LOSING THE PAPER –MORTGAGE
ASSIGNMENTS, NOTE TRANSFERS AND
CONSUMER PROTECTION
ASSIGNMENTS, NOTE TRANSFERS AND
CONSUMER PROTECTION
Alan M. White *
ABSTRACT
ABSTRACT
In this article, I survey the state of the mortgage loan transfer
system, the legal rules that govern it, and the widening gap
between those rules and the practices in the secondary mortgage
market just prior to the 2008 crisis. The review includes some
empirical assessment of the extent of errors and execution problems; the damage done by “robo-signing;” the Mortgage Electronic Registration System (“MERS”) and note delivery practices; and the extent to which courts will prevent or reverse foreclosure sales based on those errors and problems. I then examine why existing legal structures, for both paper-based and electronic transfers, are not working, and the extent to which they have failed, I also identify the key consumer and investor protection values and interests (finality, transparency, fraud protection, and so forth) that must be addressed by the law governing secondary market transfers of home loans. I conclude by outlining options for reforming the mortgage loan transfer system, including the use of a single document merging the note and mortgage, and a structure for the registration of a single
authoritative electronic version of the mortgage/note and of all
changes in parties to, and terms of, the transaction.
system, the legal rules that govern it, and the widening gap
between those rules and the practices in the secondary mortgage
market just prior to the 2008 crisis. The review includes some
empirical assessment of the extent of errors and execution problems; the damage done by “robo-signing;” the Mortgage Electronic Registration System (“MERS”) and note delivery practices; and the extent to which courts will prevent or reverse foreclosure sales based on those errors and problems. I then examine why existing legal structures, for both paper-based and electronic transfers, are not working, and the extent to which they have failed, I also identify the key consumer and investor protection values and interests (finality, transparency, fraud protection, and so forth) that must be addressed by the law governing secondary market transfers of home loans. I conclude by outlining options for reforming the mortgage loan transfer system, including the use of a single document merging the note and mortgage, and a structure for the registration of a single
authoritative electronic version of the mortgage/note and of all
changes in parties to, and terms of, the transaction.
* Professor of Law, Valparaiso Law School. Special thanks to Whitney
Dickison, Christopher Erickson and Anne Zygaldo for their invaluable assistance
with the MERS foreclosure record survey and with additional legal research.
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