What Is a Mortgage Electronic Registration System?
The Mortgage Electronic Registration System (MERS) is a database created by the mortgage banking industry that simplifies the mortgage process by using electronic commerce. MERS tracks ownership and servicing rights that are originated in the United States. It is used by the real estate finance industry for residential and commercial mortgage loan trading. It is an original mortgagee (MOM) approved by Fannie Mae, Freddie Mac, Ginnie Mae, FHA and VA, California and Utah Housing Finance Agencies and all major Wall Street rating agencies.
Understanding the Mortgage Electronic Registration System (MERS)
MERS is also a privately held company that manages the database. Its system is used by mortgage originators, servicers, warehouse lenders, wholesale lenders, retail lenders, document custodians, settlement agents, title companies, insurers, investors, county recorders and consumers. It keeps track of a confidential electronic registry of mortgages and modifications to servicing rights and ownership of the loans. County and regulatory officials and homeowners can access MERS free of charge. For homeowners, the database allows them to look up information on their own mortgages that are registered with the system.
How MERS Is Used to Find Mortgage Information
In order to use the electronic tracking, the servicer of the mortgage assigns it with a mortgage identification number (MIN) and then registers the loan with the MERS database. From there, the seller can originate the mortgage with MERS as nominees of the beneficiary, and then assigns or records the assignment of the loan to MERS in the county land record. This would make MERS the mortgagee of record.
If the lender sells the note, MERS will update its information regarding the mortgage. The servicer of a mortgage can have it removed from the MERS database by sending a request to have it deactivated. MERS will, in turn, notify Fannie Mae. If the servicer of a mortgage wants to end their membership with MERS entirely, they must also notify Fannie Mae as soon as possible.
MERS can act as a cost-saving measure to some degree because by acting as a mortgagee, it cuts the expense of recording the transfer of a mortgage from one lender to another.
The database has drawn some criticism though because, during the 2008 housing crisis, the system made it difficult at times to sort out who actually owned mortgages. That created a challenge for homeowners facing foreclosure or relief from their loans, as they needed to know who held their mortgages in order to work out some form of remedy.