transcript of va house testimony in reference to hb 1506 by mers general counsel william hultman

7/28/2019 Transcript of VA House testimony in reference to HB 1506 by MERS General Counsel William Hultman

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3 COMMITTEE MEMBER: Can you explain what you are in

4 relation to that?

5 MR. HULTMAN: We're the beneficiary, but we're an

6 agent of the lender. So instead of having two -- one party be

7 both the payee on the note and the beneficiary in deed of

8 trust, we're the beneficiary as their agent. In other words,

9 we're holding title to the mortgage lien on their behalf.

10 COMMITTEE MEMBER: Through this process called

11 nominee?

12 MR. HULTMAN: Well, nominee is just another word for

13 agent.

14 COMMITTEE MEMBER: Okay. So the actual record --

15 MR. HULTMAN: And the mortgage gets recorded or the

16 deed of trust gets recorded so the world is on notice that

17 there is a lien against the property, which is what the purpose

18 of land records are.

19 COMMITTEE MEMBER: Right.

20 MR. HULTMAN: History, even before MERS, it was neve

21 the role of the land records to tell anybody who the owner of

22 the indebtedness was.

23 COMMITTEE MEMBER: I don't disagree.

24 MR. HULTMAN: And -- I'm sorry?

25 COMMITTEE MEMBER: I don't disagree with that.

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1 MR. HULTMAN: Oh, okay. Fair enough.

2 Just in response to something else that I heard you

3 ask the people from the Banker's Association. One of the othe

4 reasons why I think some of the states have not gone down this

5 path about having the certificate of title for the indebtednes

6 is because the federal law already provides a lot of protection

7 for the borrowers. Under RESPA, any borrower is entitled to

8 write a letter to the servicer and the servicer is obligated

9 under federal law in RESPA to give -- disclose the person who

10 holds their note.

11 Also, last year from the federal legislation that got

12 passed in May, and this is the (inaudible) amendment, I forget

13 the name, but the statute, but it amended the Truth and Lending

14 Act and added a section, 404, that requires now that every time

15 the note is transferred, the transferee or the purchaser of the

16 note is required under federal law to give notice to the

17 borrower that they now own the note.

18 So this notion somehow that we have to put another

19 record in the land record, and one of the reasons that MERS

20 exists today is because prior to MERS all these assignments

21 were not getting recorded or they were being done improperly,

22 they would get rejected, and there would be breaks in the chain

23 of title. MERS (inaudible) the title to the mortgage lien in

24 MERS so that from the beginning to the end, the loan, period,

25 is never going to be a break of title because the assignments

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1 were recorded.

2 COMMITTEE MEMBER: Let me ask this question. So as

3 understand it, actually there never is an assignment made ever

4 because you from the beginning are the beneficiary --

5 MR. HULTMAN: That's correct.

6 COMMITTEE MEMBER: So for purposes of recording in

7 our courthouses, there is never an assignment that's ever made

8 The assignment, if there is one, would be a change in the

9 actual underlying promissory note.

10 MR. HULTMAN: And that's where I think some of the

11 confusion comes up with people when they talk about MERS. The

12 use the word assignment and mortgage and mortgage loan and note

13 interchangeably when there are two distinct instruments and --

14 COMMITTEE MEMBER: (Inaudible) deed of trust and

15 there's a note.

16 MR. HULTMAN: When -- I use mortgage, deed of trust.

17 COMMITTEE MEMBER: (Inaudible.)

18 MR. HULTMAN: They're interchangeable from our

19 perspective. We're really a holder of the mortgage --

20 COMMITTEE MEMBER: Right, but in Virginia you have

21 deed of trust that deals with the ownership of the property,

22 and then you have a promissory note which is never recorded,

23 which deals with the obligation on the debt.

24 MR. HULTMAN: That's correct.

25 COMMITTEE MEMBER: What you're saying is, is this

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1 language in this bill that talks about assignments really

2 doesn't affect you anyway because --

3 MR. HULTMAN: I think it would cause more confusion

4 than it solves any problems. I mean, a lot of what we see --

5 and frankly, I talk to borrowers everyday. Borrowers call me

6 up. I mean, we heard the story from one of the lawyers here

7 about how these things went in wrong places and did things.

8 Well, people make mistakes.

9 You know, if somebody called me up and asked me,

10 which they didn't, we would have helped them sort out that

11 problem. We would have gone to -- and I do this everyday.

12 Borrowers call us up and they say, I don't know who my

13 noteholder is. Because if they go on our website or if they g

14 into the toll-free number that they can call, we'll tell them

15 the identity of the current servicer and we'll also -- for 97

16 percent of our members who haven't opted out, we'll give them

17 the name of the noteholder, and sometimes I'll even give them

18 the noteholder's name if they have a compelling reason for it

19 even when they --

20 COMMITTEE MEMBER: And their contact information?

21 MR. HULTMAN: Contact in -- yeah. I mean, we'll giv

22 that information up to the people. Now, again, that's a more

23 -- the owner -- we always show who the servicer was. That was

24 our purpose. Now, since all of this activity has gone on,

25 we've been able to convince our members that, for most of them

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1 at least, that we'll be willing to disclose the -- who holds

2 the note on their -- who (inaudible.)

3 COMMITTEE MEMBER: Anything else? (Inaudible.)

4 COMMITTEE MEMBER: I have a question. This section

5 404 you were just talking about --

6 MR. HULTMAN: Section 404.

7 COMMITTEE MEMBER: Yeah, section 404, it requires

8 what now?

9 MR. HULTMAN: When the note is transferred or sold,

10 the federal legislation requires a notice be delivered to the

11 borrower from the purchaser or the transferee of the note. So

12 whoever has acquired that note for whatever reason, doesn't

13 actually have to be a sale, but it could be -- as long as

14 they're the subsequent holder of the note or the owner of the

15 loan, they're --

16 COMMITTEE MEMBER: (Inaudible) company?

17 MR. HULTMAN: Right. They're required to deliver

18 this notice to the borrower, and on it, it says who the owner

19 of the note is. It also tells the borrower who they have to

20 contact to -- if they have questions about the note. So, for

21 example, a bank is using a servicer or a trustee is using a

22 servicer to collect the payments for that, which is what most

23 professional investors do today. So, for example, you know,

24 right now 98 percent of the loans are done by Freddie

25 (inaudible) -- purchased by Freddie (inaudible). And, you

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1 know, they all use professional services because they're not in

2 that business. They're in the business of owning notes and

3 making sure they get distributed to investors world-wide. So

4 they'll tell you who to contact and they'll give specific

5 contact information in that notice to let them know who they

6 need to talk to if they have problems with their loan.

7 COMMITTEE MEMBER: This is just a follow-up. So

8 you're saying that the recordation part here that's in this

9 bill, it wouldn't affect you anyway?

10 MR. HULTMAN: Well, I think it would cause confusion

11 and it would up end up --

12 COMMITTEE MEMBER: So it would be your position that

13 it would not affect you --

14 MR. HULTMAN: Yeah, that's right.

15 COMMITTEE MEMBER: -- because you're on the original

16 (inaudible).

17 MR. HULTMAN: We're on the deed, and the conveyance

18 to us has not changed.

19 COMMITTEE MEMBER: So in other words, where the

20 change is coming is in the promissory notes?

21 MR. HULTMAN: Exactly.

22 COMMITTEE MEMBER: And then what you're doing is

23 you're acting sort of after the -- you're acting as a clearing

24 house for determining -- I mean, that -- but you know that's

25 not very well advertised. I mean, I don't think there are a

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1 lot of people that know --

2 MR. HULTMAN: I would say that there's a lot of --

3 COMMITTEE MEMBER: I --

4 MR. HULTMAN: -- misunderstanding about MERS in the

5 press and in the Internet stories about MERS. You go to our

6 website, and maybe our website is not the most user-friendly

7 website, but we're a very transparent company. Everything

8 about MERS is pretty much on our website, and as I said, we

9 disclose who we're acting for.

10 The fact that we're acting as this nominee or agent

11 is disclosed in the instrument. The fact that the instrument

12 and the borrower agrees in the deed of trust that if the

13 investor or servicer so desires, MERS may actually conduct the

14 foreclosure process in the states. And there is no state that

15 has said that we're doing anything in contravention to state

16 law in any of the 50 states so far. There's a lot of noise.

17 And you've heard about cases where they say MERS got

18 kicked out of court. Well, that may be true, but it's not

19 because MERS is not legal or MERS is not within compliance with

20 state law. It's because there was a defect in the process, an

21 the party who is bringing the prosecution had not done all of

22 the paperwork that they needed to be done, and those cases are

23 usually dismissed without prejudice and they can go back and

24 remedy those positions. But a lot of times that gets recorded

25 as MERS got kicked out of court or MERS loses a case.

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1 COMMITTEE MEMBER: Mr. Chairman --

2 COMMITTEE MEMBER: Any other questions?

3 COMMITTEE MEMBER: Mr. Chairman, I was going to ask

4 question about how I find my mortgage on the website, but I

5 went on their website and I (inaudible) found my mortgage in

6 about ten seconds (inaudible).

7 MR. HULTMAN: Now, I would say this, MERS only has 6

8 percent of the mortgages. There are some people who chose not

9 to use MERS for -- because they don't sell the loan. They buy

10 the loan and they hold the service and they hold the mortgage

11 note or they secure -- so, you know, not everybody will find

12 their mortgage on the system because we don't have a hundred

13 percent of the marketshare.

14 COMMITTEE MEMBER: Mr. Chair, when was this section

15 --

16 MR. HULTMAN: I think it was May 2009.

17 COMMITTEE MEMBER: Well, what I'm showing is that it

18 was passed December 18, 2010.

19 COMMITTEE MEMBER: It was approved.

20 MR. HULTMAN: Could have been. I may be off.

21 COMMITTEE MEMBER: Yeah. So, I guess, what your

22 position would be based on that is you now have to provide

23 notice to everybody whenever you transfer --

24 MR. HULTMAN: If history shows anything, adding

25 additional requirements to record documents with a county or

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1 clerk will result in more problems, not less problems. It add

2 costs. People will forget to do it, because people are human,

3 and then there's a question about what happens if we don't file

4 it, what impact does it have on the process other than just

5 trying to foreclose.

6 Part of the problem with the statute can also be

7 looked at is it's only requiring the assignments and these

8 transfer notices to be effective if it's only to prosecute the

9 foreclosure. You know, I get a lot of people who call me up

10 and say, I can't find who has -- I want my lien released, and

11 we'll sign the lien release if we're satisfied that the note

12 has been paid off. We can go to the title company and they'll

13 give us the information and we can actually do that on behalf

14 of borrowers. We probably do this a dozen times where we help

15 borrowers release their liens when they're not there.

16 If the statute, you know, it doesn't -- it doesn't -

17 it's not going to change human nature. People are going to

18 make mistakes. Assignments and these transfer notices will no

19 get filed. It will cause further problems for borrowers going

20 forward. (Inaudible) foreclosure process.

21 COMMITTEE MEMBER: Mr. Chairman.

22 COMMITTEE MEMBER: (Inaudible).

23 COMMITTEE MEMBER: Thank you.

24 Sir, you've been here most of the afternoon; have you

25 not?

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1 MR. HULTMAN: I have listened to the whole testimony

2 yes.

3 COMMITTEE MEMBER: And you heard a lot of the storie

4 where folks are saying they couldn't find out who owned the

5 note or anything like that. Do I understand that if their not

6 were, in fact, being held by your company, that they should

7 have been able to find that out?

8 MR. HULTMAN: If -- first of all, just -- just to be

9 clear, MERS doesn't hold the notes except in the limited sense

10 that if they're foreclosing, our rules require us to have

11 possession of the note to foreclose.

12 But if the note had been registered on MERS, it would

13 certainly have been easier for a borrower to find out who owned

14 this loan, and one of the problems, and I'll be frank with you

15 one of the problems is that, you know, I think that because the

16 investor community have -- they're not servicers and they're

17 not mortgage companies. They're investors. They have

18 delegated the authority to modify loans and make deals with

19 borrowers to their servicer. And there's a lot of confusion

20 with the borrower community about who is the right person to

21 talk to.

22 You can call up the bank in New York if they're the

23 trustee. But that's twelve guys in an office in Washington or

24 New York City or Chicago who have delegated that authority to

25 people who know how to deal with mortgages, which are the

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1 mortgage companies, the servicers who are doing these things.

2 So they can call up -- they can call the investors up, but the

3 investors are just going to tell them they need to go back to

4 the servicer because that's the party that they've empowered to

5 make those --

6 COMMITTEE MEMBER: Who are the servicers?

7 MR. HULTMAN: They're mostly national banks. I mean

8 the five biggest servicers hold probably 80 percent of the

9 servicing in the country today.

10 COMMITTEE MEMBER: So your role is, is if they

11 contact MERS, you're the one who tells them who the servicer i

12 to do their loan modification for a --


14 COMMITTEE MEMBER: -- short sale --

15 MR. HULTMAN: Yes.

16 COMMITTEE MEMBER: -- and in the event that loan

17 modification or short sale does not happen, you are the entity

18 that acts as the agent for the deed of trust beneficiary to

19 foreclose on the deed of trust?

20 MR. HULTMAN: If the investor chooses to do that.

21 Most people today do not foreclose in (inaudible). I think

22 they have decided because of a lot of the adverse publicity and

23 a lot of the noise in the press and just in general and the

24 uncertainty in their minds in the courts, they have chosen to

25 not do that, in which case an assignment of the beneficial

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1 interest would be made and recorded in the land record.

2 So if, for example, if we're serving the land record

3 for Fannie Mae as the investor and Chase is the servicer and

4 they want to foreclose, typically today they will actually

5 assign the beneficial interest probably to Chase, and that

6 assignment must be recorded, and our rules require that it get

7 recorded before the assignment -- before the foreclosure

8 process is started. Because, you know, a lot of times, there

9 have been people who have not done that and done it after the

10 fact and they've been kicked out of court and rightly so.

11 So our rules actually require that if they're going

12 to foreclose in the servicer's name, they need to do the

13 assignment of the beneficial interest out of our -- out of the

14 MERS name.

15 COMMITTEE MEMBER: Any other questions for this

16 witness?

17 COMMITTEE MEMBER: Just one follow-up, if I may?

18 COMMITTEE MEMBER: Go right ahead.

19 COMMITTEE MEMBER: Sir, you -- it sounds like you've

20 appreciated the fact that there is a problem here; is that

21 right?

22 MR. HULTMAN: I get -- like I said, I get dozens of

23 calls every --

24 COMMITTEE MEMBER: My question then is this: What

25 could you tell this panel, I mean, this committee, that would

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1 help us understand -- help these people that have talked about

2 these stories that they've given us this afternoon? What woul

3 you suggest we could do by way of legislation that would help?

4 MR. HULTMAN: I'm not -- I think anything that you

5 can do to help enhance the modification process is probably

6 where the focus ought to be, because that's really what

7 borrowers are looking for. They're calling me up and saying -

8 you know, I think you heard that theme throughout the

9 borrowers.

10 So it's really focusing on the modification process,

11 which means that you have to engage the investor community

12 because ultimately they're the ones who -- and servicers really

13 are limited and the banks are limited when their net capacity.

14 Only when they own the loan do they have the ability to make

15 those modifications, because most of the modifications are --

16 those provisions are already in -- baked into the servicing

17 agreements that they have with the investors.

18 So it's really the focus should be on the investor

19 community, and know that in the federal level that's where a

20 lot of the activity is, trying to figure out programs that wil

21 enhance the ability for people to get modifications, and more

22 importantly, be able to successfully modify.

23 I mean, one of the problems we see today is loans get

24 modified and they're still not able -- still unable to make

25 payments. So I think focusing on the underlying economics and

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1 not the structural procedural things is really where the focus

2 of the legislature ought to be.

3 COMMITTEE MEMBER: Mr. Chairman?

4 COMMITTEE MEMBER: I do want to add one thing before

5 we move on to more questions, and that is, I think you're

6 correct. May 2009 is when the legislation went into place tha

7 said that you have to provide notice to the homeowner about any

8 (inaudible).

9 MR. HULTMAN: Thank you.

10 COMMITTEE MEMBER: You were right on that.

11 COMMITTEE MEMBER: (Inaudible).

12 COMMITTEE MEMBER: I want to build on a question tha

13 Delegate Cleveland -- really, when we heard the testimony from

14 these other folks today, it seemed there were two things. One

15 is connecting the investor and the homeowner, which they would

16 claim is not possible given the lack of information that flows

17 through the system. They don't know who these people are, so

18 they can't get to them. So they can't modify, because they

19 don't know. And by the time they get to them, it's too late.

20 And that gets to the second point of the bill that

21 they're trying to argue for, and that is extended time, to give

22 some more time for them to find the investors.

23 So I guess my question builds on his, and that is,

24 what do you do if -- I'm hearing you say, yeah, we've got to

25 work with the investor community, and I'm hearing proponents o

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1 the bill saying, we can't find them and we don't have enough

2 time to get to them so we can work something out. So what's

3 the answer?

4 MR. HULTMAN: Well, I think -- first of all, I think

5 it's not correct to say that they can't find them. I think

6 sometimes what happens is, is that the investors will tell them

7 you need to deal with the servicer. And -- because I get this

8 conversation with borrowers every week. They'll call me up an

9 say, can you tell me who the investor of my note is. I'll tel

10 them and I'll say, but, you know, they're going to just refer

11 you back to the servicer. And the servicer is the one who

12 really has -- the infrastructure that is prepared to deal with

13 these things.

14 I mean, trustees are a small group of people who are

15 really required to -- and investors, are really -- all they're

16 doing is transmitting the payments from the people who made --

17 who take out these loans to the people who invested in them,

18 who could be doctors in Singapore, for all we know.

19 They've delegated that to the mortgage companies

20 because the mortgage companies admittedly are stressed with the

21 amount of work that they have to do given the extent of the

22 prices here. But they're the ones that have the

23 infrastructure. They're the ones who actually have the loan

24 files. Investors typically do not have the loan files in thei

25 possession. Those loan files are with the servicers who are

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1 collecting the payments every day.

2 So they're really the only party who is into the land

3 record -- or, excuse me, in position to actually understand

4 what the loan is and how -- and what's the payments that the

5 borrower could make given their current circumstances. They

6 know how to judge credit. They know how to do all those

7 things. The investors are not prepared to do that. That's wh

8 they delegated all of this to the servicer community to do all

9 of that work.

10 So, and, again, you know, I don't have -- I'm not

11 really -- I don't really have an opinion on whether 45 days or

12 12 days or 15 days, but there's -- that's not the only part

13 where they have a chance to do things. This is an elongated

14 process. I think somebody testified who said that it takes at

15 least a year, and I think that's probably right. That -- and

16 it's probably longer right now.

17 I think -- we've seen -- and because we're the

18 mortgagee or we're the beneficiary, we get service of process

19 on foreclosures when we're being foreclosed on. So in other

20 words, MERS can also be in a subordinate or junior position or

21 senior position, and if a loan is being foreclosed, we'll get

22 that service of process.

23 COMMITTEE MEMBER: (Inaudible) second deed of trust

24 --


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1 COMMITTEE MEMBER: (Inaudible) first deed of trust

2 (inaudible) --

3 MR. HULTMAN: And we'll get that notice and we

4 (inaudible) So we see every day how much mail is coming

5 through, and I think the system is strained. I mean, I think

6 we're at capacity how many things we can do, and I think that'

7 causing a lot of problems that you heard today.

8 COMMITTEE MEMBER: Any other questions for this

9 witness?

10 COMMITTEE MEMBER: All right. Does anybody else wan

11 to speak against it?

12 MR. HULTMAN: Thank you.

13 COMMITTEE MEMBER: Thank you.

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transcript of va house testimony in reference to hb 1506 by mers general counsel william hultman

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