Op-ed: Force home lenders to sign their names to land records
Home lenders should be required to record their names on land titles to protect homeowners, writes guest columnist Ben Shoval.
Special to The Times
EVERY person who lives in Washington state benefits from our underappreciated, unusually good land-title system. The state’s longstanding, clearly defined, open-to-the-public, county-by-county system for recording who owns real estate and debt on real estate like mortgages — and therefore who can sell it, rent it, build on it, borrow against it — is one of the best in the country.
For those who haven’t enjoyed the wonderfully bewildering experience, know that in many other states people are often taxed for land that belongs to their neighbors, have no way of determining their properties’ zoning, and can’t borrow against or sell their home since it’s impossible to clearly establish ownership.
In a unanimous decision in August, the Washington state Supreme Court delivered a strong body blow in our defense, but more must be done by the state Legislature to protect homeowners from companies like MERSCORP.
MERSCORPis owned and used primarily by a few large national banks. The company, which represents 3,000 lenders, loan servicers and investors, maintains a private registry of the owners of home mortgages. This has the practical effect of weakening our land-title system by obscuring the names of the legal owners of those loans, the lenders — the very people who have the right to foreclose.
MERSCORP has its roots in the mid-1990s and today is involved in about half of all home loans, although thankfully a far smaller percentage in our state. Its name is recorded instead of the bank’s name in the public land records. Then if the bank sells the loan to someone else, it only needs to alert MERSCORP — not the county land-records office, and not even the homeowner. There’s not much use to having clear record that you own your house if anyone can come along and foreclose it. And that’s exactly what almost happened in the case that was decided before the state Supreme Court.
This case should give the Legislature every reason to further protect our land-title system from those like MERSCORPthat obscure open-to-the-public property records. And doing so isn’t particularly difficult as a practical or political matter.
The Supreme Court decision makes clear that the Washington Deed of Trust Act allows only the legitimate owner of a loan to foreclose. The act should be amended to require that the name and contact information of that owner be publicly recorded in the same county land records as the loan itself whenever the loan is bought and sold. This is hardly burdensome upon the big banks that use MERSCORP’s system, and would put them on an equal playing field with the vast majority of Washington-based banks that have stuck with full public disclosure.
On a political level, we don’t have a major national bank based in Washington state anymore. Many of the MERSCORP-related loans that piled up in our state over the last decade came from WaMu during its short-lived and lethal pursuit of becoming a top-tier player. Washington’s many community banks have significant sway in the Legislature and have far more to gain from open records than they do from a world of hidden property information.
The MERSCORP system was allowed to grow nationally and in our state during the long housing bubble because an ever-rising market tends to paper over all sorts of problems. The state Supreme Court’s recent decision was an excellent step toward defending the open land-title system that benefits all of us — even those who don’t own any land. But it was just the first step.
Now the Legislature must act to ensure that MERSCORP and its inevitable imitators can’t obscure the names of those with the right to foreclose. This is an easy issue that brings together property rights, consumer protection and the basic promise in the U.S. Constitution that no person shall “be deprived of life, liberty, or property, without due process of law.”
Ben Shoval, president of Shoval & Co., a Yakima investment firm, is a board member of the Association of Washington Hispanic Chambers of Commerce and the Affordable Housing Coalition.