Everett Ives and Associates
What is MERS?
MERS can best be described in a very inexact and technically incorrect way, as three things:
1) A universal loan numbering system
2) A universal holding company to hold all Deeds of Trust, Mortgages and Assignments
3) A fast and inexpensive way to transfer ownership of a loan
Before you allow someone to convince you that any of these is not true, please allow me to explain each.
Universal Loan Numbering System
The MERS loan number (or MIN - Mortgage Information Number) is made up of three parts:
1) The first seven digits are the original lender's MERS ID number. You can look up a Lender's ID, or, if you have the Lender ID and want the Lender's Name, go to: https://www.mersinc.org/about-us/member-search
2) The next ten digits are any loan number the original lender wants to assign. Usually, this is the regular loan number, front padded if necessary with zeros to make the MERS number 10 digits.
3) The last digit is a Check Digit. This is a number that is a function of all previous 17 digits so that if someone transposed two or more digits in a moment of dyslexia, the check digit would expose the error.
There are calculators for the MERS number built into most LOSs and also available on the MERS website.
You will find the 18 digit MERS MIN printed in the margins on most Deeds of Trust or Mortgage instruments.
Since the resulting number is unique to your company and secondly you have assigned your own internal unique number to the middle 10 digits (loan number), this makes the MERS number globally unique and thus, universal.
Universal Holding Company
Technically, the loan is in the name of the Lender but the Lender "nominates" or chooses MERS to hold the instrument. The reason is the result of how outdated and difficult subsequent transfers had become.
By holding all loans in the name of MERS, the recorded ownership does not change, saving the time and expense of assigning the loan to a new owner. Effective owners transfer ownership of loans in the MERS computer system which is immediate and far cheaper. MERS also allows for bulk transfers which makes the sale of large portfolios of loans, far less difficult, expensive and immediate.
So, is MERS a Holding company? Not really. But, the result is roughly the same as if it was and it is universal and it cuts time and costs in an industry that finds both very difficult.
Fast and Inexpensive way to transfer loan ownership
When you want to sell or transfer a Deed of Trust, you simply go into the MERS computer system and enter in your change. The other party (buyer or transferee) then goes into the MERS computer system and accepts the transfer. A fee is paid, which is often $5.00 to $10.00. This assumes that both parties are members of MERS.
Previously, transfers had to be done by paper Assignment, an original document, prepared specifically for that transaction and according to the property's county specifications and each one had to be individually signed and notarized. There are just over 3,000 counties in the US and each one of them had their own requirements for filing, such as letter or legal sized paper, top margin, bottom margin, font size, recording fee for the first page, recording fee for the subsequent pages, and so on. You needed a computer system just to stay on top of all the different requirements. Worse, each county took from two weeks to nine months to process the Assignment and return it with the recording information. Even worse, many title companies put their address label over the lender's return address so that the Assignment was returned to them, rather than the lender and without the lender's knowledge. A large lender had to employ staff just to hunt down recorded documents.
Imagine if you were one of the very large mortgage lenders and you were selling a loan portfolio of 1,000 loans. You could easily find yourself dealing with 250 different counties and fees of over $20,000. And, you would hunt down the recorded documents for weeks. Since buyers of mortgage portfolios like to have evidence that the loans they paid for are actually transferred into their name, this made buying or selling mortgages tricky, time consuming and expensive.
In MERS, that same transaction would involve a bulk upload of loan file information to MERS and paying a fee closer to $2,500 but receiving confirmation of 100% of the transfer that same day.
Why was MERS sued by Counties?
You can imagine that the 3,000 or so counties made good money charging these recording fees. When MERS cut off their revenue stream, counties cried foul and filed suit. It's America, that's what Americans do! They had other arguments as well but, as always, it was about the money.
Why was MERS sued by Borrowers?
Some lenders were foreclosing on defaulted borrowers while the loan Security Instrument (Mortgage or Deed of Trust) was still in the name of MERS. Attorneys looking for a way to stall foreclosures argued that since MERS was not the owner of the debt (Note), MERS could not foreclose and since the Lender was not the owner of the Security Instrument, they did not have the power to foreclose. Some courts agreed, others not. The solution was simple, transfer the Security Instrument out of MERS to the Lender and do the foreclosure in the Lender's name.
Why was this necessary?
Nearly every county was operating in the stone age with regard to filing and returning recorded documents. And, keeping track of the rules for each county was nearly impossible. Laws were passed (in Texas) requiring counties to accept electronic recordings but very few complied, citing various issues. So, the industry created a solution.
Is that all MERS does?
No. MERS also provides solutions for Servicers, Warehouse Lenders, and local governments such as monitoring rental and vacant properties.
MERS is much more detailed than I have led you to believe on this page. The MERS organization wants to make absolutely certain that everyone using the system knows exactly what to do and how the system works and there is much at stake. For this reason, signing up is tedious and you will have to take a test. The test is not difficult but you will not pass without studying.
If you are migrating from Broker to Banker, you will be required to join MERS.
Anyone can go to the MERS website: https://www.mersinc.org/
|(c) 2016 - Everett Ives and Associates