What is MERS? (Mortgage Electronic Registration System)

What is MERS? This article illustrates the process of Mortgage Registration and the issues that arise with this system.

What is MERS? We are asked regularly what MERS is and about its role in the real estate and mortgage industries, but we especially hear the question when we refer clients to MERS to find the information they need but is inexplicably not found at the recorder’s office. They do not understand why and they are not alone.

MERS (Mortgage Electronic Registration Systems, Inc.) is a member-based organization. A national electronic registry system was created by the mortgage banking industry in the 1990s. It was to streamline the mortgage process and reduce recording costs. MERS accomplishes its mission in two main ways: (1) It tracks via electronic filing by its members the changes in servicing rights and mortgage loan owners, alleviating the need to pay county fees to record a mortgage assignment every single time a loan is sold, and (2) It helps consumers and industry professionals identify current mortgage loan owners and obtain mortgage releases without having to track down the loan ownership, which can be a tedious process. Despite transfers of mortgages or mergers/acquisitions of the lenders and investors that may otherwise make it difficult to trace ownership, and assuming the information is correctly reported, the system may also help identify mortgage fraud involving owner-occupancy issues and sometimes exposes property-flipping schemes that lack proper title transfers. If the loan is registered with MERS after a loan closes, the entity then acts as a “nominee” for the then-current lender and entities who purchase the loan on the secondary market.

Upon initial registration of a new loan in its system, MERS is named as the “mortgagee (also known as lender or beneficiary) as nominee” of record for the lender. The original lender then records the new mortgage (or deed of trust) naming MERS as “mortgagee as nominee” (a fancy way of saying “agent”) with the recorder’s office of the county in which the property is located. The original lender then sells the promissory note and the servicing rights on the secondary market and MERS, in turn, updates the system with that new information. The new “servicer” takes charge of managing the loan, which includes collecting/tracking loan payments and balances, etc. The promissory note (the document the borrower signs promising to repay the loan with the property listed as the security) and the servicing rights may be sold/transferred multiple times, but as long as the new entities are members, those transactions will be tracked by MERS without the need to record the transfers (assignments) with the County. However, if the servicing rights are sold to an entity that is not registered, then an assignment must be recorded at the County Recorder’s office removing MERS as the agent.

How do homeowners benefit from the Mortgage Electronic Registration System?  Homeowners whose loans are registered with MERS may contact them online or via telephone from any location to obtain information about their loans. Their website also offers a variety of resources and important links for homeowners. The system, still so unfamiliar to so many Americans, has played an especially large role in the recent and fast-growing number of “eMortgages.” Both Freddie Mac and Fannie Mae require that lenders register eNotes (electronic promissory notes) with MERS.

It is important to remember that MERS tracks mortgage owners – not homeowners.  In other words, all new owner transfers is recorded with the County Recorder’s office.  A lien report or other property report will reflect the owner’s information and loan originator.  However, if and when the loan is registered in the Mortgage Electronic Registration System, the subsequent lenders will be tracked in its system (rather than the recorder’s office).

Homeowners who need to find information about their loan may visit the following link to start the FREE process: https://mersinc.org/homeowners

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