The House Financial Services Committee wants to give a new private company unprecedented control of land records, making an end run around state laws that protect New York homeowners from fraud.
Buried in the controversial new Protecting American Taxpayers and Homeowners (PATH) Act, a housing finance reform bill sponsored by Rep. Scott Garrett (R-NJ), is a plan for creating a National Mortgage Data Repository. The repository would essentially be a privately run recorder of deeds, with vast powers formerly held by states.
As the final word on legal rights to home ownership, the repository would have far-reaching impact on residential real estate transactions, from sales to foreclosures.
The bill, which was approved by the committee July 24 in a vote along party lines, insulates the repository from almost all legal challenges in state or federal courts. Should it become law, homeowners would find themselves essentially without legal recourse to contest errors in the repository.
“This is a pretty radical intrusion on state law governing homeownership,” says Jacob Inwald, director of foreclosure prevention litigation at Legal Services NYC.
“It’s shocking that the entire structure we’re accustomed to under state law would, with a [stroke] of a pen, be displaced, and there’s no way to challenge anything that transpired within this registry,” Inwald added.
On its face, the repository serves as a solution to the record-keeping mess created by big banks and their private mortgage registry, Mortgage Electronic Registration Systems (MERS). The foreclosure crisis drags on largely because, in thousands of court cases, banks and MERS cannot produce correct documents proving the lenders’ right to foreclose.
A spokesman for the Financial Services Committee insisted, “The repository will establish a clear record of who owns what and who owes what to whom … [which] will ensure all mortgage-related actions can be carried out with legal certainty.”
But critics charge that this bill is a stealthy effort to expand a failed business model — at the expense of consumer rights and state law.
“We tried an experiment on this, and it came out very badly,” said Michael Calhoun, president of the Center for Responsible Lending, who testified against the bill.