What is MERS? My Halloween thoughs on witches, lynchmobs, “Dancing with the Stars”, Arthur Miller and “The Economist” magazine.
[categories: Washington bankruptcy attorney]
MERS stands for Mortgage Electronic Registration System. It is a company based in Reston, Virginia, and its services are utilized by the mortgage industry to track mortgages and their ownership, and has been around since the late 1990s. USA Today reports that 64 million mortgages are tracked by MERS, and that about 60% of new mortgages are tracked by MERS. (See USA Today, Page 1B, October 11, 2010, "The mess gets uglier, more confusing".
When a mortgage loan is signed by the borrower, two documents are created; the first is called the promissory note (the note) and the second is the deed of trust or mortgage document (deed/mortgage). The deed/mortgage is thereafter "recorded" in the county records where the property is located, such as the Office of the Pierce County Auditor, here in Pierce County, Washington.
But what so often happens is that the loan originally written up, funded and then recorded by local Bank A, is then sold off later to Investor B, who later sells the loan to Investor C. The idea behind MERS was to reduce costs; it is expensive for Investor B to record a "Notice of Transfer/Assignment" in the Pierce County records and it is again expensive for Investor C who buys the loan from Investor B to again record another "Notice of Transfer/Assignment" in the Pierce County records. There is the cost of hiring someone to draft up the transfer/assignment document and then to pay the fees to Pierce County, which can be substantial as to recording a transfer. I believe the current fee is $11.00 for the first page and $2.00 for every page thereafter, thus a 6 page document costs $21.00 to record (please check these fees, though, I am going from memory!).
The idea behind MERS was that Bank A would send a "Notice of Transfer/Assignment" to MERS (instead of to Pierce County) regarding the transfer to Investor B and likewise MERS would receive notice from Investor B and Investor C that investor B had transferred ownership of the loan to Investor C.
If there was later a problem with the loan and a foreclosure had to be commenced, then Investor C could go collect all of the transfer/assignment documents plus perhaps even the original mortgage/deed and perhaps even the original note from MERS because MERS served as a registry and repository for these documents and transfer information, per my understanding.
MERS probably works quite well at keeping track of millions of documents and transfers, but if say Investor B and Investor C forgot to tell MERS about their transfer, then MERS might hand out inaccurate information to Investor C’s loan servicer and the loan servicer for Investor C could become confused and perhaps start a foreclosure saying "Investor B hereby commences foreclosure on parcel #12345" when in fact Investor C is truly the owner.
What does this mean to you? Well, prior to joining the lynchmob that is trying to blame the "mortgage industry", MERS and loan servicers for the rising tide of foreclosures, you should be a thoughtful and well read person and take a moment to reflect – you should separate the baby from the bathwater before throwing both out the window: MERS is not inherently evil; it is little more than a storage facility for information and in my opinion, has been doing little more than trying to keep track of who really owns what mortgage as banks, hedge funds, mutual funds, investors and institutions holding mortgages have swapped the mortgages like young boys swapping baseball trading cards.
Remember that, unfortunately, when a witch-hunt begins, it is the non-witches that pay the worst price. Consider reading or re-reading playwright Arthur Miller’s "The Crucible" before you join the mob seeking to set fire to MERS, loan servicers and the banks/investors who gave nearly every American the chance to borrow money to fulfill a dream of home ownership. ANYONE who bothered to turn off their TV and take a little time and effort to be reasonably well read could see that we were in a housing price bubble 2002-2006 – if the lynchmob was too busy watching "Dancing with the Stars" and sports on TV instead of taking a little time to slow down and read a few issues of "The Economist", then my suggestion would be that the lynchmob should extinguish their torches and take its medicine. The news about the real estate bubble was out there – the lynchmob just wasn’t listening.
You can be a thinker or you can be a mob…the choice is yours.