The Electronic Mortgage Registration System (MERS) is a database created by the mortgage banking industry. Confidential Electronic Mortgage Registry Born in the United States, it tracks transfers and changes in mortgage ownership and administration rights. The real estate financial sector uses it for the registration of residential and commercial mortgage registration operations.
MERS, which also refers to the private company that manages the database, is approved by government-sponsored companies such as the Federal National Mortgage Association (Fannie Mae), the Federal Mortgage Mortgage Corporation (Freddie Mac), and the National Mortgage of the Government. Association (Ginnie Mae), along with government agencies such as the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) involved in home equity loans. It is also used by California and Utah housing finance agencies and all major Wall Street rating agencies.
By electronically tracking loan transfers, MERS eliminates the traditional practice that the lender must register an assignment with the county recorder each time the loan is sold from one bank to another.
The MERS system is used by mortgage developers, administrators, depository lenders, wholesale lenders, retail lenders, document holders, liquidation agents, securities companies, insurers, investors, county registrars, and consumers. City officials and regulators and homeowners can access MERS for free. Homeowners can search for information about their mortgages registered in the system.
To use electronic tracking, the mortgage server assigns you a mortgage identification number (MIN) and then registers the loan in the MERS database. MERS itself is sometimes referred to as the mortgage lender, as the original lender is officially listed on the mortgage documents; this loan is called Original Mortgage Loan (MOM). From here, the seller can start the mortgage with MERS as the lender’s representative (also known as the beneficiary) and then assign or register the loan assignment to MERS with the County Property Registry. This would make MERS the record mortgage.
If the lender sells the loan, MERS will update your mortgage information. A mortgage server can remove a mortgage from the MERS database by submitting a deactivation request. MERS, in turn, will notify Fannie Mae. If a mortgage server wants to terminate their MERS membership in full, they must notify Fannie Mae as soon as possible.
Pros and cons of the electronic mortgage registration system – MERS
As a single e-site for mortgage documents: trust deeds
And promissory notes: MERS greatly simplifies the mortgage process. MERS can act to some extent as a cost-saving measure because by taking measures
As a mortgage lender, reduce the cost of registering the transfer of a
Mortgage from one lender to another. Having the loan in the name of MERS (as a candidate) on the property records saves time and registration costs because multiple assignments are not necessary each time the loan changes hands.
However, the database has received some criticism. During the 2008 housing crisis, the system sometimes made it difficult to determine who the actual owner of the mortgage was. This created a challenge for homeowners facing foreclosure or a loan restriction, as they needed to know who had their mortgages to find some kind of remedy.
Common conditions and documents in mortgage operations
To fully understand MERS, you must understand the basic terms and documents involved in a home loan transaction.
Mortgage lender (beneficiary) and mortgage lender. A “borrower” is the lender of a mortgage. In a deed of trust, the lender is called a “beneficiary” or “lender.” The mortgage lender or the beneficiary lends money to the “borrower”, who is the borrower.
Loan documents. The loan transaction consists of two main documents: the mortgage (or deed of trust) and a bill of exchange. The mortgage or deed of trust is the document that pledges the property to secure the debt, while the promissory note contains the borrower’s promise to repay the loan.
Loan transfers. Banks often buy and sell mortgages among themselves. A “commitment” is the document that constitutes the legal record of this transfer from one entity to another. In a typical transaction, when the mortgagee sells the debt to another company, an assignment is issued and the note is endorsed (signed) to the new owner.
The role of MERS in mortgage transactions
In some mortgage lending operations, the mortgage designates MERS as the mortgagee, solely as the creditor’s representative. These loans are known as “MERS as original borrower” or “MEM” loans. In a deed of trust, MERS is designated as the beneficiary to act as the lender’s representative.
In other cases, the loan may be made to MERS, as a candidate only, at a later point in its life cycle after the loan closes. MERS then tracks loan transfers, serving as a candidate for each holder, eliminating the need for separate allocations during loan transfer.
Other states have ruled that foreclosure cases can proceed on behalf of MERS. The Minnesota Supreme Court, for example, ruled that MERS has the right to enforce the law in that state. Additionally, in a Nevada case, a homeowner’s attorney argued that having MERS as a mortgage lender was a fatal flaw in the mortgage process. He said that once a loan has a different note holder and mortgage holder, it has permanent defaults and cannot be enforced. But the Nevada Supreme Court disagrees, ruling that mortgages involving MERS could be foreclosed after being reassigned to the lender.
Since MERS changed its rules in 2011, with a few exceptions in some states, you will generally no longer see new MERS foreclosures, even in states that previously allowed them.
For information on foreclosure defense call us at (877) 399 2995. We offer litigation document review support, mortgage audit reports, securitization audit reports, affidavit of expert witness notarized, and more.
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