What is mers mortgage?

Introduction

MERS, which stands for Mortgage Electronic Registration System, is a database created to track and record mortgage loans in the United States. It was established in the 1990s as a response to the growing volume of mortgage loans being originated and the need for a more efficient way to track ownership and servicing rights. In this article, we will dive deeper into the concept of MERS and understand its role in the mortgage industry.

What is MERS?

MERS: Mortgage Electronic Registration System is a privately-owned electronic database that tracks and records mortgage loans. It was created by the mortgage banking industry to streamline the process of transferring and recording mortgage loans.

Function: MERS acts as a central registry for tracking changes in ownership and servicing rights of mortgage loans. When a mortgage loan is originated, the lender registers it with MERS. Subsequent transfers of the mortgage are recorded in the MERS database, allowing for a more efficient and cost-effective way of tracking ownership.

Benefits: The use of MERS has several benefits for the mortgage industry. It eliminates the need for physical assignments of the mortgage each time it is sold or transferred, reducing paperwork and associated costs. It also allows for faster loan processing and reduces the risk of errors in the recording of mortgage transfers.

How Does MERS Work?

Registration: When a mortgage loan is originated, the lender registers it with MERS by becoming a member of the system. The loan information, including the borrower’s name, property address, and loan amount, is recorded in the MERS database.

Transfer of Ownership: When a mortgage loan is sold or transferred to another party, the transfer is recorded in the MERS database. The new owner becomes the beneficiary of the mortgage, and MERS continues to track subsequent transfers.

Servicing Rights: MERS also tracks changes in servicing rights, which refer to the entity responsible for collecting mortgage payments and managing the loan. When servicing rights are transferred, MERS updates the database accordingly.

Controversies and Criticisms

Foreclosure Process: One of the main criticisms of MERS is its role in the foreclosure process. Since MERS is the nominal mortgagee of record for many loans, it has faced legal challenges regarding its authority to initiate foreclosure proceedings. Some argue that MERS lacks standing to foreclose, as it is not the actual holder of the promissory note.

Chain of Title: Another controversy surrounding MERS is the impact on the chain of title. Because MERS allows for the transfer of mortgage loans without recording each transfer in public land records, some argue that it creates uncertainty and confusion regarding the true ownership of the loans.

Conclusion

MERS, the Mortgage Electronic Registration System, plays a significant role in the mortgage industry by providing an electronic database for tracking and recording mortgage loans. It offers benefits such as efficiency, cost savings, and faster loan processing. However, it has also faced controversies and criticisms related to its role in the foreclosure process and the impact on the chain of title. Understanding MERS is essential for anyone involved in the mortgage industry.