Remember Mortgage Electronic Registrations Systems Inc. (MERS), the sometime whipping boy of the robo-signing scandal? It’s still the only game in town for electronic recording of mortgages, and hasn’t implemented all the fixes it promised to in a 2011 legal settlement, Bloomberg News reports.

MERS was launched in 1997 with an admirable goal — to help lenders dispense with paperwork by tracking changes in ownership and servicing rights for mortgages electronically, a crucial step in the process of securitizing home loans and selling them to investors.

While the securitization of subprime mortgages helped fuel the housing bubble, the flow of investor dollars into more prudently made loans — like those guaranteed by Fannie Mae and Freddie Mac — makes home loans more affordable.

When the housing bubble burst, MERS and its clients ran into trouble when millions of homes went into foreclosure, exposing problems with the system MERS employed for tracking ownership of loans.

“Certifying officers” authorized by MERS to execute documents in its name were accused of “robo-signing” documents they had little knowledge of.

“There’s a kernel of a good idea in there, but it was done so sloppily,” Ira Rheingold, executive director of the National Association of Consumer Advocates, tells Bloomberg’s Jesse Hamilton. “It really became quite a mess.”

Fannie Mae and Freddie Mac’s federal regulator in 2012 proposed the establishment of a new electronic registration, and lawmakers have toyed with the idea as well.

But with MERS still “wrestling with regulators, lawsuits and the departures of senior employees,” a breakdown of the system “could force clients such as Fannie Mae and Bank of America Corp. to make costly changes to their loan business,” Hamilton reports. Source: businessweek.com.

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