What Is the Mortgage Electronic Registration System (MERS)? (2024)

What Is a Mortgage Electronic Registration System—MERS?

The Mortgage Electronic Registration System (MERS) is a database created by the mortgage banking industry. A confidential electronic registry of mortgages originated in the United States, it keeps track of transfers of and modifications to servicing rights and ownership of the loans. It is used by the real estate finance industry for residential and commercial mortgage loan recording trading.

MERS, which also refers to the privately held company that manages the database, is approved by such government-sponsored enterprises as the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Government National Mortgage Association (Ginnie Mae), along wth such government agencies as the Federal Housing Administration (FHA) and the Department of Veterans Administration (VA) that are involved in housing loans. The California and Utah Housing Finance Agencies and all major Wall Street rating agencies make use of it as well.

Key Takeaways

  • Mortgage Electronic Registration System (MERS) is a privately owned database that the mortgage banking industry created to simply the registration and transfer of mortgages.
  • By tracking mortgage transfers electronically, MERS eliminates the need of a lender to register the transfer with the county recorder every time the loan is sold from one bank to another.
  • Sometimes MERS itself is designee as the mortgage lender (mortgagee).
  • While MERS can save time and recording costs, it has drawn criticism for making it difficult to see who actually is the current owner of a mortgage.

Understanding the Mortgage Electronic Registration System—MERS

Each time a mortgage is sold from one bank to another, an assignment—a document showing that the mortgage has been transferred—is, theoretically, prepared and recorded in the county land records. The assignment transfers all of the interest the original lender had under the mortgage to the new bank.

By tracking loan transfers electronically, MERS eliminates the long-standing practice that the lender must record an assignment with the county recorder every time the loan is sold from one bank to another.

The MERS 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. County and regulatory officials and homeowners can access MERS free of charge. Homeowners can look up information on their own mortgages that are registered with the system.

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. Sometimes, MERS itself is designated as the mortgagee, as the original lender is officially called in the mortgage documents; such a loan is known as an original mortgagee (MOM) loan. From there, the seller can originate the mortgage with MERS as a nominee of the lender (also referred to as the beneficiary), and then assign or record the assignment of the loan to MERS in the county land record. This would make MERS the mortgagee of record.

While MERS can act as mortgagee in county land records, it doesn't actually own the mortgage loan.

If the lender sells the loan, 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, it must also notify Fannie Mae as soon as possible.

Pros and Cons of the Mortgage Electronic Registration System—MERS

As an electronic, one-stop site for mortgage documents—deeds of trust and promissory notes—MERS greatly simplifies the mortgage process. 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. Having the loan in MERS’ name (as nominee) in the land records saves time and recording costs because multiple assignments aren't necessary each time the loan changes hands.

The database has drawn some criticism, though. 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.

What Is the Mortgage Electronic Registration System (MERS)? (2024)

FAQs

What Is the Mortgage Electronic Registration System (MERS)? ›

MERS is an American private electronic database created to track new mortgage loans, servicing rights and ownership of the loans. It provides free public access to information about home mortgages and is used by homeowners, local governments, servicers, lenders, municipalities and insurers, among others.

What does MERS do for a mortgage? ›

MERS is the lienholder of record and holds legal title to the lien granted by the borrower in the Mortgage (“MERS Mortgage”) as the nominee (agent) of the lender and the lender's successors and assigns who are members of the MERS® System. MERS is not the lender, and MERS does not service your loan.

What are the benefits of MERS? ›

How does MERS benefit borrowers? MERS as original mortgagee eliminates breaks in the chain of title, resulting in less work and lower fees paid by the lender—fees that would ultimately be passed down to the homeowner and/or consumer.

Why was the mortgage electronic registration system created? ›

The mortgage banking industry created MERS to simplify this process. This database tracks mortgages for member companies as they are sold from one bank to another financial institution. Loan owners who are members of MERS no longer have to submit assignments on their own.

What does MERS stand for in banking? ›

Mortgage Electronic Registration System, Inc. (MERS) is a company the banking industry created to simplify this process.

Can MERS discharge a mortgage? ›

When MERS is the mortgagee of record, a discharge is executed by an officer of MERS. MERS may also act as nominee for the lender and servicer and, if named as nominee, MERS remains as nominee regardless of how often the mortgage is sold.

Can MERS assign a mortgage? ›

This may be done in one of two ways. First, MERS can be identified as the nominee for the lender on the mortgage itself (referred to as "MERS as Original Mortgagee" or MOM). If the mortgage does not name MERS as the original mortgagee, then the mortgage can be assigned to MERS.

What role did MERS play in the 2010 US foreclosure crisis? ›

MERS has come under increased scrutiny in foreclosure actions because of the 2,871,891 U.S. foreclosures in 2010, the chances are high that MERS, claiming involvement in approximately 50% of US residential loans, is tracking the Notes and is named in the deed of trust as the “nominee” of the person or entity in ...

What is a MERS fee? ›

The MERS fee is the cost to register your loan in the Mortgage Electronic Registration System (now you understand where MERS comes from), which is a database used by the mortgage lending industry to track loans. In short, the MERS system enables lenders to buy and sell mortgages more easily.

What is the history of Mers mortgage? ›

WHY: MERS was created in the 1990s, In response to changes in the mortgage finance industry, to streamline the mort- gage process by using e-commerce to replace paperwork. MEMBERSHIP: About 3,000 lenders, ven- dors and government entities.

What is the difference between a mom loan and a non-mom loan? ›

MERS on Mortgage Loan Agreement

You would see a mortgagee clause with MERS as nominee for your lender. This is known as a MOM Loan, which stands for MERS as Original Mortgagee. After origination is considered a Non-MOM Loan when MERS is assigned as the mortgagee.

How to serve MERS inc? ›

Current procedure for serving legal documents upon the Mortgage Electronic Registration Systems is as follows: Legal documents can be served upon MERS by certified mailing the legal documents to GenPact MERS Mailroom 1901 East Vorhees St. #C, Danville, IL 61834-4512.

What does inactive MERS mean? ›

An inactive MERS designation may relate to the loan having been refinanced or paid off, discounted, or completely voided due to the invalid mortgage documents in the file. Or, the mortgage loan was assigned out of the MERS system to a completely new mortgage servicing company.

What does the Home Owners loan Corporation do? ›

The Home Owner's Loan Corporation (HOLC) was created in 1933 to provide mortgage relief to home owners at risk of losing their homes through foreclosure. The HOLC also developed a comprehensive housing plan that served as the basis for the National Housing Act of 1934.

What is the purpose of reverse annuity mortgage? ›

Reverse Annuity Mortgage loans allow senior homeowners the financial flexibility to stay in their own homes and continue life on their terms.

What is the purpose of the mortgage Reform and Anti Predatory lending Act? ›

The Title prohibits certain predatory lending tactics that were used frequently during the real estate bubble, and also establishes certain provisions for loan modifications which will help to change and reduce mortgages that are completely out of the borrower's ability to repay.

Why would a mortgage company return a payment? ›

Banks sometimes return payments to borrowers instead of cashing them. This very often happens if a loan payment is late. If this happens to your payments, you can still save your home. Many mortgage modifications are granted even after mortgage payments have been returned uncashed.

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