MERS
MERS is the Mortgage Electronic Registration System. It was created in 1997 to improve profits and efficiency among lenders by eliminating the need to record changes in property ownership manually in local land records. Often you will see "MERS" on the settlement statement for a home purchase as an escrow charge. MERS was set up by Fannie Mae, Freddie Mac and the mortgage industry to record loan assignments electronically.
Operating like an "electronic Phone book for mortgages" MERS saved the mortgage industry $1 billion in the past 10 years. MERS doesn't own the mortgages but will sometimes be named as "mortgagee" (the holder of the mortgage) in title. If that is the case, can MERS foreclosure and collect security on a defaulted property loan? Recently, the Kansas Supreme Court ruled that MERS didn't have an interest in the underlying mortgage in a 2006 property foreclosure and could not be named to receive property sale proceeds. This is a reversal in direction of preceding rulings and may affect millions of property liens recorded in MERS name. Expect MERS to address the issue in federal court soon and the mortgage industry to come up with a more secure way to re-record these mortgages. (Gretchen Morgenson, NY Times, 9-28-09).
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