Should cities use MERS for vacant-property registration?

Nails, Gifts and MortgagesOne convenient way for a city to start a Vacant Property Registration (VPR) program is to require homeowners or mortgageesĀ to register with the Mortgage Electronic Registration Service (MERS). MERS was created by the mortgage industry to track mortgages as they were bought and sold, but once VPR ordinances started sprouting up, MERS made its database accessible to local governments to use in conjunction with their VPR programs (this is called theĀ MERS Initiative). Using this service lets cities track who owns loans on what properties— increasing their chances of figuring out who is actually responsible for maintaining a property. And better yet, the service is offered to cities for free.

So what’s the catch? At first glance, not much; hundreds of cities are signed on, and for each registered property MERS gives them online access to the title holder, servicer, and property preservation company (a local company hired by the mortgage company to maintain a property). But my warning is this: MERS is very closely associated with the mortgage industry—which is generally opposed to VPR—and, in the past, the company’s sloppy recordkeeping has worked to shield the mortgage industry from liability. It’s unfortunate that the most viable electronic database isn’t maintained by a neutral third-party, but essentially the mortgage industry itself.

I see three alternatives (please feel free to add more). First, cities could develop their own electronic database (or encourage private citizens to develop one for them). This approach has a glaring downside: If each city creates its own database, then compliance is more difficult for the mortgage companies, who usually must maintain vacant property across the country. Second, cities could go with another company, the Federal Property Registration Corporation, which is a private company like MERS, though less criticized at this point. The third alternative is for a non-profit or government entity to create a uniform platform that local cities could adopt as their own, essentially a freeware database. This approach has the benefit of giving local communities control over the database, while maintaining uniformity, which is essential to mortgage industry compliance. I have previously proposed that the federal government create such a platform, but now realize that any developer could do it—including folks from Code for America or using Socrata—and promote it nationally.

I discuss some of these ideas in an academic paper you can download here.

As always, ideas or comments are welcome.

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