Making Home Lending More Transparent

Phil Ting's picture

Today, I am proud to join SEIU, ACCE, CRL and CRC in proposing legislation to make the home lending process significantly more transparent.  We are honored to have Assemblymember Bob Wieckowski carry our legislation asking lenders to file documents every time a loan is sold so any property owner will know who actually owns the loan they are paying every month.

Foreclosures continue to remain at all time highs in CA, while home owners continue to struggle to get their loan modified.  One problem for home owners is the lender who loaned them the money has now sold their mortgage to an investor.  Historically, the lender would have had to file a promissory note with the Recorder's office as a formal document, but today, lenders are allowed to sell notes through a system called MERS.  MERS was create about ten years ago so the financial industry could become more efficient and package loans in large numbers to be sold on Wall Street.  At the same time, if home owners defaulted, investors would be able to foreclose quickly without having to file any paperwork with Recorders across the country.  While efficiency increased, home owners today have no idea who actually owns the mortgage they pay every month.  Most lenders are just collecting the check on behalf of an investor somewhere else.  This lack of transparency has become a major issue during the foreclosure process because home owners seeking modifications and relief  were told lenders or servicers could do nothing without the approval of the investor.

In case, you are wondering why this is important, you need look no further than this story about a couple who is facing foreclosure despite have made every single payment on their mortgage.



Ben Shore's picture

Keeping Lenders Honest and Foreclosures Down

This is really great, Phil. I remember reading a lot about MERS a few months ago and thinking, how is this possible, let alone legal? The idea that something as central to The American Dream as homeownership can fall victim to predatory Wall Street scams and backdoor dealings is really, really sad. It's been such a simple premise for generations: your mortgage is on file with the Recorders office, end of story. In light of the all the corruption and dysfunction we've seen with banks and Wall Street over the last few years, it's time to get back to basics and transparency is the best start. Kudos to all involved in this for taking an important stand on an issue that is deep seeded in the American psyche. And good for Assemblymember Bob Wieckowski for carrying this out. I had the opportunity to spend some time with him during his campaign last year and was really impressed by passion and dedication. Sounds like we're on the right track here!

Phil Ting's picture

The Big Short

I just finished reading The Big Short by Michael Lewis of Moneyball and Liars Poker fame where he chronicles how many banks (Wells, BofA, Citibank), investment banks (Bear Stearns, Lehman Brothers, Merrill Lynch) and insurance companies (AIG) were fooled by all the subprime loans - took huge positions and bankrupted or almost bankrupted their companies.  A few people had the foresight to bet on the other side and made millions.  The big losers were us, the taxpayers, who spent billions bailing out the financial institutions, and homeowners who were fooled into taking loans with small monthly loan payments.  This lead to the greatest financial crash since the Depression and have created a nationwide foreclosure crisis.

Paid for by Phil Ting for Assembly 2012. FPPC ID# 1343137