Home > Economy, Business & Finance > The Mortgage Fraud Crisis Downstream: Part 1: County Level Issues

The Mortgage Fraud Crisis Downstream: Part 1: County Level Issues


ZeroHedge.com has been reporting on the mortgage crisis and how banks such as GMAC, Ally, JPMorgan Chase and Bank of America are halting foreclosures based upon the signing of faulty documents at the county level. The main problem with this is not so much a matter of the people within these organizations being dishonest as much at it is with the workflow processes being inconsistent, both at the county level in which these documents get recorded and with the banks internal workflow processes.

Here are two examples of diverging workflow processes at the county level:

Cook County Illionois (Chicago) clerk & recorders office was highly efficient in recording mortgage related documents (mortgages, assignments, modifications, etc). For the public they had 8 or so clerks who would record these documents everyday. They used an automatic scanning process as well which would digitize the documents upon recording and paying of the appropriate fee. A bar code would be printed per document as well. For the title companies, they had a batch drop off area for high volume recordings (200+ at a time). A title company could drop off up to 200+ docs for recording in the morning and pick up the receipts in the afternoon with the recording info. It was highly efficient from a time standpoint.

Problem was, you could record anything and everything, literally. We used to joke around that  one could record the sports section of the local paper and the county would be happy to oblige: Meaning there was NO Quality Control at the county level as to what was being recorded and on which property. This aided and abed-ed massive mortgage fraud with fraudulent deed transfers.

Nassau County, NY: This was totally the opposite. Nassau is highly inefficient. If you want to record a document, get on line and wait is the mantra. And you can only record 5 documents at a time. 3 windows open and the wait could be up to 3 hours. Or better yet, make an appointment for 3-4 weeks later and you could record up to 20 documents. They did check everything in the documents for county level compliance but it was a real pain in the ass. Many title companies sent there recordings in via mail and at 1 point Nassau was behind 8-9 months on recording the documents, which sat in bins and ultimately many were lost in the process, never to be found again. This process slowed down the system: counties like this could not keep up with the pace of refinances and home equity transactions.

The long and the short of this, is that there is very little uniformity in the recording processes from state to state or county to county. There are 3000+ counties across the country, and each of them has, to varying degrees, different processes, workflow, rules and requirements. This is part of the root cause downstream of the mortgage problem and crisis we face today, specifically as it relates to lost and/or defective loan documents and identifying title holders.

MERS

The diverse county level procedures and processes for recording loan documents  resulted in the creation of MERS (Mortgage Electronic Registration Systems). MERS was created, in part, to circumvent the state level county recording process due to the defects and inconsistencies in that system (on a county to county basis). The idea behind MERS, was to speed up the transfer of loan assignments by electronically registering them on a national level.

We will expand on this in a future post as well as touch on the the workflow processes at the bank and service provider level; and what can be done to insure uniformity and consistency in the industry.

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