Saturday, October 23, 2010
Former hedge fund manager Shah Gilani notes:
In creating MERS, these institutions actually changed the land-title system that this country - for much of its history - has relied upon to determine legal ownership status of land titleholders.MERS is a shell company, with no employees. However, its parent does have employees.
Not only did the lenders sidestep (read that to mean avoid) paying billions of dollars in fees to local governments, they paid themselves from the fees that MERS collected.
MERS is facing class-action lawsuits and civil racketeering suits around the country and their members are being individually named in all these suits. One suit alleges that MERS owes California a potential $60 billion to $120 billion in unpaid land-recording fees.
If suits against MERS and all its members are successful, unpaid recording fees and fines (that can be as much as $10,000 per incident) would make every one of them insolvent.
As Bloomberg notes:
MERS Inc., which holds the liens, has no employees, and MERSCORP, the parent, has only about 50, [the MERS spokeswoman said].Plaintiffs' lawyers will undoubtedly argue that the "corporate veil should be pierced". In other words, they'll argue that MERS hasn't followed normal corporate formalities (or is inadequately capitalized), and so the big banks which own it should have to pay any judgments against it. I am not sure who will win that argument.
But Plaintiffs' lawyers will probably also name the banks themselves directly as co-defendants.