The McHenry County Board’s Legislative Committee voted unanimously Monday to support a bill requiring that property records remain readily available to the public.
Senate Bill 370, proposed by state Sen. Judith Myers (R-Danville), comes in response to the Mortgage Electronic Registration System, a privately operated system that records mortgages, liens and other documents. Myers’ bill would require MERS to record mortgage documents in the county in which the property in question is located. MERS-recorded documents also would have to be made available to the public at a reasonable cost.
Myers said the legislation will probably be reworded or modified after it failed to make it out of committee.
“We are trying to work on language that would still require filing with the counties but would also allow MERS to continue,” Myers said.
McHenry County Chief Deputy Recorder Marilyn Koeller said her office and other recorders around the state fear that property titles could be at risk because of MERS.
The system acts as a property records clearinghouse. The information is accessible only to paying members of MERS. Property owners and title companies have no access to records unless they pay a fee to a MERS-member company. That fee can be whatever MERS wants to charge.
Mortgages, mortgage assignments, liens and other property records typically are recorded in the county in which the property is located. The public is free to review records filed in county recorders’ offices.
Koeller said MERS was created several years ago by major financial institutions with the support of the U.S. Department of Housing and Urban Development, Fannie Mae and Freddie Mac, which underwrite federal mortgage programs. The institutions’ aim was to boost income, she said.
“This raises an issue of the legitimacy of (property) titles,” said committee Chairman Donald Brewer. “With all the bank changes, mergers, assignments, it’s more difficult (to track mortgages) when they go to a private company.”
Many mortgages are sold or “assigned.”
Koeller said mortgages or assignments recorded in MERS but not in county recorders’ offices would not show up on traditional title searches, raising the possibility of title problems later on.
Paul Madsen, manager of Ticor Title Co. in McHenry, said title companies likely would have to raise fees to cover the higher costs of using MERS to find title records. Those higher fees would be paid by property sellers or buyers at closing.
Madsen does not have the same concerns as the recorder’s office.
“As far as mortgage assignments go, many of them already are not recorded,” Madsen said. “That’s not a big problem. If Old Kent assigns a mortgage to Bob and Bob assigns it to Bill, who cares? There’s going to be a payoff at closing, whether it goes to Bill or Bob. But if they are re-recording original mortgages, that would be a huge problem.”
Madsen said his office has come across several mortgages that were later assigned to MERS-member companies. He did not know of any original mortgages recorded with MERS but not with a county recorder.
Madsen pointed out that title companies are not responsible for documents that are not publicly recorded. So if a title company gave clear title and a mortgage recorded only in the privately operated MERS system were later discovered, the title company would not be liable.
