Acquiring a mortgage loan
Acquiring a mortgage loan - 
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Jeremy Hobson: There is one part of the mortgage market that is famously free from the government. It's called MERS -- and it allows the mortgage industry to buy and sell loans without recording transactions at the courthouse.

From WFAE in Charlotte, Greg Collard explains.

Greg Collard: The land records in Salem, Mass., date back to 1634. The local register of deeds, John O'Brien, says homeowners used to know which banks owned their mortgage. But 60 percent of the mortgages closed today are owned by something called Mortgage Electronic Registration Systems, or MERS. And O'Brien says it's muddled the land records system.

John O'Brien: I can't honestly look people in the eye who has a MERS mortgage and tell them who owns their mortgage, and that troubles me.

He says he can't track these mortgages anymore. MERS takes over once the deed is filed at the courthouse. All future transactions are tracked in the private MERS database instead of the courthouse. It's been that way since the mid-'90s.

Kurt Pfotenhauer: That was time when securitization was just starting up in a meaningful way and mortgage volume was increasing.

Increasing so much, says Kurt Pfotenhauer of the American Land Title Association, that courthouse technology couldn't keep up. So his group and other major players in the mortgage industry joined the big banks to create MERS.

Pfotenhauer: The primary motivator was to keep up with the volume, but that does have a financial element to it.

Like no more recording fees when mortgages are sold to investors. In Salem, John O'Brien says it's a loss of $75 a pop. O'Brien estimates his county has lost at least $48 million. But, even more important, he says MERS is an enabler. It's run by the country's biggest banks, and O'Brien says it allows them to keep risky transactions secret -- the type of deals that got us in the trouble we're in today.

O'Brien: I think this was a scheme that was put together to hide from the public and not to pay fees. It's as simple as that.

MERS officials wouldn't agree to an interview, but maintain it's not necessary to record assignments at the courthouse because MERS remains the mortgage owner no matter how many times a loan is sold to investors. That claim is now the subject of several court cases.

In Charlotte, I'm Greg Collard for Marketplace.