Industry Insights - June 2011

Big Fat Finance Blog

Daily blog for finance professionals run by a network of seasoned business journalists

Calculated Risk

Bill McBride on key meetings, surveys and reports about employment and the housing market

DealBook

Up-to-the-minute news tracking mergers, investments and finance by The New York Times

Dealbreaker

Entertainment meets news to add color to the finance industry and cover its culture

Felix Salmon

Felix Salmon of Reuters on recent stock and banking news

Going Concern

News about taxes and expenses for accountants and CFOs, plus in-depth news on the Big 4

Marginal Revolution

A breakdown of global economics and its modernization presented by Tyler Cowen and Alex Tabarrok

On The Money

Integrating politics with business to dissect policies and determine their effects from The Hill newspaper

Real Time Economics

The Wall Street Journal s hard-hitting economic news and insight analysis

The Big Picture

Accessible content about markets and the basics of investments from Barry Ritholz, economic commentator and author of Bailout Nation

Market Resources

June 9, 2011

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June 9, 2011

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June 8, 2011

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May 30, 2011

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May 27, 2011

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Press Releases

April 7, 2011 - Read >

Global Debt Registry (GDR) Responds to CBS 60-Minutes Segment on the Failure of Documentation in Mortgage Backed Securities—A Proven Solution Already Exists

March 10, 2011 - Read >

Global Debt Registry Response to Arizona Senate Passing Legislation Requiring Full Chain of Title Documentation on Mortgages

February 10, 2011 - Read >

Court Ruling Increases Requirements for Debt Collection Lawsuits

January 31, 2011 - Read >

Global Debt Registry Recognized as Visa PCI DSS Validated Service Provider

January 26, 2011 - Read >

Global Debt Registry Releases White Paper by Daniel J. Langin Esq. on Verification of Debt Ownership

January 25, 2011 - Read >

Global Debt Registry Awarded Provisional Patent

November 23, 2010 - Read >

US Banker Cover Story: GDR as an Alternative to MERS

November 5, 2010 - Read >

InsideARM: Foreclosure Gate and Robo-Signing Leaves ARM Industry Vulnerable

View Archives >

Mission

Global Debt Registry is a cutting-edge debt validation and turn-key media management system designed by experienced debt market professionals. The primary purpose of the registry is to maintain and establish accurate ownership of delinquent receivable accounts which allows for delivery of requested media directly to downstream buyers in the secondary charged-off debt market.

Our mission is to bring the quality and security of an issuer-direct debt sale to the reseller market by offering a clean Account-Level Chain of Title, maintaining the integrity of Issuer-level Account Data, and providing Direct Access to Account Media.

Read More >
Archives >

White Papers

Introducing Certainty to Debt Buying: Account Chain-of-Title Verification for Debt

Changes in court rules, regulations, and statutes require Issuers and Debt Buyers to prove ownership of accounts with greater documentation.

A Proven Solution for MBS Market in Documenting the Transfer of Securitized Mortgage Debt

A summary of the flaws in the process that led to the halting of foreclosure cases throughout the country and a look at litigation, potential tax and trust law violations, & pending legislation.


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Global Debt Registry, LLC
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Wilmington, DE 19806
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Global Debt Registry, LLC
3901 South Providence Road, Suite D
Columbia, MO 65203
866.660.2341


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Global Debt Registry (GDR) Responds to CBS 60-Minutes Segment on the Failure of Documentation in Mortgage Backed Securities – "A Proven Solution Already Exists."

Release Date: April 7, 2011

Global Debt Registry (GDR) has a solution to fix the documentation issues raised in the broadcast of 60 Minutes on CBS, Sunday, April 3, 2011. GDR's patent pending solution is designed to facilitate both legally rebuilding existing faulty mortgage titles that have been securitized and to properly record all such assignments for past and future transactions. Our solution will give peace of mind to investors, regulators, consumers, and bank participants. Once broadly implemented, GDR's solution will:

1) inject integrity and transparency into the management and validation process for the recording and multiple assignments of mortgages that occur(red) during the origination and securitization process;

2) flood county governments with recording and assignment fees by managing required filings of all past and present MERS assignments as well as new filings at a time when every county needs new sources of revenue;

3) will solve the banking industry's problem surrounding proof of ownership on securitized mortgage documents; and

4) be the catalyst to revive the private sector global securitization market providing desperately needed liquidity to the economy.

"Global Debt Registry is uniquely positioned to solve the problem surrounding the inability to identify the owners of mortgages that have been or will be securitized in the future," said Mark Parsells, Executive Chairman of GDR and former senior banking executive at Citigroup, Bank One and American Express. "The industry wants to do the right thing to protect consumers as well as the assets entrusted to them by shareholders of their respective companies — they just haven't had a solution that will accomplish both of those goals until now."

GDR's solution is clean and simple. The Company provides a central repository in which all mortgage originators can register mortgages that are marked to be securitized. Then, as the mortgage begins its journey through the securitization process, GDR will ensure that each transfer is properly recorded and assigned in the appropriate counties. Each county will be paid the fees that are required by the purchaser. GDR will house the electronic records of each transfer in our highly scalable and secure database. This will ensure that each and every mortgage that is securitized will be transferred properly with the appropriate assignee and showing that each time the mortgage traded hands that it is in the appropriate county records and that all required government service fees have been paid.

In 2006, Global Debt Registry (GDR) began development of a new enterprise platform built to track ownership, ensure traded data validity, and centralize document management for account and portfolio level transactions on consumer debt. Since then, GDR introduced its new platform to the consumer receivables industry and now supports more than sixty debt buying and servicing companies in all fifty states. GDR offers a new standard for tracking debt ownership with superior data recording and documentation management capabilities compared to existing systems.

In January of 2011, the company received a provisional patent from the US Patent and Trademark Office on technologies in its most recent platform Release "GDR 5.1." GDR is on VISA's Customer Information Security Program List of Compliant Service Providers. Visa's Payment Card Industry – Data Security Standards are the banking industry's highest standards for protecting confidential consumer Personally Identifiable information (PII).

"We've delivered a revolutionary data- and document-management platform with unmatched security and scalability—effectively redefining the standards for tracking and managing securitization transactions in the global financial services industry," said Greg Ousley, CEO of Global Debt Registry. "Our patent-pending technology delivers integrity to the issuing/originating, servicing, and selling of debt/securities, including tracking mortgage ownership, servicing rights, and related key data and documentation."

The most widely used system for tracking assignments/ownership and servicing rights of mortgages was introduced in 1996 requiring users to participate in little more than an "electronic handshake" with minimal oversight. The huge growth in demand for mortgage-backed securities created time pressures that led to weak and faulty documentation highlighted in the 60-Minutes piece. GDR recognizes that weakness and designed a system with numerous real-time quality assurance points to ensure transactional integrity, transparency, and protections for all parties. While millions of legacy mortgages and their supporting documentation are destined for the courts in the months and years ahead, 100 percent of GDR's registered mortgages will be managed under the financial industry's most stringent data security requirements in a process proven to meet the federal rules of evidence, including strict adherence to the Pooling and Service Agreement requirements and verification of legally required filings with county recorders.

GDR offers its services to all those seeking a proven, carefully measured solution to the issues facing the securitization industry today. For more information about Global Debt Registry please visit www.globaldebtregistry.com or contact Denis Concannon, Public Relations at 781.413.0002, dconcannon@globaldebtregistry.com.

Additional Information

For a free white paper by Attorney Daniel J. Langin summarizing the flaws in the securitization process that led to the halting of foreclosure cases throughout the country, please visit White Paper 2 - Securitization (http://www.dibbledot.com/gdr/whitepaper2/). In this second paper in a series, Attorney Langin looks closely at securities litigation in MBS, potential tax and trust law violations, and pending legislation with argument for the creation of a new standard for documenting assignment and authenticating ownership of mortgage accounts in securitizations.

About Global Debt Registry

Global Debt Registry was founded in 1996 and is backed by a $5 Billion private equity fund. GDR's customizable, patent pending platform provides a comprehensive Data Integrity, Chain of Title, and Turnkey Media Management solution to the Mortgage and Accounts Receivable Industries. Our mission is to deliver significant consumer protections as well as measurable ROI benefits to all of our clients.

About Attorney Daniel J. Langin

Daniel J. Langin is the principle of Langin Law Firm, LLC with more than 22 years of experience in private and corporate practice. Experience includes positions as General Counsel of two technology companies (GeoAccess and INSUREtrust.com), Global IT Law Manager for USF&G and St. Paul Insurance Companies, and several years as a trial lawyer. He has spoken and published on issues of technology and commercial law and policy in the United States, Canada, Europe, and Israel, and has been quoted by CNN, USA Today, CIO, Computerworld, Boardwatch, and the Boston Business Journal. He is a former member of the Aspen Institute's Internet Policy Project. For more information, see www.langinlaw.com or contact Daniel at (913) 661-2430 or dlangin@langinlaw.com.


Global Debt Registry Response to Arizona Senate Passing Legislation Requiring Full Chain of Title Documentation on Mortgages

Release Date: March 10, 2011

On February 22nd the Arizona State Senate passed SB 1249 requiring lenders that did not originate a loan to produce the full chain of title for all prior beneficiaries or risk the foreclosure sale being voided and award of attorney fees and damages. The bill passed the Republican-dominated Senate by an overwhelming margin of 28-2. The bill is now in the House where it is expected to pass despite opposition from the state's banking industry. The legislation, if passed into law, would become the first in the country requiring lenders to prove they have the right to foreclose by providing a complete list of any previous owners of the mortgage, or chain-of-title documentation on the debt.

In 2006, Global Debt Registry (GDR) recognized the serious weaknesses in consumer data management practices, and began development on a new technology platform that would ensure the integrity of managed and traded data, track account-level chain of title, and provide a turnkey portfolio and document-management repository. Today, the Company offers a fully developed and proven solution that addresses many of the issues facing the mortgage finance and servicing industry today.

"It is crucial for lenders, legislators, and consumers to understand that a solution to the issues that created this crisis already exists," said Mark Parsells Executive Chairman of GDR. "Our system provides a single source for management of all data and documentation for Issuers, servicing entities, debt buyers, sellers, legal collection firms, regulators, judges, industry participants, and consumers. We are the only turnkey provider of chain of title, data integrity, and media-management services globally, and we stand ready to provide leadership in the recovery of the lending markets and a return to the fundamentals of law."

Bruce Gilmore, President and CIO added, "Our patent-pending technologies are in use by more than 60 accounts-receivable clients and servicing entities in all 50 states. The system can be easily customized to provide titling, data integrity, and media-management services for any asset class and industry. Users can easily transmit and receive data and documents while meeting the most stringent regulatory and industry data protection requirements."

Lawmakers in other states including New York, Oregon, and Virginia have proposed legislation similar to the Arizona bill. Attorneys General of all 50 states are collectively investigating the mortgage servicing industry. GDR offers its knowledge and expertise to those seeking a proven, carefully measured solution to the issues facing the debt industry today.

For more information about Global Debt Registry contact Greg Ousley, CEO, at 866-660-2341, ceo@globaldebtregistry.com, or visit www.globaldebtregistry.com.

About Global Debt Registry
Global Debt Registry delivers significant consumer protections as well as measurable ROI benefits to all participants in the Accounts Receivable Industry by providing the nation's only proven, patent-pending AR titling solution. GDR's customizable platform provides a comprehensive Data Integrity, Chain of Title, and Turnkey Media Management solution. GDR maintains the integrity of traded data and documentation (validates debt); maintains accurate ownership (account-level chain of title); and provides automated access for media lifecycle management. The Company offers a customizable platform both in the performing and non-performing Securitization and ARM industry markets.


Court Ruling Increases Requirements for Debt Collection Lawsuits

Release Date: February 10, 2011

A recent state appellate court ruling requiring debt purchasers to provide documented proof of account ownership as part of its evidence to bring a lawsuit against a debtor foreshadows changes for debt buyers' and collectors' use of the court system, according to one ARM legal expert.

On February 1, the Second Division of the Illinois First District Appellate Court ruled that collection agencies filing a lawsuit to collect a claim on a debt buyer's behalf must include copies of all previous owners, the date of assignment to those owners, and the amount paid by the debt buyer.

Typically, collection attorneys are allowed to submit to the courts a list of delinquent accounts with some identifying consumer information and amounts owed to initiate a lawsuit. But in Unifund CCCR Partners v. Mohammad Shah, the three-judge panel unanimously agreed that Illinois law requires more than an affidavit of the debt's chain of title to prove assignment. Justice Maureen E. Conner wrote that state law requires that an affidavit must accompany copies of each assignment to ensure that the person suing someone has the legal right to do so.

Collection attorney Ronald Canter, of The Law Offices of Ronald S. Canter, LLC in Rockville, Md., said the court's decision reflects a growing trend of requiring debt collection professionals to provide more paperwork if they want to sue debtors.

"There is reason to believe that the trial courts in Illinois will follow this decision and require debt buyers who sue on purchased accounts in their own name to include the full documented chain of title, a statement of consideration paid for the debt, and an account exhibit that includes a specific reference to the assignment and/or bill of sale," Canter said.

The Federal Trade Commission issued a report last year that called the legal debt collection system "broken", and encouraged states to take the lead in rectifying the perceived problems. Given the FTC's stance and political interest in protecting consumers in the wake of the housing mortgage debacle, Canter said "spread sheet accounting is no longer going to be accepted. That's where the trend is moving both for legislators, regulars and in court decisions."

Mark Parsells, executive chairman of Global Debt Registry, LLC, agreed. He said some federal and state regulars have met with the Delaware-based debt titling company to educate themselves about available solutions to track and verify consumer debt.

"We've met with various regulators at their request and they've asked us to explain the solutions," Parsells said. "They like the solutions and particularly like the fact that our records provide an accurate chain of title at the account level every time the account is transferred."

But Canter fears that the ruling adds an extra burden on debt buyers and collection agencies doing business because the extra paperwork will increase the cost of the paper and collections. Even scarier, he said, is that debt buyers may have to reveal what they paid for the debt as a condition for suing.

"The public filing of price information disadvantages the debt buyer whose competitors can find out what price the debt buyer/plaintiff paid for their accounts based on a review of court filings," Canter said. "Public notice of the price also will add ammunition to consumer advocates who constantly complain about accounts sold for pennies on the dollar."

Some collection agencies and debt buyers may be tempted to fight the changes. But Canter said now is the time for the industry to change and adapt because more courts, legislators and regulars are likely to require the information because it's available.

"There will have to be an effort to make this information available in a cost effective way…for it to be sold with the account or accessed with the account," he said.


Global Debt Registry Recognized as Visa PCI DSS Validated Service Provider

Release Date: January 31, 2011

Global Debt Registry (GDR) is pleased to announce that it is now included on Visa's list of PCI DSS compliant Service Providers. Inclusion on this list is a public recognition by VISA of GDR's commitment to the very highest industry standards for protecting confidential consumer data throughout the securitization and receivable lifecycle management process.

"GDR's commitment to protecting consumer data – as evidenced by our PCI DSS compliance – positions GDR as a leader in the processing and protection of consumer data," said Mark Parsells, Executive Chairman of GDR. "Meeting the requirements to be on the VISA List of Compliance Service Providers along with our delivery of ground-breaking products and services cements our leadership position and creates unparalleled assurances for our clients that their data is protected."

"At GDR, our entire business is based upon data and document integrity and security. If you cannot adequately protect data and documents, you cannot assure their integrity," said Greg Ousley, CEO of GDR. "We have produced the securitization and ARM industry's first PCI-compliant AR-titling, data integrity, and media management platform. Our system effectively "titles" pre and post charged-off debt, creating greater protection for consumers, reduced transactional risks, and enhanced ROI for Securitization and ARM industry participants. GDR's breakthrough patent-pending technologies are answering the demand from investors, securitizers, servicers, regulators, judges, consumer attorneys, consumer advocates, and legislators for a higher level of transparency and integrity throughout the receivables securitization, performing and recovery life cycle. Achieving Visa PCI DSS validation affirms our capabilities and establishes us as a benchmark for the Securitization and ARM industries."

For more information about PCI DSS visit www.pcisecuritystandards.org. For information about Visa PCI DSS Validated Providers visit www.usa.visa.com/download/merchants/cisp-list-of-pcidss-compliant-servic.... For more information about Global Debt Registry contact Greg Ousley, CEO, at 866-660-2341 ceo@globaldebtregistry.com, or visit www.globaldebtregistry.com.

About Global Debt Registry
Global Debt Registry delivers significant consumer protections as well as measurable ROI benefits to all participants in the Accounts Receivable Industry by providing the nation's only proven, patent-pending AR titling solution. GDR's customizable platform provides a comprehensive Data Integrity, Chain of Title, and Turnkey Media Management solution. GDR maintains the integrity of traded data and documentation (validates debt); maintains accurate ownership (account-level chain of title); and provides automated access for media lifecycle management. The Company offers a customizable platform both in the performing and non-performing Securitization and ARM industry markets.


Global Debt Registry Releases White Paper by Daniel J. Langin Esq. on Verification of Debt Ownership

Release Date: January 26, 2011

Global Debt Registry (GDR), a provider of accounts receivable titling solutions, announces the release of a free white paper "Introducing Certainty to Debt Buying: Account Chain-of-Title Verification for Debt" written by Attorney Daniel J. Langin.

As a result of changes in court rules, regulations, and statutes that require Issuers and Debt Buyers to prove ownership of accounts with greater documentation, the once predictable process of collecting charged off debt has now become less predictable and more uncertain. In this white paper, Attorney Daniel J. Langin outlines current legal challenges and provides insight on necessary changes and solutions. A must read for all issuers and buyers of debt.
To download the white paper click here: Download White Paper, or copy and paste the following URL into your web browser: www.globaldebtregistry.com/images/gdr/white_paper/index.html
For more information contact Greg Ousley, CEO, Global Debt Registry at 866-660-2341, or visit www.globaldebtregistry.com.

About Global Debt Registry
Global Debt Registry delivers significant consumer protections as well as measurable ROI benefits to all participants in the Accounts Receivable Industry by providing the nation's only proven, patent-pending AR titling solution. GDR's customizable platform provides a comprehensive Data Integrity, Chain of Title, and Turnkey Media Management solution. GDR maintains the integrity of traded data and documentation (validates debt); maintains accurate ownership (account-level chain of title); and provides automated access for media lifecycle management. The Company offers a customizable platform both in the performing and non-performing ARM industry markets.

About Attorney Daniel J. Langin
Daniel J. Langin is the principle of Langin Law Firm, LLC with more than 22 years of experience in private and corporate practice. Experience includes positions as General Counsel of two technology companies (GeoAccess and INSUREtrust.com), Global IT Law Manager for USF&G and St. Paul Insurance Companies, and several years as a trial lawyer. He has spoken and published on issues of technology and commercial law and policy in the United States, Canada, Europe, and Israel, and has been quoted by CNN, USA Today, CIO, Computerworld, Boardwatch, and the Boston Business Journal. He is a former member of the Aspen Institute's Internet Policy Project. For more information, see www.langinlaw.com or contact Daniel at (913) 661-2430 or dlangin@langinlaw.com.


Global Debt Registry Awarded Provisional Patent

Release Date: January 25, 2011

Global Debt Registry (GDR), a provider of asset securitization ownership, servicing rights validation, and turnkey accounts receivable titling solutions, announced today that the Company has filed its first cornerstone provisional patent with the United States Patent and Trademark Office, awarded as serial number 61/435,034. The patent protects GDR technologies developed for the Company's recently released Version-5.1 enterprise management tool.

"GDR has created a truly unique offering for the global accounts receivable and securitization industries," said Mark Parsells, Executive Chairman. "There are no other companies that do what GDR does. We believe this intellectual property will play a significant role in resolving many of the problems that have produced improper portfolio and account-level chains of title, inaccurate data, documentation integrity, and inadequate record keeping surrounding asset securitizations, servicing, and sales in all segments of the global AR space. It is just another step in GDR's mission to establish itself in the market as a forward thinking, leading edge technology powerhouse."

"Our groundbreaking patent pending technology is central to GDR's state-of-the-art debt titling solutions," said Greg Ousley, Chief Executive Officer. "The filing of our intellectual property is just our latest step in crystallizing our efforts to revolutionize the way issuers, investors, and servicers manage the securitization and accounts receivable lifecycle process."

Bruce Gilmore, President and CIO added, "GDR is the only turnkey provider of accounts receivable chain-of-title, data integrity, and media-management services globally. GDR-5.1 is now available and in use by more than 60 customers in all 50 states. The system can be easily customized for any titling, data integrity, and media-management need with very little—if any—development required by the user. Users can easily transmit and receive data while meeting the most stringent regulatory and industry data protection requirements."
The Company will file all documentation for the non-provisional patent on the technology before the end of 2011.

For more information contact Greg Ousley, CEO, Global Debt Registry at 866-660-2341, or visit www.globaldebtregistry.com.

About Global Debt Registry
Global Debt Registry delivers significant consumer protections as well as measurable ROI benefits to all participants in the Accounts Receivable Industry by providing the nation's only proven, patent-pending AR titling solution. GDR's customizable platform provides a comprehensive Data Integrity, Chain of Title, and Turnkey Media Management solution. GDR maintains the integrity of traded data and documentation (validates debt); maintains accurate ownership (account-level chain of title); and provides automated access for media lifecycle management. The Company offers a customizable platform both in the performing and non-performing ARM industry markets.


With MERS Under Fire, a Rival Registry Says It Can Do Better

Release Date: November 23, 2010

Greg Ousley wants to be a chaperone of sorts for the secondary mortgage market.

The chief executive of Global Debt Registry says his company's system, which was designed to track ownership of delinquent credit card debts, can improve upon the widely used Mortgage Electronic Registration System. MERS' reputation has taken a beating in recent months as questions about its legal standing in foreclosure cases have increased amid a broader controversy over mortgage servicers' record keeping.

One criticism of MERS is that it relied on its members to update and register mortgage assignments themselves. Ousley's system would manage and oversee the entire mortgage-transference process for lenders and servicers.

"What GDR advocates is a person-managed solution, a third party that watches and makes sure that everyone is doing what they're supposed to be doing," Ousley said.

"My system is managed with a person involved in the transaction and a quality assurance process that says, 'The note is here, it was transferred,' not just relying on two parties to say what they were going to do," he said. "It makes sure they're the actual owners of what they're trying to sell, makes sure the documents exist that are supposed to exist and then, once it takes place, validates that everything that was supposed to happen, happened."

Analysts and legal experts say Global Debt Registry, or some other start-up, could conceivably capitalize on MERS' troubles and take market share.

"There's a lot of controversy around MERS right now," said Michael Benoit, who represents banks as a partner in the Hudson Cook law firm. "Can you build a better, or not necessarily better, but a different mousetrap? Absolutely. I don't know that MERS is necessarily the final say."

Karmela Lejarde, a spokeswoman for Merscorp Inc., the company that owns the MERS system, said it is not familiar with Global Debt Registry.

Developed in 2006, Global Debt Registry has the capability, Ousley said, to record the flow of all the underlying documentation of a mortgage, not just the assignment of the note, which is what MERS was designed to track.

After the sale of a mortgage is complete, Global Debt Registry would record the transfer of the assignment at the county level, which would bring transparency back to the process, Ousley said, and let consumers find out who owns their mortgage.

Ousley faces a Goliath in getting the mortgage industry to adopt his debt registration system. For all its troubles, MERS is owned by a consortium of some of the largest players in the industry and is used by more than 3,500 mortgage companies. It tracks about 60 million mortgages.

At the same time, Ousley is relatively unknown in the mortgage industry, and Global Debt Registry's adoption by debt buyers has been slow going.

Its first debt portfolio was uploaded in June 2009. Today, the Columbia, Mo., company counts more than 50 debt buyers and broker participants in its system and has recorded transfers on more than 350,000 accounts, for a total of $1.7 billion in face-value transactions — a fairly small portion of the overall debt buying industry.

Until now, Global Debt Registry has focused on nonmortgage loans, but Ousley, who spent seven years running a national billing firm and collection agency, said he believes his system could easily be applied to the mortgage industry.

Debt buyers have faced paperwork problems not unlike those bedeviling mortgage servicers. The debt buyers have been increasingly challenged in court over the proper documentation of debt, and are often required to prove not only their ownership of the debt but also that the amount being collected is correct. And like mortgages, credit card and other consumer debt often changes hands countless times and can be difficult to track.

Global Debt Registry would differ from MERS, Ousley said, by tracking all loan-related documents. He said he envisions his system integrating with county recorders, so that when a mortgage assignment is transferred, the transaction is recorded in his system as well as at the county courthouse. "There's got to be a happy medium where you can maintain those county records and record them in a central depository," Ousley said. "You keep them involved, but yet you maintain your centralized database. I think that is where things may have gotten off track."

"I'm a big believer that the county record thing was working," he went on. "I'm only saying that my system was built to provide all the protection and to meet all the rules and regulations. But not have all this controversy surrounding it."

Including county recorders in the process could face some resistance from the mortgage industry, however. MERS was created in 1996 to help lenders avoid racking up fees at the county recorder's office every time a mortgage changed hands, which, during the securitization boom, occurred quite frequently.

"One of the critical components of creating an effective secondary market is portability," said Rob Carpenter, chief technology officer of Dorado Corp., a mortgage origination technology company. "Investors need to be able to move loans to other investors without high costs. … The alternative is sending someone down to the local courthouse. … It isn't 21st century business."

The MERS system's legal standing has been challenged many times. Four states — Arkansas, Kansas, Maine and Missouri — have said that MERS cannot bring foreclosure actions against borrowers. Some servicers, like JPMorgan Chase & Co., have taken heed and no longer bring foreclosure actions in MERS' name.

Christopher Peterson, an associate dean and law professor at the University of Utah, was skeptical about the idea of a new, improved MERS. "Is this going to fix the current mess? Probably not," he said.

"There's nothing wrong with having companies that … subcontract record keeping solutions. … Just having some system that keeps track of the information doesn't solve the problem of having the physical promissory note," Peterson said.

Ousley does not claim to have solved the issue of lost notes. He acknowledged that his system works best when all the documentation is in order.

He is meeting with servicers, regulators and other mortgage industry participants to get the word out about his system. He even approached Merscorp, wanting to discuss working together. The company declined to meet with him, he said.

"I don't know that MERS is going to go away because it's got 60 million mortgages wrapped up in it," Ousley said. "I can augment it. I can supplement it. I can plug the holes."


Foreclosure Gate and Robo-Signing Leaves ARM Industry Vulnerable

Release Date: November 5, 2010

A segment of the accounts receivables management industry was affected last month when several of the nation's major banks halted foreclosures and the sale of foreclosed properties to look into their practices.

Delmar Financial Services in Boca Raton, Fla., which does back office accounts receivables management work for law firms specializing in foreclosures, was among them.

"Our larger clients came in and said 'stop doing what you're doing. Put everything on whole while we try to figure it out,'" recalled Chris Conway, Delmar's senior vice president. "Everything is still pretty much at a standstill. Some things are continuing to go forward after everything is verified."

Some banks, including the nation's largest mortgage servicer, Bank of America, have resumed foreclosures. But the scandal that stems from lenders use of "robo-signers" to file thousands of affidavits swearing that they had personal knowledge of the debt owed still may have a broad impact on the ARM industry.

For starters, it has made the ARM industry more vulnerable to regulation or activists judges, experts say. If nothing else, the foreclosure scandal has given consumer attorneys ammunition for lawsuits or defenses.

"It will, in some instances, bring up affirmative defenses to prove that the debt is valid, especially if (collection attorneys) take the legal route," Conway said.

Some industry insiders said the foreclosure mess may even impede debt buying in that space.

"I would think the types of issues being investigated would have a chilling effect on buyers of these types of loans," said Al Brothers, CEO of Cavalry Portfolio Services, a debt buyer. "In some ways, when buying a loan you're stepping into the banks shoes in that you're buying a problem that might be their problem."

On November 16, the Senate Banking Committee will hold hearings to see just how widespread the problems are with processing foreclosures. Whether or not the hearings set the stage for new regulations at the federal level, the allegations against the banks have drawn the attention of 50 state attorneys general who are investigating foreclosures in their states. Some attorneys general have admitted that they don't expect their investigations will overturn foreclosures. But foreclosure experts say the AGs do expect to find problems with documentation.

"What you'll likely see is major fines levied against the servicers and potentially criminal prosecution. You're looking at a situation where someone might be found guilty of falsifying court documents," said Rick Sharga, senior vice president at RealtyTrac, a public data base of U.S. foreclosures and bank owned property.

Sharga said the AGs are pursuing the investigations because they want to preserve the integrity of the judicial process given the questions the foreclosures raised about proper documentation and legal ownership. Now that The New York Times has reported that debt buyers also have employed robo-signers to file affidavits to collect on credit card, auto loans and other consumer debt, chances are that state AGs will turn their attention to the collection practices of debt buyers too.

In the end, the banks will be able to prove that nearly all of the homeowners facing foreclosure have defaulted on their loans and that their bank is the rightful owner of the debt. But some debt buyers may have a harder time given that much of the debt they buy has been sold several times over several years.

"The buyer should have documentation," said Kaulkin Ginsberg Director Mark Russell. "The challenge is, not all credit issuers have an ability to give all the proper documentation when they sell a file."

That problem becomes more significant for debt buyers and collection agencies that have to appear in court, said Mark Parsells, executive chairman of Global Debt Registry, LLC, the ARM industry's first and only debt titling firm.

"If you can't prove you own it and that the amount you are trying to collect on is accurate and up to date, you're going to start losing cases and get countersued as well," Parsells said.

Parsells says the ARM industry can avoid such problems by adopting title policies that begin with the original lender and are required each time the debt is sold.

"The concept of titling is a common sense concept. It's done with cars. "Similarly, a person would never buy a house without a clean title," he said.

So far, no judge has canceled a foreclosure because of faulty documentation, Sharga said. But that doesn't mean it won't happen.

"The (financial) industry should be concerned about the prospect of more activist judges trying to set precedent by overturning foreclosures because of these paperwork issues," he said.