💻 What is Mortgage Electronic Registration Systems Inc. (MERS)?

The vast majority of mortgages in Massachusetts name MERS as the mortgagee (i.e., the entity that holds the mortgage) while designating the bank that loaned money to the homebuyer as simply “the lender.” Here is an except from a typical residential mortgage:

(C) “MERS” is Mortgage Electronic Registration Systems, Inc. MERS is a separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns. MERS is the mortgagee under this Security Instrument. MERS is organized and existing under the laws of Delaware, and has an address and telephone number of P.O. Box 2026, Flint, MI 48501-2026, tel. (888) 679-MERS.

“Lender” is PEOPLE’S UNITED BANK, NATIONAL ASSOCIATION
Lender is a banking institution organized and existing under the laws of the UNITED STATES.

This distinction between nominee and lender creates uncertainty amongst borrowers, lawyers, and even courts.

MERS is a registration system that allows banks and investors to assign mortgages among themselves while avoiding the cost and confusion of recording the assignments in local registries throughout the country.

This became especially valuable in the early 21st century when investors started buying and selling mortgage-backed securities which may be traded frequently.

According to the MERS Wikipedia page,

Real estate law and real estate transactions in the US are subject to state regulations and county level recordation requirements. That made it quite cumbersome for financial companies to develop a smooth operation of a market based on mortgages in the early 1980s. This is because every time a financial instrument containing mortgages is sold, various state laws may require that the sale of each such mortgage (or deed of trust) be recorded in the local county courts in order to preserve certain rights (e.g., the right to foreclose non-judicially), which triggers an obligation to pay corresponding recording fees. So, the financial industry, eager to trade in mortgage-backed securities, needed to find a way around these recordation requirements, and this is how the MERS system was born to replace public recordation with a private one.

The problem for lawyers and litigants is knowing how to treat MERS when it comes to legal documents and lawsuits.

When it comes to legal documents, MERS should be treated as the mortgagee. Thus, if a document such as a mortgage discharge or assignment is recorded at the registry of deeds, it should be executed by a MERS agent and not by the original lender. Likewise, the registry index should show MERS–and not the lender–as the mortgagee.

Anyone involved in litigation against their mortgage holder should name both their lender and MERS as a party in the case. I personally name MERS as a defendant while other lawyers name MERS simply as a “Party in Interest.” In my opinion, naming MERS as anything less than a defendant creates unneeded confusion and gives the opposing attorney an opportunity to challenge the “Party in Interest” designation.

For more discussion on MERS as it relates to real estate law refer to REBA Title Standard No. 72 and Massachusetts Land Court Guideline 42.