The featured guest on the November 19 program was Jocelyn Hibshman, an expert on long-term care insurance.
The first part of the program, however, dealt with another quite different legal subject that I felt that the audience might know nothing about but should - - the MERS system of electronic mortgage registration. Referring to three recent newspaper articles that I had read (linked below) and two recent law review articles by Professor Christopher Peterson of the University of Utah School of Law, I noted that the purpose of this system has been to make only a single recording with the county recorder’s office of any residential real estate mortgage to MERS - - no matter how many times that mortgage is subsequently assigned. After that initial recording, either showing MERS as the initial mortgagee itself or else showing MERS as the initial assignee of the mortgage, no further public recording of subsequent assignments of the mortgage ever occurs. Instead, all information about such assignments and the ownership of the note secured by the mortgage is supposedly electronically tracked within this company-owned nongovernmental system.
As I pointed out, this “one-stop recording” approach appears to conflict with the long-established policy of all the states’ recording acts of enabling members of the public to determine who owns real estate and who owns the mortgages on real estate, from an examination of the public records. Thus, there would seem to be serious questions about the legality of making multiple successive assignments of the rights to a mortgage without paying the fees to record those assignments in the public record and equally serious questions about the validity of “assignments in blank,” i.e., assignments to a proxy without the recordation of each actual interest holder in the public record.
But these question become even more serious if, as is very often the case, MERS has been recorded as the initial mortgagee lender. The problem in all such cases is the long-settled law in every jurisdiction in this county that a mortgage may not be separated from the note that it secures. MERS is certainly not in fact a mortgage lender. The notes supposedly secured by MERS mortgages have instead been issued to mortgage “originators” which, as soon as they have funded the loans, have resold them to underwriters for “packaging” into mortgage-backed bonds and derivative “collateralized debt obligations.” These, in turn, have been purchased by supposedly nontaxable income pass-through trusts (“REMICs”) owned by investors throughout the world. This extended process of mortgage “securitization,” involving multiple assignments of the beneficial interest in each loan contained in the “package,” all under the supposed security blanket of MERS’s supposed initial mortgage rights, is extremely difficult to reconcile with the settled principle of law just mentioned (i.e., that a mortgage may not be separated from the note that it secures). Instead, at least three state supreme courts - - those in Arkansas, Kansas, and Maine - - have recently ruled that such an obvious separation of the notes from the mortgages securing them makes those mortgages themselves invalid.
Such possible invalidity would have potentially immense ramifications. In bankruptcy, for example, it might enable hard-pressed homeowners to propose Chapter 13 repayment plans that treat a MERS mortgage loan as unsecured debt on a par with, say, credit cards.
Such invalidity could also expose the originators and underwriters of such loans, after they have been “securitized,” to liability for failure to comply with their warranties that those loans were secured by valid mortgages. Furthermore, the trusts that ultimately purchased those loans would possibly owe huge amounts of income taxes because they would not qualify as “REMICs” - - Real Estate Mortgage Income Conduits - - if the mortgages were invalid.
In short, as I concluded this important initial segment of the program, in funneling more than one-half of all the residential mortgage loans made in this country through the MERS system, the mortgage bankers may well have created for themselves a problem vastly larger that one of sloppy recordkeeping. The possible invalidity of many, if not indeed most, MERS mortgages is a matter of major public interest, which is why I brought it to the attention of the audience.
Long-term care insurance is also of major public interest, as evidenced by Indiana’s “Partnership Program” with insurance companies that offer suitably qualified long-term care insurance benefits. Basically, under that program, if the insured person first exhausts the insurance benefits - - for policies issued in 2008, in the minimum amount of $228,045 - - that person may then qualify for Medicaid benefits without regard to the amount of that person’s assets.
As Jocelyn explained, long-term care insurance also provides liberal benefits for in-home health care or residence in an assisted-living facility, other than a nursing home. Both of these are strongly preferred over nursing homes by most elderly people who need daily care assistance, but in-home health care requires a Medicaid waiver, for which there is a growing waiting list.
Given the facts that a very large percentage of the population will at some point in their lives need long-term care but that such care is not covered by Medicare, a strong case can be made that many more middle-class families should have long-term care insurance for their more elderly members than presently do. Such insurance can be indispensable in protecting a middle-class family’s wealth from the potential cost of extended long-term care, which can easily exceed Seventy-Five Thousand Dollars ($75,000) per year. Such insurance can also free family members from the often overwhelming burden of themselves providing such care.
Jocelyn explained many further additional details about long-term care insurance products (including “hybrid” products combined with life insurance or annuities) and their pricing. We discussed another newspaper article that reported Met Life’s withdrawal from underwriting new long-term care policies for individuals after the end 2010 and other main-line insurers’ seeking premium increases of as much as 40% (on a class basis) for many of their customers. The entire, extremely informative interview is available in electronic format for any listeners who request it. November happened to be “long-term care awareness month,” and hopefully this program did its part.
Links to the aforementioned newspaper article links about MERS appear immediately below:
“Some Sand In The Gears Of Securitizing”:
“One Mess That Can’t Be Papered Over”:
“AP IMPACT: Bypassing County Fees May Cost Banks”:
http://www.foxnews.com/us/2010/11/10/ap-impact-bypassing-county-fees-cost-banks/.
http://www.foxnews.com/us/2010/11/10/ap-impact-bypassing-county-fees-cost-banks/.
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