I can't recommend this Peter Coy column on the foreclosure fiasco highly enough. It zooms out from the mortgage confusion over titles, ownership and securities to explain how the housing crash messed with Americans' fundamental faith in property rights and trust between banks and customers. Here are the key paragraphs:
All this at a time when every imaginable bit of information--from your bank statement to your Facebook photos--seems to be stored in the cloud, ready for instant retrieval. Google "who owns my mortgage?" and you get a quarter of a million results in a quarter of a second. What the cloud can't tell you is what you really want to know, which is who actually does own your mortgage--that is, who has the power to throw you out on the street if you stop paying. The only way to verify that is to leave the cloud and dive into a recording system that predates the founding of the U.S.Titles and mortgages on real property are officially recorded in county clerks' offices, a slow-moving, old-fashioned, deliberate world of ink, paper, and filing cabinets. The process has been perfected over a millennium, going back to the Domesday Book, the survey of English property completed in 1086 for William the Conqueror. This paper-based system, though admirably accurate and permanent, wasn't equipped for the era of rapid-fire refinancing and securitization. When over 8 million new and used homes are sold per year, as at the height of the boom, and most loans are packaged into securities, you need a lot of clerks.The mortgage industry responded to the scale and speed of the modern housing market by creating an electronic overlay called Mortgage Electronic Registration Systems (MERS) in 1997. MERS, however, lacks the thoroughness and--more important--the legal standing of the old system. Some judges have rejected foreclosures based on MERS when the party claiming to hold the mortgage couldn't produce the note to prove to the court's satisfaction that it was in fact the creditor. The courts want to see paper.
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