do things. process. This is an elongated
I think somebody testified who said that it takes at That -- and
least a year, and I think that's probably right. it's probably longer right now.
I think -- we've seen -- and because we're the mortgagee or we're the beneficiar
y, we get service of process on foreclosures when we're being foreclosed on. So
in other
words, MERS can also be in a subordinate or junior position or senior position,
and if a loan is being foreclosed, we'll get that service of process. COMMITTEE
MEMBER: -MR. HULTMAN: Exactly. (Inaudible) second deed of trust
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COMMITTEE MEMBER: (inaudible) -MR. HULTMAN: (inaudible)
(Inaudible) first deed of trust
And we'll get that notice and we
So we see every day how much mail is coming I mean, I think
through, and I think the system is strained.
we're at capacity how many things we can do, and I think that's causing a lot of
problems that you heard today. COMMITTEE MEMBER: witness? COMMITTEE MEMBER: to
speak against it? MR. HULTMAN: Thank you. Thank you. All right. Does anybody els
e want Any other questions for this
COMMITTEE MEMBER:
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