Bain Decision Brings Us Back to Reality

People are asking in emails and calls why I think this decision from Washington State is so basic and decisive. So here is my answer.

If MERS was right, then there would be no point to having a statutory scheme for recording of deeds and mortgages. Let’s take a simple example, if MERS was named on the deed as the Grantee by a real person who was selling the property as Grantor. So far so good. Everything is in order if the deed is recorded in the county recorder’s office in the same county as where the property is located.

So you decide you would like to make an offer to MERS for purchase of the property. MERS says we don’t own the property and you say but the recorded deed says you are the owner and the statute says that makes you the owner. MERS says no, we are not the owner we are just a nominee for a succession of owners. You’ll have to figure it out for yourself.

So you go to a lawyer and you say I want to buy this property and I went to the owner of record, but they say they have no power to sell it because they don’t own it. So who owns it? The lawyer makes some calls and is finally told that on the MERS data files the owner is XYZ Corp. He looks into the title record and finds no evidence of any XYZ Corp. nor that they ever had an interest or stake in the property.

So the lawyer goes back to his client and tells the prospective buyer, well, they have identified XYZ Corp as the owner and here is their telephone number. And ask “how do I know they are the owner if there is nothing in the title record? Are we to simply take the word of someone at MERS? IS that the way title works in this state?”

So the lawyer thinks for a minute and says well, MERS says they will sign off if XYZ signs off and XYZ is willing to show an assignment from MERS to XYZ that hasn’t been recorded yet. But you are still concerned. “We are still taking the word of someone at MERS that XYZ Corp is the owner. I guess if we get a deed  or assignment of deed from MERS that helps but isn’t something wrong here?”

The lawyer does some research and finds out that MERS is designed to pass around the title to the property by way of an unsecured database and that neither MERS nor XYZ can actually be trusted source of title without their being a final order from a judge declaring the rights of the stakeholders. But then he gives you the bad news. You are just a prospective purchaser who has no interest in the property so you cannot get that order from a court. It must be MERS or XYZ and they refuse to do that. But the good news is that they have accepted your offer to purchase the property.

Head scratch. The lawyer is saying that you must have a final order from a judge which can be certified and recorded in the county recorder’s office and you don’t have the right (standing) to go get that order and the “sellers” refuse to participate in that strategy, for whatever reason.

So you go to your local title insurance company and find out that that sure, they will issue a policy, but the policy will exclude off-record transactions so if there are any claims that are different than what is represented in the MERS or XYZ documents, the problem is yours.

So there you are, ready to buy the property, you have a willing “Seller” and no certainty or insurance that you can get title.

THAT is exactly what the statutory scheme for recordation of title instruments is all about. It creates certainty without all the steps above and it provides a free marketplace where people can trust that they are getting what they think they are buying. The same holds true for mortgages. So you want to pay off your mortgage now? Go to MERS and start at the top of this blog and work your way down again. That is why the decision in Washington is so important and why it is the only right decision to make.

Tags: MERS, recording statutes
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