What is the Mortgage Electronic Registration System (MERS)? Definition, How It Works, and Examples

The Mortgage Electronic Registration System, commonly known as MERS, is a significant innovation in the real estate finance industry. It serves as both a database and a privately held company responsible for managing it. MERS was established by the mortgage banking industry to simplify and expedite the registration and transfer of mortgages in the United States. This electronic registry efficiently tracks changes in servicing rights and ownership of loans, benefiting both residential and commercial mortgage transactions.

Each time a mortgage changes hands, an assignment is traditionally prepared and recorded in the county land records. This assignment signifies the transfer of all interests the original lender held under the mortgage to the new lender. MERS revolutionizes this process by tracking loan transfers electronically, eliminating the need for lenders to record assignments with county recorders whenever loans switch from one bank to another.

The MERS system serves a wide range of stakeholders, including 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, as well as homeowners, can access MERS without charge. Homeowners can inquire about their registered mortgages using this system.

To employ electronic tracking, the mortgage servicer assigns a mortgage identification number (MIN) and registers the loan within the MERS database. In some cases, MERS itself is designated as the mortgagee, officially referred to in the mortgage documents, creating an Original Mortgagee (MOM) loan. The seller can then originate the mortgage with MERS as a nominee of the lender (also known as the beneficiary) and subsequently record the assignment of the loan to MERS in the county land record, making MERS the mortgagee of record.

However, it’s crucial to note that even when MERS acts as the mortgagee in county land records, it does not actually own the mortgage loan. If the lender decides to sell the loan, MERS updates its information regarding the mortgage. The servicer of a mortgage can request to have it removed from the MERS database, leading to notification to Fannie Mae. If a mortgage servicer wishes to terminate their membership with MERS entirely, they must promptly notify Fannie Mae.

The Mortgage Electronic Registration System functions as a one-stop site for mortgage documents, including deeds of trust and promissory notes. It streamlines the mortgage process by acting as the mortgagee, reducing the expenses associated with recording transfers when mortgages change hands. Having the loan registered under MERS’ name (as a nominee) in land records saves time and reduces recording costs, as multiple assignments are unnecessary every time a loan changes ownership.

Despite these advantages, MERS has faced criticism during times of financial crisis, notably the 2008 housing crisis. It sometimes obscured the true ownership of mortgages, making it challenging for homeowners facing foreclosure or seeking relief from their loans, as a clear understanding of mortgage ownership is vital for working out remedies.

MERS simplifies the registration and transfer of mortgages by electronically tracking loan transfers, reducing the administrative burden for lenders, saving time and costs.

Yes, homeowners can access MERS to obtain information about their registered mortgages, including details about their loan servicers.

MERS can serve as the mortgagee of record during mortgage transfers, but it does not actually own the mortgage loan.