In the world of real estate, the Mortgage Electronic Registration System (MERS) is a term that has been gaining more and more recognition lately.

This is because the MERS system has been playing a significant role in the tracking and transferring of mortgages in the United States.

For those who are unfamiliar with the term, MERS is an electronic registry that tracks the ownership and servicing rights of mortgage loans. It was created to streamline the mortgage process and to make it easier for lenders to buy and sell mortgages.

Since its inception in 1995, MERS has become the largest database of mortgages in the US.

Here are the six things you must know about the MERS system:.

1. How MERS Works

MERS tracks the ownership and servicing rights of mortgages electronically. When a loan is originated, the lender enters the information into the MERS system, which creates an electronic record of the mortgage.

The lender then becomes a member of the MERS system, which allows it to transfer ownership of the loan without having to record the transaction in the local land record office.

When a mortgage is transferred from one lender to another, the transfer is recorded in the MERS system.

This allows the new lender to service the loan and collect payments from the borrower without having to go through the costly and time-consuming process of recording the transaction in the local land record office.

The MERS system also allows lenders to bundle mortgages together and sell them as mortgage-backed securities.

The system tracks the ownership of these securities and allows for the transfer of ownership without having to record the transaction in the local land record office.

2. How MERS Benefits Lenders and Borrowers

MERS benefits lenders and borrowers by making the mortgage process more efficient and less expensive. Lenders can buy and sell mortgages more easily, allowing them to offer more competitive rates to borrowers.

Borrowers benefit from lower mortgage rates and a smoother mortgage process.

MERS also benefits borrowers by providing a central repository of mortgage information. Borrowers can access their mortgage information online and make payments electronically, making it easier for them to manage their mortgages.

3. The Controversy Surrounding MERS

Despite its benefits, MERS has come under fire in recent years for its role in the subprime mortgage crisis. Critics argue that MERS contributed to the crisis by allowing lenders to foreclose on homes without proper documentation.

Because MERS tracks ownership electronically, it can be difficult to determine who owns a mortgage. This has led to errors and inconsistencies in foreclosure proceedings, which have been the subject of numerous lawsuits in recent years.

Additionally, some argue that MERS undermines the traditional system of recording property ownership in local land record offices.

They argue that the lack of transparency in the MERS system makes it difficult for homeowners to determine who owns their mortgage and who has the right to foreclose on their home.

4. How MERS is Regulated

MERS is regulated by the Office of the Comptroller of the Currency (OCC) and the Federal Reserve. These agencies have oversight over MERS and are tasked with ensuring that the system is operating in compliance with federal laws and regulations.

The OCC and the Federal Reserve have both issued guidance regarding the use of MERS.

This guidance requires lenders to ensure that all transfers of mortgages are recorded in the MERS system and that the system is used in compliance with all applicable laws and regulations.

5. How MERS is Used Today

Despite the controversy surrounding MERS, the system is still widely used in the mortgage industry today. According to the MERS website, over 70 million mortgages are registered in the system.

Mortgage lenders continue to use MERS because of the benefits it offers in terms of efficiency and cost savings. However, lenders are also taking steps to ensure that they are using the system in compliance with all applicable laws and regulations.

6. The Future of MERS

It remains to be seen what the future holds for MERS. The system has come under scrutiny in recent years, and critics argue that it undermines the traditional system of property ownership recording.

However, MERS continues to be a central part of the mortgage industry in the US. As long as it continues to provide benefits in terms of efficiency and cost savings, it is likely that lenders will continue to use the system.

Conclusion

The Mortgage Electronic Registration System (MERS) is a system that tracks the ownership and servicing rights of mortgages electronically.

Despite its benefits, MERS has come under fire in recent years for its role in the subprime mortgage crisis and for its lack of transparency in property ownership recording.

However, MERS continues to be widely used in the mortgage industry today, and lenders are taking steps to ensure that they are using the system in compliance with all applicable laws and regulations.