Released: September 27, 2009

The mortgage machine backfires

Source: Gretchen Morgenson, New York Times (Free Registration)

With the mortgage bust approaching Year Three, it is increasingly up to the nation’s courts to examine the dubious practices that guided the mania. A ruling that the Kansas Supreme Court issued last month has done precisely that, and it has significant implications for both the mortgage industry and troubled borrowers.

The opinion spotlights a crucial but obscure cog in the nation’s lending machinery: a privately owned loan tracking service known as the Mortgage Electronic Registration System. This registry, created in 1997 to improve profits and efficiency among lenders, eliminates the need to record changes in property ownership in local land records.

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