The New York Times Sunday profiles this fascinating corporation.
MERS stands for Mortgage Electronic Registration Systems.
Public mortgage documents used to logged in longhand down at the county records office. They provided a clear indication of homeownership.
Now the system is electronic and more confusing. It’s harder for homeowners to figure out who owns their mortgages and who exactly is foreclosing on them and do these entities have the right to foreclose.
How can MERS, which owns no properties, foreclose on people?
Judges are taking an increasingly skeptical approach to the claims and foreclosures of MERS.
But by the 1990s, the centuries-old system of land records was showing its age. Many county clerk’s offices looked like something out of Dickens, with mortgage papers stacked high. Some clerks had fallen two years behind in recording mortgages.
For a mortgage banking industry in a hurry, this represented money lost. Most banks no longer hold onto mortgages until loans are paid off. Instead, they sell the loans to Wall Street, which bundles them into investments through a process known as securitization.
MERS, industry executives hoped, would pull record-keeping into the Internet age, even as it privatized it. Streamlining record-keeping, the banks argued, would make mortgages more affordable.
But for the mortgage industry, MERS was mostly about speed — and profits. MERS, founded 16 years ago by Fannie Mae, Freddie Mac and big banks like Bank of America and JPMorgan Chase, cut out the county clerks and became the owner of record, no matter how many times loans were transferred. MERS appears to sell loans to MERS ad infinitum.
This high-speed system made securitization easier and cheaper. But critics say the MERS system made it far more difficult for homeowners to contest foreclosures, as ownership was harder to ascertain.