Reconciling the Legal Conflict between Mortgage Law and Technology in the Twenty-First Century
Open Access
- Author:
- Markey, Thomas Scott
- Area of Honors:
- Elective Area of Honors - Business Law
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Daniel Robert Cahoy, Thesis Supervisor
Daniel Robert Cahoy, Thesis Supervisor
Fiona Marie Greaves, Faculty Reader
Daniel Robert Cahoy, Thesis Honors Advisor - Keywords:
- subprime mortgages
subprime
electronic mortgage recording
pooling and servicing agreement
MERS
mortgage-backed securities
securitization
mortgage
subprime crisis
foreclosure
promissory note - Abstract:
- As technology continues to advance at a rapid pace, the law is often slow to adapt. A perfect example of the conflicts caused by this slow adaptation can be seen in the secondary mortgage market. In an effort to cut costs, investment banks have taken shortcuts in the paperwork required to assign a securitized mortgage from the mortgage originator to the trustee that pools mortgages into marketable securities. The result has been a rash of failed foreclosures because the banks cannot prove they own the promissory notes underlying the mortgages. Complicating matters is an internet company that claims to be the mortgagee for sixty million home loans: the Mortgage Electronic Registration System (MERS). Designed to simplify the paperwork in the secondary mortgage market, MERS has taken the radical step of foreclosing on home loans. The problem is that MERS does not own legal title to the mortgages on which it is foreclosing. From analyzing MERS and the investment banks, one can conclude that the mortgage industry demands reform. This paper recommends that legislators create a legal tool called a mass pooling agreement (MPA). The MPA will simplify and economize the securitization process by offering a legal avenue for the mass pooling of promissory notes during the creation of mortgage-backed securities.