Rumors were rampant Friday that R.K. Arnold, the CEO of the embattled MERS, would resign. Today, MERS made the announcement. Maybe they’ll hand out the CEO position on a rotating basis the way they hand out Vice Presidencies or “certifying officer” positions to anyone who asks for one! Actually, no.
Merscorp Inc., the parent company of Mortgage Electronic Registration Systems Inc., said R.K. Arnold has retired as chief executive officer and president, and Paul Bognanno will take the job on an interim basis.
Bognanno, former chairman of Radian Guaranty Inc., will lead the search process for a permanent replacement, Reston, Virginia-based Merscorp said in an e-mailed statement.
The MERS system, which Arnold helped develop, has come under fire in courts on the role it has, if any, in home foreclosures. It’s an electronic database of more than half of all the outstanding residential mortgages in the U.S. Merscorp has said it was created by the mortgage industry in 1995 to improve servicing after county offices couldn’t deal with the flood of mortgage assignments.
Let me just correct that last paragraph. MERS was created by the mortgage industry to avoid recording fees at county offices. This notion that the county offices couldn’t handle it is just not true. The banks didn’t like that they were charged for the transfer.
As this mentions, Arnold wasn’t just a figurehead CEO, he basically was MERS. They only have a handful of employees, and he’s been there since 1996. As much as this is a personnel decision, it’s also the end of MERS, in a sense. Throughout the foreclosure fraud crisis, MERS has been exposed, not only as a tax avoidance scheme, but as a registry which introduced tremendous complexity into the securitization process, and led to a breakdown in the mortgage assignment process. The “electronic handshake” pulled off by entering mortgage transfers into the database simply does not have the same force of law as reality, and MERS has no internal standards or tracking of the transfers put into the database, making them only slightly more credible than fiction. And MERS trying to both stand in as the mortgagee and also claim no financial responsibility in the mortgage makes absolutely no sense, as several judges have pointed out. You cannot justify MERS without offering up a series of lies and misstatements.
Numerous states have MERS lawsuits floating through the system. I don’t see how the company survives, or at least how it becomes more trouble for the banks who own it than it’s worth. Arnold must have thought so too.