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Mortgage Electronic Registration Systems (MERS) is a privately held company]that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States.[1]

MERS serves as the mortgagee of record for lenders, investors and their loan servicers in the county land records. MERS claims its process eliminates the need to file assignments in the county land records which lowers costs for lenders and consumers by reducing county recording revenues from real estate transfers[2] and provides a central source of information and tracking for mortgage loans.[3]

MERS' role in facilitating mortgage trading was relatively uncontroversial in its early days a decade ago but continued fallout from the subprime mortgage crisis has put MERS at the center of several legal challenges disputing the company's right to initiate foreclosures. Should these challenges succeed, the US banking industry could face a renewed need for capitalization.[4]


MERS System

Information contained in the MERS System can help to identify possible mortgage fraud involving the identity of a prospective buyer and owner-occupancy issues. The centralized database of MERS can also help detect property flipping schemes and purchases conducted on behalf of ‘straw buyers’ seeking to defraud lenders and sellers.[5]

Mortgage Identification Number (MIN)

Originated by MERS, the Mortgage Identification Number (MIN) is a unique 18-digit number used to track a mortgage loan throughout its life, from origination to securitization to payoff or foreclosure.[6]


Through MERS ServicerID, homeowners can search for their mortgage servicer, regardless of whether the mortgage has changed hands since the loan was originated. By identifying the loan servicer, homeowners may seek to identify their lender to initiate negotiations for revised mortgage terms and take actions that can avoid foreclosure.[7]

The MERS eRegistry

The MERS eRegistry is a system of record that identifies the owner (Controller) and custodian (Location) for registered eNotes.[8]

Built by MERS with the endorsement of the Mortgage Bankers Association and launched in 2004, the MERS eRegistry satisfies the "safe harbor" requirements of E-SIGN and UETA legislation.[9]

Both Fannie Mae[10] and Freddie Mac[11] require the registration of eNotes on the MERS eRegistry before they are eligible for purchase.


In February 2009, MERS was selected to manage the day-to-day operations of the Mortgage Industry Standards Maintenance Organization (MISMO), although the Mortgage Bankers Association will continue its full control over MISMO.

MBA President and CEO John A. Courson said the selection of MERS as a management partner, “will result in the continued enhancement of data standards and transparency, which are critical to the return of investor confidence and liquidity in our marketplace.”[12]

Legal foundation of MERS challenged

In Roman mythology, the god Janus, for whom each year’s first month is named, was the deity of beginnings and endings.1 According to legend, the titan Saturn gave the two-faced God the power to see both the future and the past. Romans carved both of Janus’ two faces on gates and doorways to solemnize momentous transition.2 Most notably, in the Roman forum the Senate erected the ritual gates called the Janus Geminus which the Romans opened in times of conflict.3 At war’s outset Priests made sacrificed here to curry favor from the gods and forecast the prospects of success.4

No deity could better symbolize what financiers hoped to create when they founded the Mortgage Electronic Registration System—known as MERS. MERS sits as a dichotomous, enigmatic gatekeeper on the vestibule of our nation’s complex and turbulent mortgage finance industry. Financiers invoked MERS’ name at the beginning of millions of subprime and terminate so many of these loans through foreclosure. And like Janus, MERS is two-faced: impenetrably claiming to both own mortgages and act as an agent for others that also claim ownership.

This essay examines recent case law developments in an update to an earlier article on the legal problems associated with MERS.5 In particular, this essay looks at two of the most fundamental unanswered legal questions regarding MERS’ role in mortgage lending. Given recent cases questioning MERS’ ownership interests in loans registered on its database, do security agreements naming MERS as a mortgagee or deed of trust beneficiary actually succeed in conveying a property interest?

Moreover, financial institutions used MERS to avoid paying billions of dollars in recording fees to county and state governments. Should these governments—many of which are facing dire financial crises—be entitled to recoup unpaid recording fees? And perhaps most important, does the fact that such fundamental issues remain live controversies tell us something more about the commercial norms our country needs to rebuild a trustworthy financial system.

This essay begins with a short introduction to MERS’ role in the residential mortgage finance including the still evolving legal foundation of the company’s business model. Next, Part II explores whether security agreements naming MERS as a mortgagee or deed of trust beneficiary meet traditional common law title conveyance requirements. Then, the Part III explores the financial industry’s exposure to county and state government lawsuits seeking to recoup unpaid recording fees. This essay concludes by reflecting on the difficult position facing appellate judges and legislators that will be called upon to resolve these controversies, as well as investors contemplating the purchase of MERS-recorded mortgages.

Officials appeal for exam of foreclosure practices

JP Morgan discontinues use for '07 and '08 loans

JPMorgan Chase is expanding its review of foreclosures to 41 states as pressure builds on banks to answer allegations of document fraud.

The bank is now reviewing about 115,000 foreclosure cases, up from 56,000, Douglas Braunstein, chief financial officer for JPMorgan Chase & Co., said Wednesday. JPMorgan had stopped proceedings in the 23 states that require judicial review of foreclosures and now is looking into similar deals in states where there "could possibly be an issue," spokesman Joseph Evangelisti said.

The bank acted in response to evidence that mortgage lenders have used flawed court papers to evict homeowners.

Bank officials also said JPMorgan had previously stopped using the banking industry's controversial electronic mortgage tracking system for foreclosures in 2007 and 2008. The bank still uses the system, known as MERS, for other loan purposes.

Lawyers in class-action lawsuits have argued that MERS — which allowed financial institutions to do away with paperwork in favor of electronic tracking — lacks the required paper trail to prove mortgage ownership.

The news of an expanded probe came just as officials in 50 states and the District of Columbia announced a joint investigation into allegations that mortgage companies used illegal methods in dealing with foreclosure documents that were used to evict people from their homes. The probe will examine whether mortgage company employees made false statements and whether they prepared foreclosure paperwork in a fraudulent manner.

The foreclosure mess has escalated in the last month. Ally Financial's GMAC Mortgage has stopped foreclosure proceedings in the 23 states where courts weigh in on home seizures. Bank of America has now frozen foreclosures in 50 states. Litton Loan Servicing, Goldman Sachs' mortgage service unit, has halted some questionable foreclosures.

Lawmakers have called for an all-out national foreclosure moratorium. What's at stake is the nation's entire foreclosure machinery. If it is indeed brought to a standstill, it could further damage an already struggling housing market as well as deal a blow to a frail economic recovery.

MERS in the foreclosure crisis

"... Why MERS?

But why was MERS created in the first place?

MERS, the banks and the mainstream financial press all say that it was simply to save fees by digitizing mortgage electronic.

But as Ellen Brown notes, there is in reality a very different reason that the big banks created MERS:

The rating agencies required that the conduit be "bankruptcy remote," which meant it could hold title to nothing ....

Indeed, the secretary and treasurer of MERS admitted this in a deposition, stating:

As a requirement for mortgages that were securing loans or promissory notes that were sold to securitize trust, the rating agencies would only allow mortgages MERS -- well let me step back. They required that a bankruptcy remote single purpose entity be created in order for transactions holding loans secured by MERS, by mortgages MERS served as mortgagee to be in those pools and receive a rating, an investment grade rating without any changes to the credit enhancement. They required that to be a bankruptcy remote single purpose subsidiary of MERS, of Merscorp. (page 32, lines 9-20)


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