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Mortgage Electronic Registration System (MERS)
The mortgage electronic registration system, also called MERS, refers to a database company created by the mortgage banking industry. Its role is to maintain a mortgages tracking database for its members as they get transferred from one bank to the other. Electrical tracking of loan transfers eliminates the traditional practice of lenders having to record an assignment with the country recorder every time there is a sale of loan from bank to bank.
A Little More on What is the Mortgage Electronic Registration System (MERS)
The MERS originated from the United States and approved by Fannie Mae, Finnie Mae, Freddie Mac, VA and FHA, Utah, and California Housing Finance Agencies, including major Wall Street rating agencies. It was created to help in servicing and ownership rights tracking. It is a privately help company mandated to manage the database. It is most common in the real estate finance industry for commercial and residential mortgage loan trading.
County homeowners, county, and regulatory officials are allowed to access MERS for free. For homeowners, the database enables them to search for information on their mortgage loans already registered in the system. The users of the system include mortgage:
- Warehouse lenders
- Wholesale lenders
- Retail lenders
- Document custodians
- Settlement agents
- County recorders
- Title companies
The Role of MERS in the Mortgage Transaction
When it comes to some home loan transactions, MERS becomes the mortgagee, as a sole nominee for the lender. Their loans are usually referred to as MERS and functions as Original Mortgagee loans.
In some cases, the loan is usually assigned to MERS as a sole nominee for the lender, at a later period in the life cycle after the closing of the loan. MERS then begins to track the loan transfers as it acts as the nominee for every holder, eliminating the separate assignments required during the loan transfers.
How to Find Mortgage Information using MERS
For easy use of electronic tracking, the mortgage’s servicer is supposed to assign it with a mortgage identification number, also known as MIN. The loan is then registered with the MERS database. The seller is always free to originate the mortgage with MERS as the beneficiary’s nominee, and then record the loan assignment to MERS in the land record of the county. After doing this, the MERS then becomes the record’s mortgagee.
If the lender happens to sell the note, MERS makes sure that it updates the information about the mortgage. The mortgage’s service can remove the information from MERS’s database upon sending a request for it to be deactivated. The MERS is then supposed to notify Fannie Mae. In a case where the mortgage’s servicer wants to end their membership with MERS, they also need to notify Fannie Mae early enough.
Mortgage Electronic Registration System Criticism
To some extent, MERS acts as a measure of saving costs. By acting as a mortgagee, it reduces recording expenses for the transfer of a mortgage from lender to lender.
However, there has been some criticism regarding MERS. During the housing crisis, the system had made it hard for individuals to identify the actual owner of the mortgages. Homeowners found this challenging, and at some point, they had to face relief from their loans or foreclosure. They needed to know their mortgage holder so that they could work out a number of remedies.