Wednesday, January 26, 2011
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Megan McArdle is the business and economics editor for The Atlantic. She has worked at three start-ups, a consulting firm, an investment bank, a disaster recovery firm at Ground Zero, and the Economist.
I've never really understood the objections to "me-too" drugs. Somehow, the topic of health care makes otherwise sensible people forget everything they ever knew about economics and start spouting Victorian-era Socialist rhetoric about wasteful competition and superfluous duplication. These same people would think you were crazy if you started ranting about how many societal resources are wasted by having three kinds of unsalted butter available in the supermarket. And yet, this is the same argument.
We've talked about this here before, but now we can put some numbers on the topic, thanks to this article in Nature Reviews Drug Discovery. The authors have covered a lot of ground, looking at first-in-class drugs approved from the early 1960s up to 2003, with later entrants in the same areas accepted up to 2007. There are 94 of those different therapeutic classes over that period, with a total of 287 follow-on drugs coming after the pioneer compounds in each. So there you have it - case closed, eh?One thing that never seems to occur to the denigrators of "Me-Too's" is that in some ways, they're riskier than novel drugs. Of course, you know the pathway can be targeted. But once there's a good treatment on the market, the FDA's approval bar goes up for successive drugs. Treat cancer, and you can get by with a lot of ugly side effects and not so good efficacy. But if you want to introduce another high-blood pressure drug, you'd better show that it's superior to existing treatments in some way, and that its side effects are pretty minimal.Not so fast. Look at the timing. For one thing, over that nearly 50-year period, the time it takes for a second entry into a therapeutic area has declined steeply. Back in the 1970s, it took over nine years (on average) for another drug to come in and compete, but that's gone down to 1.7 years. (The same sort of speed-up has taken place for third and later entries as well). Here's what that implies:
Implicit in some of the criticism of the development of me-too drugs has been the assumption that their development occurs following the demonstration of clinical and commercial success by the first-in-class drug. However, given assessments of the length of time that is typically required for drug development -- estimated at between 10 to 15 years -- the data on the timing of entry of follow-on drugs in a particular class, in this study and in our previous study, suggest that much of the development of what turn out to be follow-on drugs must occur before the approval of the breakthrough drug.
That it does, and the overlap has been increasing. I've been in the drug industry since 1989, and for every drug class that's been introduced during my career, at least one of the eventual follow-on drugs has already been synthesized before the first one's been approved by the FDA. In fact, since the early 1990s, it's been the case 90% of the time that a second drug has already filed to go into clinical trials before the first one has been approved, and 64% of the time another compound has, in fact, already started Phase III testing. Patent filings tell the story even more graphically, as is often the case in this industry. For new drug classes approved since the 1970s, 90% have had at least one of the eventual follow-on drugs showing its first worldwide patent filing before the first-in-class compound was approved.So the mental picture you'd get from some quarters, of drug companies sitting around and thinking "Hmmm. . .that's a big seller. Let's hang a methyl off it now that those guys have done the work and rake in the cash" is. . .inaccurate. As this paper shows (and as has been the case in my own experience), what happens is that a new therapeutic idea becomes possible or plausible, and everyone takes off at roughly the same time. At most, the later entrants jump in when they've heard that Company X is working in the same area, but that's a long time before Company X's drug (or anyone's) has shown that it's going to really work.
If you wait that long, you'd be better off waiting even longer to see what shortcomings the first drug has out in the real marketplace, and seeing if you can overcome them. Otherwise, you're too late to go in blind (like the first wave does). And blind it is - I can't count the number of times I've been working on a project where we know that some other company is in the same area, and wondering just how good their compound is versus ours. If you know what the structure is (and you don't always), then you'll make it yourself and check your lead structure out head-to-head in all the preclinical models you care about. But when it comes to the clinical trials, well, you just have to hold your breath and cross your fingers.
From iamafarmer:
Germany-"We'll export our way out of this!"
Australia-"We'll ramp up exports!"
France-"Our exports will see us through!"
SoKorea-"Our Export-based model will be our bulwark!"
Japan-"Thankfully, we can rely on exports"
and now, finally, we have the last guy to the party
USA-"We'll increase our exports in the next 5 years"
Either SOMEONE is throwing a hail mary here or Martian and Venusian Aggregate Demand have gone parabolic in the last quarter.
"We'll all become export nations!" is the new "We'll all provide value-added service!"
To put us on solid ground, we should also find a bipartisan solution to strengthen Social Security for future generations. And we must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans' guaranteed retirement income to the whims of the stock market.The absolute favorite tactic, however, is the management reorganization. You may be in a saturated market where your second-rate franchisees are slowly destroying your brand, making it impossible to attract higher-quality franchisees . . . but that's nothing that can't be fixed by creating a new Chief Strategy Officer under the CEO, and giving that officer oversight of marketing, research, and HR. Perhaps a much larger competitor whose cost structure allows them to undercut your prices by 32% has entered your niche, but can they really withstand the fearsome might of your ISO 9000 certification and your new cross-functional product teams? The government regulators who just outlawed your three top-selling products and made two-thirds of your capital plant obsolete may be powerful--but not as powerful as your revolutionary sales force compensation scheme!
The trouble starts when Ms Moyo ventures into economic analysis. In comparing America's economy with China's, for instance, whether you convert yuan into dollars at market exchange rates or after adjusting for purchasing power matters a lot. Measuring at purchasing-power parity makes the gap in GDP and living standards look narrower. This explains a great deal of the difference between two sets of figures that Ms Moyo cites. Yet she does not mention it.
This is basic stuff. Much else in elementary economics also gets mangled here. Governments usually manipulate exchange rates to make their currencies artificially weak, not strong. In the Keynesian national-income identity, G represents government spending, not the budget surplus. The idea of a special tax on sports stars' incomes to discourage youngsters from unrealistic aspirations is intriguing, if contentious; suggesting that the two groups might bargain away such effects is absurd.
There are some puzzling omissions. Ms Moyo rightly complains at the exclusion of big emerging economies (except Russia) from the G8. She celebrates the strengthening of their diplomatic muscles. Amazingly, she seems not to have noticed the prime manifestation of this: the rise of the G20, which since 2008 has eclipsed the smaller, rich-country club.
Worse, Ms Moyo commits some jaw-dropping factual errors. General Motors, she writes, was bought by Fiat, "an event unimaginable just a couple [of] years earlier". Yes, and it still is: the Italian carmaker did not purchase GM, but a 20% stake in Chrysler, recently increased to 25%. France gets "almost 20% of its electricity from nuclear sources". The OECD says the figure is close to 80%.
Ms Moyo's editors are as bad as her fact-checkers. If they couldn't spot the analytical flaws, they might have done something about the stylistic ones that range from curious analogies to long phrases in parentheses. Endnotes are used almost at random.How does something like this happen? Online, of course--people write quickly, and they often work from memory rather than looking up every fact. It is, as any writer can attest, startlingly easy for a bad fact--like Fiat buying GM--to insert itself so thoroughly into your consciousness that you don't even know you ought to look it up.
I think this is kind of awesome, in the same way that I love negative campaign ads and the cheerful people who earnestly discuss high-fructose corn syrup in 30-second spots.
You're going to sit there & tell me you've never had a pithy-yet-informative discussion with a friend or family member contrasting the hype about the alleged evils of high fructose corn syrup with the down-home truth about how natural & wholesome it is? Really? Why, just this morning as I was enjoying one of the blueberry muffins my wife had made, I remarked about how glad I was to be having her home-cooked food, b/c it's blessedly free of high-fructose corn syrup, transfatty acids, & other commonly maligned bogeymen of our foody-age. Well, she came right back at me with all of the facts & figures that she had dug up last night during one of her regular exhaustive visits to the Corn Refiners Association website. I gotta tell you, it really opened my eyes about a few things... Mostly it made me question why I had ever thought marrying such a pedantic bore might be a good idea. Well, at least there's the blueberry muffins, I suppose.I confess, I have wondered how the corn growers settled on "the supercilious know-it-alls of the world" as their spokesmen for the wonders of corn syrup.
What to say about a statement by the Governor's Highway Safety Association spokesman which seems to blame--I swear, I am not making this up--Michelle Obama's national fitness campaign for an uptick in pedestrian deaths?
Well, first off, there are no figures provided. Via Dr. Google, I see "The Governors Highway Safety Association says in the report that 1,891 pedestrians were killed in the first six months of 2010, up from 1,884 in the same period in 2009 -- a 0.4 percent increase. " Now, I don't know the historical variation in these things, but I'd say offhand that this is a statistically insignificant swing. Regardless, a variety of factors -- alcohol, technology, and road design among them - seem to be considered possible explanations for the slight reversal in trend.I presume that the spokesman had some sort of temporary freakout during the radio interview and blurted something he didn't quite mean. It happens even to seasoned pros. But c'mon, guys, where's the mumbling, red-faced, excruciatingly apologetic retraction?Second, while I don't pay much attention to the social campaigns of First Ladies, I don't recall Mrs. Obama telling people that they should get drunk, strap on an iPod, and go wandering around the streets reading their BlackBerries. She's advising people to get some exercise, not to go wander around in traffic. Yes, that's technically a form of exercise. There are others.
Third, anecdotally at least, I have indeed seen an increase in pedestrians distracted by electronic devices, whether it be texting while walking or grooving to whatever's piping through their little white earbuds. Then again, I've seen the same thing among people operating automobiles -- and traffic deaths are down 8 percent during the same period.
I am the spokesman for the Governors Highway Safety Association. In the interview you reference, I did not blame Mrs. Obama for the small uptick in pedestrian deaths. I noted that in our study we note that programs such as Mrs. Obama's may be increasing the number and frequency of pedestrians and thus exposing them to more risk. We support these programs but want to make sure that pedestrians are behaving safely-not using iphones, texting, crossing in dangerous places, etc. It's ludicrous to suggest that the non-partisan, nonprofit Governors Highway Safety Association is blaming Mrs. Obama. We encourage walking/jogging, etc. We just want to make sure that this doesn't lead to more needless deaths.Fair enough, but it seems like we should get some data on the number and frequency of pedestrians, and their relationship to programs like Mrs. Obama's.
Couple of great comments to the post on Harpers. Gabriel Rossman reminds us of a classic work:
Our hostess writes "We tend to think about labor disputes as attempts to divide the spoils of success: unions form when there are excess profits that they can divert to workers. "
It's probably worth remembering that the subtitle to Hirschman's Exit, Voice, and Loyalty was "Responses to Decline in Firms, Organizations, and States"Meanwhile, I am chastised for my simplistic characterization by reader Mickey Zellberg:
"We tend to think about labor disputes as attempts to divide the spoils of success: unions form when there are excess profits that they can divert to workers"DougJ says I'm being too triumphal:The only people who think this have no experience with actually working conditions in the real, low-paid wage world. The Harper's people unionized because their management were assholes. This happens all the time.
I once worked at the famous Strand Bookstore in New York City. The workers there had unionised and made little more than minimum wage under their contract. They had a crappy little health plan. The main point of unionizing for them was that it enabled them to say "F You" to the boss.
And this is borne out in many studies of unions, which show that "lack of respect" was the main motivation.
The Atlantic isn't exactly an economic powerhouse either.
In keeping with today's emerging "labor" theme, I now turn to David Leonhardt's article on the mystery that is puzzling economists: why is American GDP recovering robustly, while employment growth lags other nations, and our own history?
Relative to the situation in most other countries -- or in this country for most of the last century -- American employers operate with few restraints. Unions have withered, at least in the private sector, and courts have grown friendlier to business. Many companies can now come much closer to setting the terms of their relationship with employees, letting them go when they become a drag on profits and relying on remaining workers or temporary ones when business picks up.I think I can tell an intuitively compelling story where this is true (though Adam Ozimek disagrees): unions fight layoffs harder than single workers can, so more powerful labor means fewer firings.Just consider the main measure of corporate health: profits. In Canada, Japan and most of Europe, corporate profits have still not recovered to precrisis levels. In the United States, profits have more than recovered, rising 12 percent since late 2007.
For corporate America, the Great Recession is over. For the American work force, it's not.
There's something both puzzling and tragic about the labor disputes at Harper's. I had been aware of their struggles with circulation--indeed, I'm part of them. Given how high the price is, and how rarely I felt like I was finding surprising, challenging articles, eventually, regretfully, I stopped taking the magazine. Apparently, a lot of other people agreed, a problem that was compounded by the recession.
In the months following Hodge's ouster, the staff became alarmed when MacArthur's name began appearing on top of the masthead (previously it had been underneath the editors' names, along with the business staff). Senior editors Bill Wasik, Luke Mitchell, and Jen Szalai departed, along with web editor Paul Ford. To fill Hodge's position, MacArthur appointed Ellen Rosenbush, Harper's' longtime managing editor, as acting editor. The move struck many staffers as a way to have a more pliant editor in charge: Rosenbush helped edit MacArthur's monthly column in the Providence Journal and his book You Can't Be President.. Staffers also complained that MacArthur's business plan was doomed to fail. He seemed to show little interest in the web in general or the iPad in particular, at a moment when The Atlantic, its longtime thought-leader rival, had invested heavily online and had reaped benefits both in prestige and in financial viability. "He said no one will ever make money on the web," one staffer told me on condition of anonymity.At least in this corner of The Atlantic, we wish our brother journalists at Harper's nothing but success; any feelings of rivalry have waned to nothingness since those rambunctious days of the 1880s.A couple of months after Hodge's firing, senior editor Donovon Hohn helped to convene a meeting about publishing Harper's on the iPad. MacArthur didn't attend. But shortly thereafter, staffers began receiving xeroxed articles from MacArthur in their mailboxes that trashed the iPad and Kindle. One article from the Spectator had a hand-typed line at the top:
To: Hoipolloi
From: RickLast month, MacArthur wrote a column for the Providence Journal, subsequently posted on Harper's' website, that bashed the Internet. "I never found e-mail exciting," he wrote. "My skepticism stemmed from the suspicion that the World Wide Web wasn't, in essence, much more than a gigantic, unthinking Xerox machine ..."
When one staffer brought MacArthur's attention to a recent New York Times article that stated The Atlantic was profitable this year because of its heavy investments in the web, MacArthur responded: "They're lying. They're a private company and they can say whatever they want."
This is exactly how Stigler describes regulatory capture happening. If you're going to regulate trucking intelligently, you have to get people who know about trucking. The only place to get them is industry (by and large) and industry is the only place they can go back to after serving at the agency, other than academia where they train people to either go into industry or agency. Pretty soon, the agency makes rules for the benefit of the incumbent players, industry takes out ads welcoming the new mandate, innovation dies, stasis prevails, and we all end up working for the betterment of Goldman Sachs.
Approximately 300 million Americans face a serious risk of being killed in an auto accident. Which is to say, there are auto accidents, and the entire population of the country is at risk of being one of the thousands of people every year who are killed on our nation's highways.
I was going to write something on why Farhad Manjoo's polemic on the double space after a period is dead wrong. But Tom Lee's piece on the topic is so superlatively better than what I would have written that I will just turn the mike over to him:
I'll take Manjoo's word that all typographers like a single space between sentences. I'm actually pretty sympathetic to arguments from authority, being the big-state-loving paternalist that I am. But, with apologies to friends and colleagues of mine who care passionately about this stuff, I lost my patience with the typographically-obsessed community when they started trying to get me to pay attention to which sans-serif fonts were being used anachronistically on Mad Men.I love you guys, but you're crazy. On questions of aesthetic preference there's no particular reason that normal people should listen to a bunch of geeky obsessives who spend orders of magnitude more time on these issues than average. It's like how you probably shouldn't listen to me when I tell you not to use .doc files or that you might want to consider a digital audio player with Ogg Vorbis support. I strongly believe those things, but even I know they're pointless and arbitrary for everyone who doesn't consider "Save As..." an opportunity for political action.
Nor should we assume that just because typographers believe earnestly in the single space that their belief is held entirely in good faith. They're drunk on the awesome power of their proportional fonts, and sure of the cosmic import of the minuscule kerning decisions that it is their lonely duty to make. Of course they don't want lowly typists exercising opinions about letter spacing. Those people aren't qualified to have opinions!
(For what it's worth, I don't think you rabble should be using Flash or Silverlight or anything other than plain text in your emails. You can't be trusted with it! And, not that this motivates me or typographers at all of course (we just want what's best for you), but when you do such things it makes my job slightly harder.)
Manjoo's argument about beauty, like all such arguments, is easy enough to dismiss: I disagree. I find it easier to read paragraphs that are composed of sentences separated by two spaces. Perhaps this is because I, like most technologists, spend most of my time working with (quite lovely!) fixed-width fonts for practical reasons. But there's also a deeper beauty to the two space rule -- a sort of mathematical beauty. Let me explain.
Consider the typical structure of writing. Letters are assembled into words, which turn into phrases, which are arranged into sentences -- at the same time being assigned to speakers, a neat trick -- which are then combined into paragraphs.
It's a chemical process, a perfect and infinitely flexible hierarchical system that should command our admiration. Being able to rationally examine, disassemble and interrogate the final product is a mark of the system's beauty. Anything less is settling for a sort of holistic mysticism.
It's disrespectful to let writing's constituent elements bleed into one another through imprecise demarcations. If you see me "making mistakes with comma placement", please rest assured that it's deliberate. In most cases the comma doesn't belong to the phrase delimited by the quotation marks that enclose it. Placing an exclamation point or question mark to the left or right of a close-quote is a weighty decision! That we violate the atomic purity of quotations with injected commas is an outrage.
Matt Yglesias muses about the possibility of a Brooklyn-based currency:
Here's a random paragraph from Paul Krugman's opus on the Euro:
I think of this as the Iceland-Brooklyn issue. Iceland, with only 320,000 people, has its own currency -- and that fact has given it valuable room for maneuver. So why isn't Brooklyn, with roughly eight times Iceland's population, an even better candidate for an independent currency? The answer is that Brooklyn, located as it is in the middle of metro New York rather than in the middle of the Atlantic, has an economy deeply enmeshed with those of neighboring boroughs. And Brooklyn residents would pay a large price if they had to change currencies every time they did business in Manhattan or Queens.
I guess I wonder how inconvenient this would really be in 2010 as opposed to 1970. Individuals wouldn't, after all, really need to "change currencies" every time they went to Manhattan. You could buy things with your credit or debit card, and if you only had Brooklyn Bucks in your pocket, American dollars are only an ATM visit away. I think the real issue here isn't so much that it would be too inconvenient as that it wouldn't be inconvenient enough--getting US dollars and dollar-denominated financial assets would be so simple that US dollars would circulate widely in Brooklyn and Brooklyn Bucks would wind up being marginalized.
Eh, the currency exchange problem is pretty big, as long as you're forward looking. Ordinary people who don't operate businesses, and travel mostly for pleasure, don't tend to think about this so much. For us, the major problem with operating in different currency zones is the hassle of changing money. But for anyone who enters into contracts, currencies are a major problem. After all, what happens if the exchange rate changes?
As a general rule, people want to get paid in the same currency in which their obligations are denominated. Matt would not like a ten-year contract that paid him in Brazilian reals while he lived in the United States, even if pulling the money out of his bank account in dollars was a painless transaction. What if the real dives 40% against the dollar? How would he make the mortgage?
This is why the annual reports of multinational corporations so frequently contain discussions of currency risk, and currency movements that either boosted or deflated their profits. When you're dealing with developed countries, this isn't usually an enormous effect, because multinational operations rarely sell something in a currency zone without incurring expenses in that currency zone; since those move together, it mitigates the problems. But companies who are exposed to currency risk do try to hedge it where they can.
The European borrowers in places like Iceland who started thinking about currency like tourists--as mostly an issue of convenience--got themselves into big trouble. A lot of people in Iceland took out loans denominated in other currencies, expecting that their biggest risk was a fairly minor movement in the relative exchange rates. When there were big swings, they were hammered. Of course, that has happened to exporters, too, but it's not the sort of mistake anyone makes twice.
So having a unified currency really does enhance economic transactions, by removing the currency risk that people face: it's now much less dangerous to enter into forward-looking contracts with people in other countries. But as Krugman and others have documented, it also has substantial thoughts.
Since he has frequently made the point in the comments section that non-lawyers are egregiously misunderstanding the issues at stake, I have asked Rob Lyman to explain what he means. Rob used to have his own blog, once upon a time, and as you can see, the world lost a great blogger when he gave it up.
So, thanks to the generous invitation of our gracious hostess, herewith my discussion of why the mortgage mess has nothing to do with "archaic land records systems." There are doubtless more legal errors that merit discussion, but I'm going to stick with what I know best. Several things should be said 1) this is not legal advice. It's general information. Consult a lawyer, and pay him well. 2) The law varies considerably from state to state, so some of what I say may be downright wrong in your state; I'm speaking in broad generalities here. 3) I'm not actually a land lawyer. I'm a patent lawyer. It happens that patents have a title system which closely resembles the land title system, and yes, I've written a mortgage intended to cover a patent. But I may make mistakes that a real estate lawyer wouldn't make. Feel free to correct me.
I'm going to start with a summary of the purposes and effects of the recording system used by most counties in the US. Then I'll pause briefly to discuss the rules surrounding transfers of the documents in issue. After that, it should be clear what the problems the banks are currently experiencing are, and what they should have done to avoid them.
So. Land records. It is obvious that it is possible to have possession and apparent ownership of land without actually owning it, or having the right to sell it. You can't just walk up to the guy living in the house and buy it from him and expect that to go well. Renters obviously can't sell the house, and there are many sorts of "estates" in land which permit possession without the power of sale. The way one transfers (or proves) ownership is by deed: here is a document showing that the previous owner transferred it to me, and showing what sort of transfer it was.
But of course the question arises: how did the previous owner get the right to do that? Who sold it to him? This gives rise to the concept of a "chain of title," stretching back to time immemorial, which at common law was 1189. So now suppose your seller shows you a nice chain of title going back to the coronation of Richard I, and you buy the house. The next day, some other dude shows up and says HE bought the house from the same owner, too. Or worse, somebody shows up with a chain of title dating back to the coronation of Richard II, claming to have bought the place from an entirely different "previous owner." Which one of you gets it?
At common law, first in time was first in right; whoever had gotten their deed from the previous owner won, and the other guy had no recourse but to sue that the seller for fraud. Or maybe sue the guy who has been dead for a few hundred years for fraud. This system was obviously not fully satisfactory. The solution is to permit buyers to record their deeds in searchable books at the county courthouse, so that you can see if anyone else has bought the place before you.
Additionally, the recording laws operate to cut off the interests of people who fail to record their deeds. This means that if buyer A fails to record his deed, and buyer B comes along later and, after a diligent search of the land records, buys the house from the sneaky seller, buyer B can deprive buyer A of the property by recording. There are different types of recording statutes which operate in slightly different ways, but the basic rule is this: you don't have to record, but if you don't, you risk somebody coming along later, "buying" the place from the same guy who sold it to you, and then kicking you out successfully. On the other hand, if you record promptly, you can be protected from somebody who bought before you, but failed to record, as well as anyone who buys after you.
Lenders who get mortgages from buyers can (and should!) also record their mortgages, and for the exact same reasons: they don't want their interest in the property (the right to take it over if they aren't paid) to be cut off by a subsequent buyer. Mortgages will have a priority based on the order of their recording: first recorded will generally be the first paid. So recording the mortgage is a pretty good idea.
Note something here however: recording is generally not mandatory, nor does it affect the validity of a deed or mortgage. It is perfectly possible to, say, bring a trespassing action against someone even if you have no recorded deed, as long as you can produce the actual deed to show the court you are in fact entitled to bring it. Similarly, to foreclose, no recordation is necessary. The county records affect ONLY the rights of prior and subsequent buyers/mortgagees. So the fact that mortgage securitizers didn't record these transfers does not in any way affect the validity of the transfers. They weren't required to record them.
One other thing to note is that county recording offices usually record only documents affecting title to land (although they do vary in both their rules and the rigor with which they are enforced). That means that transferring the note (the evidence of the debt) wouldn't even be recordable in many places; only the mortgage (which is a security interest in real property) would even be accepted by the clerks.
So what happened?
Well, there's a right way and wrong way to transfer the rights to both a stream of payments (the note) and to foreclose (the mortgage or deed of trust). I have been saying that the former calls for "wet ink" on the face of the document, which nk101 pointed out isn't quite right. Wet ink is required to make someone a "holder" of the note, but not to grant the right to enforce it, for which being a mere "assignee" will suffice. So I got that wrong (or exaggerated a bit). But what is clear is that to transfer ownership of either a note or a mortgage, you must do it in writing. A handshake or a call to your broker isn't good enough, even if it's a really really earnest handshake. This doesn't necessarily have to be a literal piece of paper, although I confess I have a personal preference for that sort of thing. You could do it with some kind of electronic document and digital signature, if you like. But either way, the transfer must be evidenced by some kind of document, which you will then have to produce for the court to prove you have the rights you say you have.
Also, of course, somebody is going to have to produce proper evidence of the original note and mortgage; a scan or photocopy should suffice, presuming your bank hasn't managed to get a reputation for forgery, in which case the judge may start wanting to see wet ink on that, too.
It appears that the formality of a writing was neglected in many MERS-related cases. So while the bankers all agree amongst themselves (thanks to MERS), that Servicing Company A has the right to receive payments and sue for foreclosure, SCA is unable to produce documentary evidence sufficient to support that claim in court.
However, SCA was never required to record the transfer of the mortgage, and had the transfer been properly accomplished, the failure to record would have had no effect on their right to foreclose. SCA is in some sense taking a risk that whoever sold them the mortgage might sell it to someone else, too, but since bankers have deep pockets, they don't generally go in for that kind of easily proven fraud. Plus, since all the bankers are using MERS, an erroneous extra transaction would probably be denied by the MERS system (I don't really know how MERS works, but I presume this is why it was created: to give banks some of the confidence that recording laws give them).
The problem here is improper assignments of mortgages (and notes), not failure to do something which was, after all, never legally required. In some sense, a policy of recording transfers would have prevented the problem, because if you're going to go record something, you need to actually have that something in hand, and thus you wouldn't neglect to create that something. However, failure to record is not an attempt to "circumvent the law," and having a highly sophisticated recording apparatus wouldn't have prevented idiots from failing to effect transfers in writing.
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