What To Do With Mers?
Most of the mortgages are owned by an entity called MERS (Mortgage Electronic Recording System). This is not some physical entity, it is just like an electronic warehouse which keeps title record of most of the mortgages in USA. Now, irrespective of the fact that you are making your mortgage payments directly to your lender, this entity possibly may have all of your records. It is an electronic entity. Many cases have been decided in USA calling it a non party-in-interest. This term is a legal terms which means that only legal entity can sue or be sued. Every action in US courts must be initiated by a real party in interest and be defended by a real party in interest. MERS as such is not a real party in interest. They can be identified in your mortgage record as the “mortgagee of record” or sometimes as “nominee” or agent for the purpose of making future transfer of transactions.
What Is MERS and How Does It Work?
It was a mysterious electronic organization, a very large electronic database of mortgages and mortgage transactions. It was crafted in the mid 1990s as a legal device to replace the county land title recording system. The real estate boom was largely attributed to MERS as the securitization process culminates with MERS. Most of the lenders joined MERS happily as it transferred and registered all the mortgage transaction to its data bank. The lenders saved lots of money because most of the transaction took place electronically and saved millions for lenders as they saved having local agents in various counties throughout USA. Also, most of its work was generic, similar, and ingenuity was required so there was a tremendous cost saving which made lenders very rich, and softened their lending practices.
Innumerable Problems Created by the MERS System
We know that under the traditional (and legally authorized) method of keeping track of who owns what, any person is free to walk into a land records office and search the entire historical record of who bought and sold any particular piece of property. In other words, this was commonly called a “title search.” Under the MERS system, however, no such search is possible. MERS Members are not required to report transfers to the database and so there is no real way to be sure about who owns what.
One Court Says: MERS Doesn’t Deliver Clear Title
Back to our previous comment that MERS cannot sue in their names because they are not a real party in interest. As it is one of the cardinal principle of transfer that a note follows the deed and they cannot be sold separately. In In re Agard, a bankruptcy judge analyzed MERS for the purpose of deciding whether a bank seeking foreclosure could prove that it owned the promissory note accompanying the mortgage — a prerequisite in bankruptcy court when asking the court for permission to proceed with the foreclosure. Previously, MERS had attempted to assign the mortgage and promissory note to the foreclosing bank and the question was whether it successfully did so.
The bankruptcy court in Nevada had decided that MERS is not a proper party which can sue in its own name because it had not entered into any transactions with the homeowners. It concluded that MERS, as currently structured, did not deliver clear title to the foreclosing bank.
MERS Announces Some Changes
Because of the various problems it faces in the Courts, MERS has recently announced that it is changing one of its membership rules (Rule 8) to require that members no longer foreclose in MERS name. MERS has also told its members that assignments out of MERS’s name should be recorded in the county land records even if the state law doesn’t require it.