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- / Chapter B8-7: Mortgage Electronic Registration System (MERS)
B8-7-01, Mortgage Electronic Registration Systems (MERS), Inc. (12/13/2023)
The MERS system is an electronic system that assists in the tracking of loans, servicing rights, and security interests. To initiate the electronic tracking, the seller/servicer assigns a special MERS Mortgage Identification Number (MIN) to the loan and registers it in MERS. This topic contains information about MERS, including:
- Naming MERS as the Nominee for the Beneficiary in the Security Instrument
- Requirements for the Use of MERS in Specified Geographic Areas
- MERS Registration
- Use of the MIN
- Mortgage Assignment to MERS
- Termination of MERS
Naming MERS as the Nominee for the Beneficiary in the Security Instrument
A seller/servicer that wants to register a newly originated loan (but not a co-op share loan) with MERS may prefer to designate MERS as the nominee for the beneficiary in the security instrument. Doing so, eliminates the need for a subsequent assignment of the security instrument should the seller/servicer sell (or transfer servicing of) the loan to another seller/servicer that is a member of MERS. In such cases, the applicable security instrument must be modified to:
show MERS as the nominee for the seller/servicer,
define and name the originating seller/servicer, and
obtain the borrower’s acknowledgment of MERS’ role in the mortgage transaction.
If the seller/servicer encounters a situation where Fannie Mae is the owner of record for a loan because the original assignment of the loan to Fannie Mae was recorded in the public records, the seller/servicer must correct the error before it completes the MERS registration by:
preparing an assignment of the loan from Fannie Mae to MERS,
sending the assignment to Fannie Mae for execution, and
recording the assignment in the public records.
Changes that must be made to create a standard MERS security instrument for each jurisdiction may be found in the Instructions document for each state-specific security instrument (see Fannie Mae's Legal Documents website), with the exception of loans secured by property located in certain geographic areas, as described below.
The seller/servicer is responsible for the accurate and timely preparation and recordation of the security instrument and any MERS-related documents required to be used in specific geographic areas. Sellers/servicers must also take all reasonable steps to ensure that information pertaining to MERS is updated and accurate at all times.
Even when MERS is named as the nominee for the beneficiary in the security instrument, it has no beneficial interest in the mortgage. All actions that MERS takes with respect to a loan are based on the instructions initiated by the originating seller, Fannie Mae, or the servicer. The originating seller remains responsible for all of its Contractual Obligations and any liability that it or Fannie Mae incurs as a result of the MERS registration, any MERS transaction, or the failure of MERS to perform any obligation with respect to a MERS-registered loan. In addition, the seller/servicer is solely responsible for any failure to comply with the provisions of its MERS Member Agreement, Rules, and Procedures.
Requirements for the Use of MERS in Specified Geographic Areas
In the states listed below, sellers/servicers must use the Mortgage Electronic Registration Systems, Inc. Rider (MERS Rider) ( Form 3158 ) when a newly originated loan will be registered with MERS. Sellers/servicers must also follow the Instructions to the MERS Rider and the applicable security instruments to make changes to the standard security instruments for the following states:
As the MERS Rider must be used in these specified states, post-closing assignments to MERS are prohibited.
MERS Assignment Form - Maine
In the state of Maine, sellers/servicers must use the MERS Mortgage Assignment (Form 3749) to assign loans to MERS at origination or post-closing, as applicable. Loans in which the Maine security instrument has been modified to name MERS as the original mortgagee of record, solely as nominee for the seller/servicer, are ineligible for delivery to Fannie Mae.
If a seller/servicer registers a loan on the MERS system before delivering it to Fannie Mae, the seller/servicer must ensure that the MIN is registered in MERS and names itself as the investor. Additionally, the seller/servicer must include the MIN in the delivery data. After Fannie Mae purchases or securitizes the mortgage, Fannie Mae notifies MERS to update its records to reflect Fannie Mae’s ownership interest in the loan.
Note : For loans registered in MERS iRegistration where MERS is not named as the nominee for the beneficiary in the security instrument, the MERS MIN should not be reported on the loan schedules, unless the loan is an eMortgage registered on MERS eRegistry.
If a seller/servicer registers a mortgage with MERS after Fannie Mae has purchased or securitized the loan, the seller/servicer must name Fannie Mae as the investor during registration and notify MERS of Fannie Mae’s ownership interest in the loan.
Use of the MIN
For each MERS-registered loan delivered to a document custodian, the seller/servicer must indicate the MIN on the security instrument and related documents. Because the status of a MERS-registered mortgage can change, the seller/servicer is not required to include the MIN on the note. Additionally, the seller/servicer is still responsible for making sure that the document custodian has sufficient information to determine whether a loan that is included in a subsequent transfer of servicing is registered with MERS at the time of the transfer. The seller/servicer must have adequate controls in its processes to enable it to readily identify MERS-registered mortgages.
The seller/servicer can choose from the following options:
place the MIN on the note when the loan is registered with MERS and, if the MERS registration is subsequently terminated for any reason, notify the document custodian to delete the MIN from the note;
wait to advise the custodian of the status of the MERS registration for a loan until a change in status actually occurs; or
notify the custodian about the status of the MERS registration for a loan at the time of a servicing transfer by providing the custodian with a listing of all MERS-registered loans that are included in the transfer and a certification that any and all other loans included in the transfer are not currently registered with MERS. (The listing may be prepared by the seller/servicer or, with the seller/servicer’s authorization, by MERS.) If there are more MERS-registered loans included in the transfer than there are unregistered loans, the listing may instead identify the unregistered loans—and, in that case, the certification should state that any and all other loans included in the transfer are currently registered with MERS.
Mortgage Assignment to MERS
If the originating seller/servicer is the beneficiary for a loan that it registers with MERS, they must prepare an assignment of the mortgage to MERS. Refer to the section above, entitled Requirements for the Use of MERS in Specified Geographic Areas , for additional information about, and restrictions on, assignments of loans to MERS.
By delivering a MERS-registered loan to Fannie Mae, the seller/servicer:
warrants that MERS is the mortgagee of record (either by being named as an assignee in a recorded assignment of the security instrument or as nominee for the beneficiary in the security instrument); and
warrants that the MIN is valid and properly registered in MERS naming the seller/servicer as the investor.
Sellers/servicers are not required to include a copy of the assignment of the loan to MERS in the delivery package they submit to the applicable document custodian.
Termination of MERS
If the seller/servicer decides to discontinue the use of MERS, they must request from MERS that the loan be “deactivated” in MERS. MERS will notify Fannie Mae about the deactivation of any loan in which it has an interest.
If the seller/servicer’s membership in MERS is terminated, the seller/servicer must promptly notify Fannie Mae’s MERS Program Office (see E-1-02, List of Contacts ).
In the event that either its membership in MERS or the MERS registration for an active loan is terminated for any reason while Fannie Mae has an ownership interest in the loan, the seller/servicer must perform the functions outlined in the following table for each MERS-registered loan that it is servicing for Fannie Mae.
Recent Related Announcements
The table below provides references to recently issued Announcements that are related to this topic.
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Understanding the Assignment of Mortgages: What You Need To Know
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A mortgage is a legally binding agreement between a home buyer and a lender that dictates a borrower's ability to pay off a loan. Every mortgage has an interest rate, a term length, and specific fees attached to it.
Written by Attorney Todd Carney . Updated November 26, 2021
If you’re like most people who want to purchase a home, you’ll start by going to a bank or other lender to get a mortgage loan. Though you can choose your lender, after the mortgage loan is processed, your mortgage may be transferred to a different mortgage servicer . A transfer is also called an assignment of the mortgage.
No matter what it’s called, this change of hands may also change who you’re supposed to make your house payments to and how the foreclosure process works if you default on your loan. That’s why if you’re a homeowner, it’s important to know how this process works. This article will provide an in-depth look at what an assignment of a mortgage entails and what impact it can have on homeownership.
Assignment of Mortgage – The Basics
When your original lender transfers your mortgage account and their interests in it to a new lender, that’s called an assignment of mortgage. To do this, your lender must use an assignment of mortgage document. This document ensures the loan is legally transferred to the new owner. It’s common for mortgage lenders to sell the mortgages to other lenders. Most lenders assign the mortgages they originate to other lenders or mortgage buyers.
Home Loan Documents
When you get a loan for a home or real estate, there will usually be two mortgage documents. The first is a mortgage or, less commonly, a deed of trust . The other is a promissory note. The mortgage or deed of trust will state that the mortgaged property provides the security interest for the loan. This basically means that your home is serving as collateral for the loan. It also gives the loan servicer the right to foreclose if you don’t make your monthly payments. The promissory note provides proof of the debt and your promise to pay it.
When a lender assigns your mortgage, your interests as the mortgagor are given to another mortgagee or servicer. Mortgages and deeds of trust are usually recorded in the county recorder’s office. This office also keeps a record of any transfers. When a mortgage is transferred so is the promissory note. The note will be endorsed or signed over to the loan’s new owner. In some situations, a note will be endorsed in blank, which turns it into a bearer instrument. This means whoever holds the note is the presumed owner.
Using MERS To Track Transfers
Banks have collectively established the Mortgage Electronic Registration System , Inc. (MERS), which keeps track of who owns which loans. With MERS, lenders are no longer required to do a separate assignment every time a loan is transferred. That’s because MERS keeps track of the transfers. It’s crucial for MERS to maintain a record of assignments and endorsements because these land records can tell who actually owns the debt and has a legal right to start the foreclosure process.
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Assignment of Mortgage Requirements and Effects
The assignment of mortgage needs to include the following:
The original information regarding the mortgage. Alternatively, it can include the county recorder office’s identification numbers.
The borrower’s name.
The mortgage loan’s original amount.
The date of the mortgage and when it was recorded.
Usually, there will also need to be a legal description of the real property the mortgage secures, but this is determined by state law and differs by state.
The original lender doesn’t need to provide notice to or get permission from the homeowner prior to assigning the mortgage. But the new lender (sometimes called the assignee) has to send the homeowner some form of notice of the loan assignment. The document will typically provide a disclaimer about who the new lender is, the lender’s contact information, and information about how to make your mortgage payment. You should make sure you have this information so you can avoid foreclosure.
When an assignment occurs your loan is transferred, but the initial terms of your mortgage will stay the same. This means you’ll have the same interest rate, overall loan amount, monthly payment, and payment due date. If there are changes or adjustments to the escrow account, the new lender must do them under the terms of the original escrow agreement. The new lender can make some changes if you request them and the lender approves. For example, you may request your new lender to provide more payment methods.
Taxes and Insurance
If you have an escrow account and your mortgage is transferred, you may be worried about making sure your property taxes and homeowners insurance get paid. Though you can always verify the information, the original loan servicer is responsible for giving your local tax authority the new loan servicer’s address for tax billing purposes. The original lender is required to do this after the assignment is recorded. The servicer will also reach out to your property insurance company for this reason.
If you’ve received notice that your mortgage loan has been assigned, it’s a good idea to reach out to your loan servicer and verify this information. Verifying that all your mortgage information is correct, that you know who to contact if you have questions about your mortgage, and that you know how to make payments to the new servicer will help you avoid being scammed or making payments incorrectly.
In a mortgage assignment, your original lender or servicer transfers your mortgage account to another loan servicer. When this occurs, the original mortgagee or lender’s interests go to the next lender. Even if your mortgage gets transferred or assigned, your mortgage’s terms should remain the same. Your interest rate, loan amount, monthly payment, and payment schedule shouldn’t change.
Your original lender isn’t required to notify you or get your permission prior to assigning your mortgage. But you should receive correspondence from the new lender after the assignment. It’s important to verify any change in assignment with your original loan servicer before you make your next mortgage payment, so you don’t fall victim to a scam.
Attorney Todd Carney
Attorney Todd Carney is a writer and graduate of Harvard Law School. While in law school, Todd worked in a clinic that helped pro-bono clients file for bankruptcy. Todd also studied several aspects of how the law impacts consumers. Todd has written over 40 articles for sites such... read more about Attorney Todd Carney
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What Is the Mortgage Electronic Registration System (MERS)?
Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.
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What Is a Mortgage Electronic Registration System—MERS?
The Mortgage Electronic Registration System (MERS) is a database created by the mortgage banking industry. A confidential electronic registry of mortgages originated in the United States, it keeps track of transfers of and modifications to servicing rights and ownership of the loans. It is used by the real estate finance industry for residential and commercial mortgage loan recording trading.
MERS, which also refers to the privately held company that manages the database, is approved by such government-sponsored enterprises as the Federal National Mortgage Association ( Fannie Mae) , the Federal Home Loan Mortgage Corporation ( Freddie Mac) , and the Government National Mortgage Association ( Ginnie Mae) , along wth such government agencies as the Federal Housing Administration (FHA) and the Department of Veterans Administration (VA) that are involved in housing loans. The California and Utah Housing Finance Agencies and all major Wall Street rating agencies make use of it as well.
- Mortgage Electronic Registration System (MERS) is a privately owned database that the mortgage banking industry created to simply the registration and transfer of mortgages.
- By tracking mortgage transfers electronically, MERS eliminates the need of a lender to register the transfer with the county recorder every time the loan is sold from one bank to another.
- Sometimes MERS itself is designee as the mortgage lender (mortgagee).
- While MERS can save time and recording costs, it has drawn criticism for making it difficult to see who actually is the current owner of a mortgage.
Understanding the Mortgage Electronic Registration System—MERS
Each time a mortgage is sold from one bank to another, an assignment—a document showing that the mortgage has been transferred—is, theoretically, prepared and recorded in the county land records. The assignment transfers all of the interest the original lender had under the mortgage to the new bank.
By tracking loan transfers electronically, MERS eliminates the long-standing practice that the lender must record an assignment with the county recorder every time the loan is sold from one bank to another.
The MERS system is used by mortgage originators, servicers, warehouse lenders, wholesale lenders, retail lenders, document custodians, settlement agents, title companies, insurers, investors, county recorders, and consumers. County and regulatory officials and homeowners can access MERS free of charge. Homeowners can look up information on their own mortgages that are registered with the system.
In order to use the electronic tracking, the servicer of the mortgage assigns it with a mortgage identification number (MIN) and then registers the loan with the MERS database. Sometimes, MERS itself is designated as the mortgagee, as the original lender is officially called in the mortgage documents; such a loan is known as an original mortgagee (MOM) loan. From there, the seller can originate the mortgage with MERS as a nominee of the lender (also referred to as the beneficiary), and then assign or record the assignment of the loan to MERS in the county land record. This would make MERS the mortgagee of record.
While MERS can act as mortgagee in county land records, it doesn't actually own the mortgage loan.
If the lender sells the loan, MERS will update its information regarding the mortgage. The servicer of a mortgage can have it removed from the MERS database by sending a request to have it deactivated. MERS will, in turn, notify Fannie Mae. If the servicer of a mortgage wants to end their membership with MERS entirely, it must also notify Fannie Mae as soon as possible.
Pros and Cons of the Mortgage Electronic Registration System—MERS
As an electronic, one-stop site for mortgage documents—deeds of trust and promissory notes—MERS greatly simplifies the mortgage process. MERS can act as a cost-saving measure to some degree because, by acting as a mortgagee, it cuts the expense of recording the transfer of a mortgage from one lender to another. Having the loan in MERS’ name (as nominee) in the land records saves time and recording costs because multiple assignments aren't necessary each time the loan changes hands.
The database has drawn some criticism, though. During the 2008 housing crisis , the system made it difficult at times to sort out who actually owned mortgages. That created a challenge for homeowners facing foreclosure or relief from their loans, as they needed to know who held their mortgages in order to work out some form of remedy.
MERS. " About Us Frequently Asked Questions ."
MERS. " Quick Facts ," Page 1.
MERS. " Homeowners ServicerID ."
MERS. " MERS System Frequently Asked Questions ."
Govinfo.gov. " Problems in Mortgage Servicing from Modification to Foreclosure ."
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MERS’s “Maine” Purpose: Recognizing Key Differences Between MERS Mortgages
- A line of judicial opinions from Maine’s Supreme Court calls into question the ability of foreclosing lenders to rely on mortgage assignments from Mortgage Electronic Registration Systems, Inc. when proving ownership of the mortgage.
- However, not all MERS mortgages are the same. Some have key differences that could distinguish them from Maine’s more problematic MERS rulings.
- Before writing off assets or otherwise determining courses of action on MERS mortgages, foreclosing lenders in Maine should check whether they can distinguish the language in their mortgage from the language Maine’s Supreme Court found controlling.
Maine’s Supreme Court recently held that a foreclosing lender’s equitable interest in the mortgage does not by itself equate to ownership of the mortgage and does now allow courts to compel the mortgage’s assignment. * Beal Bank USA v. New Century Mortg. Corp. , 2019 ME 150, ¶ 15. The opinion revives concerns over the viability of foreclosing Maine mortgages involving Mortgage Electronic Registration Systems, Inc. (MERS).
MERS operates as an electronic mortgage registry whereby borrowers taking out mortgage loans give the mortgage to MERS as nominee for the lender’s successors and assigns. Although MERS mortgages generally include standardized language, different model mortgages utilize different descriptions of MERS’s core functions and purpose. Typically, the different MERS language makes little substantive difference in its powers. However, where state courts interpret MERS’s authority based on specific language in the mortgage, as Maine’s courts do, foreclosing lenders should check their specific mortgage language before proceeding.
In 2010, Maine’s Supreme Court analyzed MERS language with the following description in the paragraph defining MERS: “For purposes of recording this mortgage, MERS is the mortgagee of record.” Mortg. Elec. Reg. Sys. v. Saunders , 2010 Me. 79, ¶ 9 (emphasis removed). Relying at least in part on this language, the court held that MERS lacked standing to foreclose because the borrower gave MERS the right to only record the mortgage. Four years later, the court extended its MERS analysis from Saunders to mortgage assignments from MERS, holding that the assignments transfer only MERS’s right to record the mortgage. See Bank of America, N.A. v. Greenleaf , 2014 Me. 89, ¶ 17. This can create problems for foreclosing lenders who often rely on assignments from MERS to demonstrate their ownership of the mortgage.
Maine’s Supreme Court recently confirmed that the original lender can ratify a prior MERS assignment to give it the same effect as if the original lender assigned its interests in the mortgage rather than MERS. U.S. Bank N.A. v. Gordon , 2020 Me. 33, ¶ 10. This allows foreclosing lenders to correct the chain of assignments with an assignment or other document from the original lender acknowledging the transfer. Similarly, language in later documents, such as loan modification agreements, sometimes separately conveys full rights in the mortgage to a subsequent entity other than MERS, validating mortgage assignments from those entities.
What can foreclosing lenders do when the original lender no longer exists, and no other documents can demonstrate a transfer of the original lender’s full mortgage interest to the foreclosing lender? Before writing off the asset or making other decisions about how to proceed, lenders should confirm that their specific mortgage includes the same relevant MERS language that Maine’s Supreme Court considered controlling in Saunders and its progeny. As discussed below, some MERS mortgages include key differences relevant to the Saunders analysis.
Proof of Mortgage Ownership
Maine law requires the lender to establish the following elements to foreclose a delinquent mortgage: (1) the existence of the mortgage; (2) proof of ownership of the mortgage and note, including all assignments and endorsements; (3) a breach of the condition in the mortgage; (4) the amount due on the note, including attorney’s fees and costs; (5) the order of priority and any amounts that may be due to other interested parties; (6) evidence of a properly served notice of default and a mortgagor’s right to cure per 14 M.R.S. § 6111; (7) proof of completed mediation (or a waiver or default of mediation); and (8) SCRA compliance affidavit. See Chase Home Fin. LLC v. Higgins, 2009 ME 136, ¶ 11.
For the second element (proof of ownership of the mortgage and note), most foreclosing lenders rely on their status as the mortgage note’s holder along with a chain of mortgage assignments from the original lender to the foreclosing lender. Under the MERS system, the borrower usually gives the mortgage note to the original lender while separately conveying the mortgage to MERS as nominee for the original lender and the original lender’s successors and assigns. See, e.g., Saunders , 2010 Me. 79, ¶ 8. In many judicial foreclosure states, MERS then assigns the mortgage to a subsequent note holder when necessary to permit foreclosure. Case law from Maine’s Supreme Court has long complicated this system.
Saunders , Greenleaf , and Beal
In Saunders , MERS filed a foreclosure action in its own name, seeking to foreclose the mortgage as the nominee for the note holder. Maine’s Supreme Court held that MERS lacks standing to foreclose under Maine law. Saunders , 2010 Me. 79, ¶ 15. The court specifically quoted the applicable language in the mortgage at issue there:
C) “MERS” is Mortgage Electronic Registrations Systems, Inc. MERS is a separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns. 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. FOR PURPOSES OF RECORDING THIS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD. * * * [Borrowers] mortgage, grant and convey the Property to MERS (solely as nominee for Lender and Lender’s successors and assigns), with mortgage covenants, subject to the terms of this Security Instrument, to have and to hold all of the Property to MERS (solely as nominee for Lender and Lender’s [***9] successors and assigns), and to its successors and assigns, forever. * * * [Borrowers] understand and agree that MERS holds only legal title to the rights granted by [Borrowers] in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right: (A) to exercise any or all of those rights, including, but not limited to, the right to foreclose and sell the Property; and (B) to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument. * * * [Borrowers] grant and mortgage to MERS (solely as nominee for Lender and Lender’s successors in interest) the Property described [below].
Saunders , 2010 Me. 79, ¶ 9 (emphasis in original).
Relying on this quoted language, Maine’s Supreme Court found that “[t]he only rights conveyed to MERS in either the [borrower’s] mortgage or the corresponding promissory note are bare legal title to the property for the sole purpose of recording the mortgage.” The court noted that “[e]ach reference to MERS within the [borrower’s] mortgage describes MERS solely as the ‘nominee’ to the lender,” and it explained (quoting Black’s Law Dictionary 1149 (9th ed. 2009)) that “[a] nominee is a ‘person designated to act in place of another, [usually] in a very limited way,’ or a ‘party who holds bare legal title for the benefit of others or who receives and distributes funds for the benefit of others.’”
The Saunders court further noted that under the mortgage, the borrowers expressly gave the lender—not MERS—the rights provided for in the mortgage, and that the borrowers did not make any of the mortgage covenants to or in favor of MERS. Saunders , 2010 Me. 79, ¶ 10. Accordingly, the court determined that MERS did not qualify as a mortgagee under Maine’s foreclosure statute (discussing 14 M.R.S. §§ 6321–6325).
The Saunders court next considered MERS’s standing under traditional standing rules that require a plaintiff to “show that it has suffered an injury fairly traceable to an act of the mortgagor and that the injury is likely to be redressed by the judicial relief sought.” Saunders , 2010 Me. 79, ¶ 14. Noting again that “[t]he only right MERS has in the [borrower’s] mortgage and note is the right to record the mortgage,” the court held that “MERS lacked standing to institute foreclosure proceedings and could not invoke the jurisdiction of our trial courts.”
Maine’s Supreme Court later extended its Saunders ruling to mortgage assignments from MERS. See Greenleaf , 2014 Me 89. In Greenleaf , the court analyzed identical mortgage language as the language at issue in Saunders . As in Saunders , the court quoted the specific MERS language at issue, including the definition paragraph for MERS that read: “ FOR PURPOSES OF RECORDING THIS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD. ” (Emphasis in original.)
Based on this specific language, Maine’s Supreme Court reiterated that “the mortgage conveyed to MERS only the right to record the mortgage as nominee for the lender.” Greenleaf , 2014 Me. 89, ¶ 15. Thus, the court found that “[w]hen MERS then assigned its interest in the mortgage . . . it granted . . . only what MERS possessed—the right to record the mortgage as nominee.” Accordingly, the record the foreclosure plaintiff provided to show ownership of the mortgage “demonstrate[d] only a series of assignments of the right to record the mortgage as nominee, but no more.”
After Saunders and Greenleaf , foreclosing lenders in Maine “continued to argue that a holder of a note secured by a mortgage has an equitable pre-foreclosure right to compel an assignment of the mortgage.” Fannie Mae v. First Magnus Fin. Corp. , No. RE-2016-110, 2019 Me. Super. LEXIS 104 *3 (Penobscot C’ty Oct. 24, 2019). Unfortunately, Maine’s Supreme Court recently rejected that work-around. See Beal , 2019 Me. 150.
In Beal , the court considered Maine’s equitable trust doctrine that “one who takes a mortgagee’s title holds it in trust for the owner of the debt to secure the debt for which the mortgage was given.” 2019 Me. 150, ¶ 7 (quotations omitted). It rejected the plaintiff’s argument that it could compel the original mortgagee to assign it the mortgage because the original mortgagee held the mortgage in trust for the plaintiff. Noting that “the language of the mortgage was identical to that in [ Greenleaf ]”, the court held that applying the equitable trust doctrine in the situation presented “would be at odds with our holding in Greenleaf .”
These three decisions— Saunders , Greenleaf , and Beal —call into question the viability of mortgage foreclosures involving some MERS mortgages and assignments. However, they should not apply to all MERS mortgages in Maine.
Distinguishing Saunders , Greenleaf , and Beal
Importantly, Saunders , Greenleaf , and Beal all specified that the language in the mortgages at issue there included the identical “for purposes of recording this mortgage, MERS is the mortgagee of record” language. See Saunders , 2010 Me 79, ¶ 9; Greenleaf , 2014 Me. 89, ¶ 14; Beal , 2019 Me. 150, ¶ 3 n.4. Other courts in Maine to have considered issues affected by Saunders and its progeny have also expressly confirmed that the language is the same. See U.S. Bank v. Gordon , 2020 Me 33, ¶ 25 (Horton, J. concurring); Knope v. Green Tree Servicing , 2017 Me. 95, ¶ 3 n.1 (referencing specifically the “for purposes of recording this mortgage” language) (capitalization removed); First Magnus , 2019 Me. Super. LEXIS 104, *2 n.1.
However, not all MERS mortgages include the “for purposes of recording” language. For example, at least some MERS mortgages approved for use in Maine by the Fair Housing Association (FHA) instead read:
This Security Instrument secures to Lender: (a) the repayment of the debt evidenced by the Note, with interest, and all renewals, extensions and modification of the Note; (b) the payment of all other sums, with interest, advanced under paragraph 7 to protect the security of this Security Instrument; and (c) the performance of Borrower’s covenants and agreements under this Security instrument and the Note. For this purpose, Borrower does hereby mortgage, grant and convey to MERS (solely as nominee for Lender and Lender’s successors and assigns) and to the successors and assigns of MERS the following described property . . . .
* * * Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument; but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender, including, but not limited to, releasing or canceling this Security Instrument.
Mortgage, at 1–2 (emphasis added). These alternate MERS mortgages differ from the MERS mortgages discussed in Saunders and its progeny in key respects.
Whereas Maine’s Supreme Court interpreted the mortgage at issue in Saunders as limiting MERS’s status as nominee to “purposes of recording this mortgage,” the alternative MERS mortgages quoted above expressly confirm that the borrower grants the mortgage to MERS for the purpose of securing repayment of the debt to the lender. This distinction is important because even to the extent that Saunders and Greenleaf focused on MERS’s status as nominee, the term “nominee” by itself does not mean “party limited to recording a document.” Rather, Maine’s Supreme Court describes a nominee as “a person designated to act in place of another, usually in a very limited way.” Saunders , 2010 Me. 79, ¶ 10 (internal quotations omitted). Those limitations naturally arise from the contract itself, i.e., the specific mortgage language at issue.
The Saunders court construed the mortgage’s language there to mean that the borrower gave the mortgage to MERS as the lender’s nominee for the purpose of recording the mortgage. See Saunders , 2010 Me 79, ¶ 10. Yet under other MERS mortgages, the borrower conveys the mortgage to MERS for the purpose of securing repayment to the lender. The borrower further expressly agrees that the interest it gives to MERS—which it gives for the purpose of securing repayment—includes the right to exercise “any or all” of the lender’s interests “if necessary to comply with law or custom.” Those rights specifically include without limitation “the right to foreclose and sell the Property.”
Thus, under some MERS mortgages’ alternative language, the borrower grants MERS a mortgage interest allowing it to exercise the lender’s right to foreclose for the purpose of securing repayment. In other words, the mortgage bestows on MERS a contractual right to foreclose, or more importantly for this articles purposes, a contractual right to take any action “necessary to comply with law or custom” to secure repayment to the lender through foreclosure.
Maine’s Supreme Court has repeatedly recognized that MERS can assign only the mortgage rights it has. See, e.g., Greenleaf , 2014 Me. 89, ¶ 16. In Saunders and its progeny, the mortgages at issue limited those rights to “purposes of recording,” at least according to Maine’s Supreme Court. 2019 Me. 79, ¶ 9. The language in other MERS mortgages does not limit the rights to the purpose of recording; it limits them only to any interests necessary to comply with law or custom to secure repayment to the lender.
Moreover, MERS’s lack of standing to foreclose should not impact this analysis. Maine’s Supreme Court acknowledges that its standing analysis is separate and distinct from the question of mortgage ownership. See Greenleaf , 2014 Me. 89, ¶ 22 n.13. This suggests that MERS’s lack of standing to foreclose should not limit its ability to assign its contractual rights under the mortgage to a party who could demonstrate standing.
Under Maine law, MERS lacks standing to foreclose because it does not qualify as a mortgagee under the applicable statute and because it does not suffer an injury sufficient to give the court jurisdiction. See, e.g., Saunders , 2010 Me. 79, ¶¶ 10, 14–15. However, because standing and ownership are separate issues, Maine law could still allow MERS to assign its contractual rights under the alternative MERS mortgages, including its right “to exercise any or all of [the lender’s] interests, including, but not limited to, the right to foreclose.”
Put differently, MERS can assign whatever interest it has in the mortgage to another party. See, e.g., Greenleaf , 2014 Me. 89, ¶ 16. For MERS mortgages that do not limit MERS’s authority to recording purposes, those interests include rights beyond just recording. If MERS assigns those interests to a subsequent note holder who can establish standing, then the note holder should properly acquire all the same interests in the mortgage that the original lender had, and no legal mechanism should preclude the note holder from foreclosing.
Notably, this analysis fully comports with Maine’s traditional understanding of a nominee as holding “bare legal title for the benefit of others.” Saunders , 2010 Me. 79, ¶ 10. As nominee, MERS holds legal title to the mortgage interests for the benefit of the lender and the lender’s successors and assigns. When MERS assigns that legal title to the party for whom it holds it—i.e., the lender’s successor and assign—MERS’s legal title merges into the beneficiary-assignee’s interests, and the beneficiary-assignee acquires full rights under the mortgage. Where the mortgage limits MERS’s interest to “purposes of recording” under Maine case law, MERS can only transfer that limited interest. See, e.g., Greanleaf , 2014 Me. 89, ¶ 17. However, mortgages that do not limit MERS’s interest to recording purposes should not create similar impediments to foreclosure.
The impact of different MERS mortgage language under Saunders and Greenleaf appears untested in Maine courts. Until the Beal decision, lenders could still seek foreclosure under the position that the original lender holds any mortgage interest MERS itself could not assign in equitable trust for the party to whom MERS assigned its interests, meaning the foreclosing lender could compel a mortgage assignment from the original lender and continue with the foreclosure. See Beal , 2019 Me. 150, ¶ 8. Now that Maine’s Supreme Court has shot down the equitable trust argument, however, foreclosing lenders must seek alternative arguments to enforce their mortgage rights. Before they decide how to proceed, they should check their Maine mortgage to see how it describes MERS’s main purpose.
* Kevin M. Hudspeth serves as of counsel to Maurice Wutscher LLP, a national financial services law firm, where he practices in the appellate, consumer credit, and regulatory compliance groups. He has extensive experience with real estate litigation in Ohio, Illinois, and other jurisdictions throughout the country. He regularly advises attorneys and clients about contested foreclosure issues arising in multiple states.
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Promissory Notes, Mortgage Assignments, and MERS’ Role in Real Estate
After the fall out of the subprime mortgage crisis that triggered the Great Recession, the effects still linger when looking at homeownership statistics in the United States. Nearly 10 million homeowners lost their homes to foreclosure between 2006 and 2014. Damaged credit and traumatized psyches paired with stricter lending standards and soaring median home prices mean that some former homeowners will never own another home.
Today, the United States is seeing the highest rates of unemployment since the Great Depression at nearly 15% due to the COVID-19 pandemic, and of those who still own a home, nearly 4.1 million borrowers are struggling to make their monthly payments. Many are turning to forbearance for momentary relief from their mortgages.
For many homeowners, the question of what happens to their mortgage after closing day might not ever come up. Until the threat of foreclosure or the need for forbearance arises, most borrowers simply send in their monthly payments with no questions asked.
Now is a good time to consider the process after closing, and how it affects their property rights. Here are some of the questions to ask.
What happens after a real estate closing?
- At closing, the borrower signs the mortgage, the deed, and the promissory note
- The mortgage and the deed are recorded in the public record
- The promissory note is held by the lender while the loan is outstanding
- Payments are sent to the mortgage servicing company
- The mortgage may be securitized and sold to investors
- The mortgage may be transferred to another bank
- The mortgage servicing rights may change to another company
- When the mortgage is paid in full, a mortgage lien release or satisfaction with a number referencing the original mortgage loan is recorded in the public record to show the debt is no longer outstanding
- The promissory note is marked as paid in full and returned to the borrower
Banks often sell and buy mortgages from each other as a way to liquidate assets and improve their credit ratings. When the original lender sells the debt to another bank or an investor, a mortgage assignment is created and recorded in the public record and the promissory note is endorsed.
What are Loan Transfer Documents?
Assignments and endorsements prove who owns the debt and subsequently who has the authority to bring foreclosure action.
A Mortgage Assignment is a document showing a mortgage loan has been transferred from the originator to a third party.
In addition to the assignment, the originator of the loan or the most recent holder of the loan must endorse (or sign over) the promissory note whenever the loan changes hands. Sometimes, the note is endorsed “in blank,” which means that any party that possesses the note has the legal authority to enforce it.
While these documents are supposed to be recorded in the public land records systems, sometimes there’s a “break” in the chain. A missing mortgage satisfaction or assignment can cause a huge headache for homeowners when they go to sell. Without knowing who the official mortgage lienholder of the property is, the home can’t be sold. The title agent in charge of the closing is tasked with fixing the issue so that clear ownership rights can be established and the final mortgage payoff can be sent to the right lender if needed.
What is Mortgage Securitization?
In the last 30 years or so, the buying and selling of mortgage loans between lenders, banks, and investors has grown more complicated. When a mortgage is turned into a security, it’s pooled with similar types of loans and sold on the secondary mortgage market. The purchasers or investors in these securities receive interest in principal payments.
Securitization is good for lenders because it allows them to sell mortgage loans from their books and use that money to make more loans.
Where securitization goes wrong, as we saw during the housing crisis, is when bad or “toxic” assets are pooled together and sold on the secondary market to unsuspecting investors. Subprime mortgage-backed securities had received high ratings from credit agencies and offered a higher interest rate, but they also were the first to hemorrhage losses when borrowers began defaulting on homes with underwater mortgages.
Securitization isn’t an inherently good or bad process, it’s simply a mechanism by which banks liquidize assets, increase their credit and ratings, and clear their balance sheets.
For homeowners, securitization means that the mortgage isn’t owned by a single lender and is instead part of a pool of mortgages owned by investors. A mortgage service company is responsible for collecting the mortgage payments and sending it to the proper investors. Securitization also means that tracking the note and who has the authority to enforce it can get messy.
What is the Mortgage Electronic Registration System, Inc. or MERS?
The MERS system is a private, third-party database system used to track servicing rights and ownership of mortgages in the United States. This system of registering the promissory note and mortgage was created to make transferring these documents easier on the secondary mortgage market.
How does MERS work?
For some real estate transactions, the mortgage originator will designate MERS as the mortgagee at closing. These loans are called MERS as Original Mortgagee (MOM) loans. When buying a home, a borrower should see clear language on the mortgage or deed of trust document granting and conveying legal title of the mortgage to MERS as mortgagee. This gives the company the right to act on behalf of the current and subsequent owners of the loan.
In other transactions, the loan may be assigned to MERS in the public record at a later date after closing.
After MERS is designated as a nominee to act on behalf of the lender, it tracks the transfers of the loans between parties and acts as a nominee for each holder. This eliminates the need to file separate assignments in the public record each time the loan is transferred. If a lender sells the loan, MERS will update this information in their system.
Even though MERS is designated as the mortgagee, it doesn’t own the debt or hold the promissory note. MERS doesn’t service mortgages or collect payments on mortgages.
Benefits of MERS
Some of the benefits of the MERS system include:
- No document drafting fees
- Eliminates the need for multiple assignments each time the loan changes hands
- Reduces recording costs
- Saves time and administrative costs for lenders and servicers
- Provides the identification of servicers and investors for free for homeowners and lenders
- Used by Lenders to find undisclosed liens
- Used by municipalities to find companies responsible for maintaining vacant and abandoned properties
- Mortgage Identification Numbers (MIN) are assigned to each loan for easy tracking
- Selling of loans and servicing transfers are more efficient in the secondary market
- Obtaining lien releases when a lender goes out of business is simplified
- Cost savings by the mortgage industry is theoretically passed on to homeowners
Does MERS really save consumers money?
The MERS system is not meant to act as a replacement for public land records. However, some states, including Kentucky, New York, Texas, Alabama, and Delaware have sued the company that controls MERS for lost revenue from missing record filing fees. In the case of Kentucky , the state alleged that MERS did not record mortgage assignments with Kentucky County Clerks as they were transferred between banks. At $12 a recording, all those transfers without corresponding mortgage assignments add up to big bucks.
Despite numerous lawsuits challenging MERS over its mortgage assignment authority, the company that controls MERS usually receives favorable judgments . In 2016, courts in Texas ruled that MERS’ mortgage assignments were valid and dismissed two cases. County recorders in Pennsylvania also brought cases claiming that MERS and MERS System members failed to record mortgage assignments when transferring promissory notes, a violation of Pennsylvania recording laws. MERS emerged as the winner of these lawsuits as well.
Kentucky and other states argue that skipping out on these fees hurt the consumers and taxpayers in their states.
What is MERS role in foreclosures?
Depending on the state, a foreclosure process might be either judicial (reviewed by a judge in court) or nonjudicial. In the past, MERS, acting on behalf of lenders, has been named as the plaintiff in foreclosure proceedings. Sometimes MERS was even listed as the beneficiary in nonjudicial notices.
Whether or not MERS has the authority to file foreclosure as either the plaintiff or beneficiary is hotly contested. Some states have ruled that MERS doesn’t have standing to foreclose since it doesn’t have any financial interest in either the property of the promissory note.
MERS Splits the note and the mortgage
A court case from 1872, Carpenter v. Longan , established that where the promissory note goes, a deed of trust or mortgage must follow and, according to the United State’s Uniform Commercial Code (UCC) , the promissory note must also have a clear chain of title.
Foreclosure proceedings during the Great Recession proved to be complicated by the MERS system. Within the MERS system, a note and mortgage may be transferred multiple times, so to avoid an endorsement each time, the note is “endorsed in blank.” In one foreclosure after the other, borrowers were able to demonstrate that the subsequent assignments of the promissory note had gone unendorsed.
Although the MERS systems has helped the mortgage industry, title agents, and even borrowers better manage and understand who has the servicing rights and holds the authority to foreclose, several borrowers facing foreclosure have argued that the system impermissibly “splits” the note and the mortgage between the note holder and MERS as the beneficiary of the deed of trust or mortgage.
This process of bifurcation, it’s claimed, causes the relationship between the mortgage and note to become defective and subsequently unenforceable.
Homeowners facing foreclosure, especially in the aftermath of the housing bubble burst of 2008, were successful in delaying or avoiding foreclosure by arguing that the authority to foreclose was not satisfactorily established due to breaks in the chain of assignments and endorsements.
However, Article 3 of the UCC establishes anyone who possesses the note has the legal authority to enforce it. So foreclosing parties have countered that possession of the note should be enough.
As a result, some states, like Michigan, have ruled in favor of these borrower’s arguments by requiring reunification through valid assignment before foreclosures may proceed. Others have ruled that reunification is not necessary since MERS would be authorized to foreclose for the note holder on their behalf. In 2015, The Nevada Supreme Court actually clarified previous rulings by stating that the involvement of MERS actually cures the defect. This is because the note holder could potentially or theoretically direct or compel MERS to assign the deed of trust, resulting in reunifying the instruments.
Homebuyers should always ask questions
With the advent of eClosing solutions, eNotes, eVaults, and the MERS eRegistry , the real estate, title, and mortgage industry continues to build systems that improve the homebuying experience.
Despite all the advancements, homebuying can be a confusing and overwhelming process. It’s important to ask questions of the right real estate professionals. Hiring your own attorney to represent your interests in the real estate transaction is always a good idea.
While the pros and cons of MERS is debated, homeowners today will want to keep up with recommendations from the CFPB should they fall behind on their mortgage payments and reach out to their mortgage servicer as soon as possible.
Is release tracking part of your post-closing process?
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Mortgage Assignment Laws and Definition
(This may not be the same place you live)
What is a Mortgage Assignment?
A mortgage is a legal agreement. Under this agreement, a bank or other lending institution provides a loan to an individual seeking to finance a home purchase. The lender is referred to as a creditor. The person who finances the home owes money to the bank, and is referred to as the debtor.
To make money, the bank charges interest on the loan. To ensure the debtor pays the loan, the bank takes a security interest in what the loan is financing — the home itself. If the buyer fails to pay the loan, the bank can take the property through a foreclosure proceeding.
There are two main documents involved in a mortgage agreement. The document setting the financial terms and conditions of repayment is known as the mortgage note. The bank is the owner of the note. The note is secured by the mortgage. This means if the debtor does not make payment on the note, the bank may foreclose on the home.
The document describing the mortgaged property is called the mortgage agreement. In the mortgage agreement, the debtor agrees to make payments under the note, and agrees that if payment is not made, the bank may institute foreclosure proceedings and take the home as collateral .
An assignment of a mortgage refers to an assignment of the note and assignment of the mortgage agreement. Both the note and the mortgage can be assigned. To assign the note and mortgage is to transfer ownership of the note and mortgage. Once the note is assigned, the person to whom it is assigned, the assignee, can collect payment under the note.
Assignment of the mortgage agreement occurs when the mortgagee (the bank or lender) transfers its rights under the agreement to another party. That party is referred to as the assignee, and receives the right to enforce the agreement’s terms against the assignor, or debtor (also called the “mortgagor”).
What are the Requirements for Executing a Mortgage Assignment?
What are some of the benefits and drawbacks of mortgage assignments, are there any defenses to mortgage assignments, do i need to hire an attorney for help with a mortgage assignment.
For a mortgage to be validly assigned, the assignment document (the document formally assigning ownership from one person to another) must contain:
- The current assignor name.
- The name of the assignee.
- The current borrower or borrowers’ names.
- A description of the mortgage, including date of execution of the mortgage agreement, the amount of the loan that remains, and a reference to where the mortgage was initially recorded. A mortgage is recorded in the office of a county clerk, in an index, typically bearing a volume or page number. The reference to where the mortgage was recorded should include the date of recording, volume, page number, and county of recording.
- A description of the property. The description must be a legal description that unambiguously and completely describes the boundaries of the property.
There are several types of assignments of mortgage. These include a corrective assignment of mortgage, a corporate assignment of mortgage, and a mers assignment of mortgage. A corrective assignment corrects or amends a defect or mistake in the original assignment. A corporate assignment is an assignment of the mortgage from one corporation to another.
A mers assignment involves the Mortgage Electronic Registration System (MERS). Mortgages often designate MERS as a nominee (agent for) the lender. When the lender assigns a mortgage to MERS, MERS does not actually receive ownership of the note or mortgage agreement. Instead, MERS tracks the mortgage as the mortgage is assigned from bank to bank.
An advantage of a mortgage assignment is that the assignment permits buyers interested in purchasing a home, to do so without having to obtain a loan from a financial institution. The buyer, through an assignment from the current homeowner, assumes the rights and responsibilities under the mortgage.
A disadvantage of a mortgage assignment is the consequences of failing to record it. Under most state laws, an entity seeking to institute foreclosure proceedings must record the assignment before it can do so. If a mortgage is not recorded, the judge will dismiss the foreclosure proceeding.
Failure to observe mortgage assignment procedure can be used as a defense by a homeowner in a foreclosure proceeding. Before a bank can institute a foreclosure proceeding, the bank must record the assignment of the note. The bank must also be in actual possession of the note.
If the bank fails to “produce the note,” that is, cannot demonstrate that the note was assigned to it, the bank cannot demonstrate it owns the note. Therefore, it lacks legal standing to commence a foreclosure proceeding.
If you need help with preparing an assignment of mortgage, you should contact a mortgage lawyer . An experienced mortgage lawyer near you can assist you with preparing and recording the document.
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Assignment of Mortgage
All Sellers must be MERS members, able to register and transfer loans through MERS. All loans must be registered with MERS at time of delivery to Pennymac and a MERS transfer of beneficial rights and transfer of servicing rights must be initiated by the Seller, to PennyMac Corp. (#1009313), within 24-hours of purchase .
If a Mortgage is registered with MERS and MERS is not the original mortgagee of record, the lender must ensure that:
- An assignment to MERS has been prepared, duly executed and recorded, prior to delivery for purchase.
- The chain of assignments is complete and recorded from the original mortgagee to MERS. Add “Mortgage Electronic Registration Systems, Inc, P.O. Box 2026, Flint, MI 48501-2026” as the assignee.
- The Mortgage Identification Number (MIN) is printed on the bottom center of the Assignment, about one-half inch below the last line of text and one-half inch above the bottom of the page.
- The MERS phone number (888-679-6377) must be printed at the bottom of the page.
If a mortgage is registered with MERS naming MERS as original mortgagee of record (MOM), no assignments are necessary if:
- The mortgage is originated naming MERS as the original mortgagee of record, solely as nominee for the lender named in the Security Instrument and the Note, and the lender's successors and assigns.
- The lender has ensured that the Security Instrument is properly executed, acknowledged, delivered and recorded in all places necessary to perfect a First Lien security interest in the mortgaged premises in favor of MERS, solely as nominee for the lender named in the Security Instrument and the Note, and lender's successors and assigns.
- The MIN must be placed on the Security Instrument to the right of or below the form title, but NOT within the recording margin of the document.
- Additional verbiage approved by the agency must be added to the Mortgage/Security Instrument. MERS Corporate Office can provide the correct state specific verbiage.
Toll Free: (800) 649-3366 Tel: (802) 876-6800
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18.5 Discharges Involving Mortgage Electronic Registration System (MERS)
When MERS is the record holder of a mortgage, the mortgage shall be discharged only by MERS. A valid discharge may be issued by (1) MERS, or (2) a member of MERS acting through a certifying officer of MERS.
Comment 1. MERS was created for the purpose of streamlining the mortgage process by eliminating the need to record assignments. When MERS is the mortgagee of record, a discharge is executed by an officer of MERS. MERS may also act as nominee for the lender and servicer and, if named as nominee, MERS remains as nominee regardless of how often the mortgage is sold.
Comment 2: MERS serves as mortgagee of record or as nominee for the beneficial owner of the mortgage loan. MERS becomes the mortgagee of record by assignment or in the original security instrument (MERS as Original Mortgagee or “MOM”). Once MERS is the mortgagee of record, subsequent assignments of the mortgage are not necessary upon a transfer of servicing to another MERS member or the sale of the beneficial interest in the note because MERS remains the mortgagee on behalf of the current owner and servicer. The servicer of a MERS-registered loan has the legal authority to discharge the mortgage on behalf of MERS because, as a member of MERS, authority was granted to their officers through a corporate resolution. The person authorized to sign discharges is sometimes referred to as a “certifying officer” by MERS.
Comment 3: A title examiner who finds a discharge signed by a member of MERS may presume that the signer was a duly appointed certifying officer.
Example: A Mortgage from “John and Mary Doe to MERS as nominee for ABC Bank” may be discharged by either: (a) a MERS certifying officer from ABC Bank or (b) by a MERS member other than ABC Bank acting through a certifying officer.
Comment 4: For assistance in obtaining a discharge or getting help from MERS, determining whether a particular lender is a member of MERS, information may be obtained from:
- MERS website: www.mersinc.org
- MERS Help Desk: 1.888.680.6377
- provide the Borrower’s SSN or the Mortgage Identification Number (MIN) on the mortgage and the automated system will provide the name of the current servicer.
Comment 5. A title examiner may consider information within the discharge to determine that the discharge was executed on behalf of MERS and is, therefore, a valid discharge of a MERS mortgage. Such information may include the existence of a MIN (MERS Mortgage Identification Number), a reference in the body or signature line to MERS, or a reference to an assignment to MERS.
September 26, 2008: This standard was added.
MERS & Mortgage Securitization
Mers & The Debt MERS does record the assignment in the actual real property records system. The actual note itself, is the creation of the legal obligation to have the loan/note repaid for the debt. Thus the note is the actual legal document which backs the debt. The debt itself has not been transferred or negotiated by MERS
• MERS does record the assignment in the actual real property records system. The actual note itself, is the creation of the legal obligation to have the loan/note repaid for the debt. Thus the note is the actual legal document which backs the debt. The debt itself has not been transferred or negotiated by MERS
• MERS is not legally entitled to receive monthly payments from the borrower. MERS cannot legally be entitled to benefit from a foreclosure in any sale of the home in a foreclosure sale.
• MERS does not own the mortgage note, thus it cannot attempt to foreclose.
• MERS cannot have any legal claim or interest in the loan interest, the debt, security instrument which MERS serves as a nominee.
MERS and Securitization of Residential Mortgage Loans
Mortgage Electronic Registration System (MERS) has been named the beneficiary for this loan. MERS was created to reduce in need of executing and recording of assignment of mortgages, with the idea that MERS would be the mortgagee of record. This would allow “MERS” to foreclose on the property, and at the same time, it would assist the lenders in avoiding the recording of the Assignments of Beneficiary on loans sold. This helped to save money for the lenders in manpower and helped to reduce the costs of recording these notes. It was also designed to “shield” investors from liability as a result of lender misconduct regarding the process of mortgage lending. MERS is imposed to overcome certain laws and other legal requirements dealing with mortgage loans holding an “artificial” entity. Because of designating certain member employees to be MERS corporate officers, the foreclosing agency and MERS “designated officer” has a conflict of interest. MERS and the servicer both have not a beneficial interest in the note even they don’t receive the income from the payments. And actually the service employee can’t sign the Assignment in the name of MERS because the Assignment execution of MERS employee is illegal. The new party has not executed the Assignment from the actual owner of the note. An assignment will result in a nullity because of a mortgage in the absences of the assignment and physical delivery of the note. It must also bear in mind that the lender or other holder of the note registers the loan on MERS. Thereafter, all sales or assignments of the mortgage loan are accomplished electronically under the MERS system. MERS never acquires actual physical possession of the mortgage note, nor do they acquire any beneficial interest in the Note. From the beginning MERS has indicated numerous violations of Unfair and Deceptive Acts and Practices because of conflicting nature and identity of the servicer and the beneficiary. As these practices were intentionally designed, it misleads the borrower and benefits the lenders. So the main point becomes, is MERS the Servicer or the foreclosing party? As the Servicer is the party who initiate the foreclosure and they take the documents to their own employee who are designated as a “Corporate Officer of MERS”, and who conveniently signs the document for MERS, aren’t they the “foreclosing party”?
Is MERS the Beneficial Owner of the Note? 1. MERS is named after the beneficiary on the Deed of Trust and holding only legal title to the interest granted by Borrower in this Security Instrument…has the right: to exercise any or all of those interest, including, but not limited to, releasing and canceling this security instrument. 2. MERS can claim to hold the Note but it has not any actual possession of the Note 3. MERS don’t get any payments or income from the monthly payments. Ultimate Investor gets this money. The Investor has the beneficial interest in the Note because the Investor receiving the payments. 4. MERS agreement indicates that MERS will comply with the instructions of the holder of mortgage loan promissory notes at all time. It also indicates that “When the beneficial owner will not give contrary instructions , MER may depends on instructions from the servicer shown on the MERS system in accordance with these rules and the procedures with respect to transfers of beneficial ownership. 5. MERS is not the beneficial owner of the note that has been testified in Florida Courts. Assignment of Beneficiary MERS does not keep the record of the assignment of beneficiary though it is required by law, until the foreclosure process starts and the Notice of Default has been filed, and apparently, only when it appears that the borrower will not be able to reinstate the loan and then foreclosure is inevitable. It maintains itself as the beneficiary throughout the entire process up to foreclosure. MERS has represented in Florida Courts that its sole purpose is as a system to track mortgages. It has stated that the lenders and servicers do entry for themselves and it does not do the entries itself, but. When an Assignment of Beneficiary is executed, it is the member servicer or lender that goes to the website, downloads the necessary forms, completes the forms and then takes it to the designated “MERS officer” to sign. MERS agreements state that MERS and the Member agree that: (i) the MERS System is not a vehicle for creating or transferring beneficial interest in mortgage loans, (ii) transfer of servicing interests reflecting on MERS System are subject to the consent of the beneficial owner. Since MERS and the servicer both haven’t a beneficial interest in the note, they don’t receive the income from the payments, and since it is actually an employee of the servicer signing the Assignment in the name of MERS, this begs the question: Is the assignment executed by the MERS employee even legal, since the actual owner of the note has not executed the assignment to the new party? A good indicator might be in Sobel v Mutual Development, Inc, 313 So 2d 77 (1st DCA Fla 1975). An assignment of a mortgage in the absence of the assignment and physical delivery of the note in question is a nullity.
Possession of the Note & Holder in Due Course Coming to the forefront, possession of the Note is a key argument. The foreclosing entity has to prove possession and ownership of the original Note in order to foreclose. A survey reported that upwards of 40% of the Notes are missing and cannot be found that’s why this comes to the forefront. And MERS is once again involved in this. MERS foreclosure lawsuits often include a Lost, Missing, or Destroyed Affidavit In Judicial Foreclosure states. The Note cannot be found, and that the Note prior to being lost was in the possession of MERS which was “testified” by this affidavit. This has become very problematic for MERS,As they have admitted in Courts that they do not own the Note or even hold the Note. If this is so, then MERS is likely filing fraudulent Affidavits. When challenged, one defense that MERS uses to support its “legal standing” is that the servicer has possession of the Note and Deed. MERS, by the act of having its own “Officers” as employees of the servicer, entitles it to foreclose on behalf of the servicer and the beneficiary. When confronted with this defense, the response should be for the servicer to produce the note. It should also be noted that the lender or other holder of the note registers the loan on MERS. Then, under the MERS system all sales or assignments of the mortgage loan are accomplished electronically. MERS never acquires actual physical possession of the mortgage note, and they don’t acquire any beneficial interest in the Note. Securitization Process Securitization is the name for the process by which the final investor for the loan ended up with the loan. It entailed the following: 1. Mortgage broker had client who needed a loan and delivered the loan package to the lender. 2. The lender approved the loan and funded it. This was usually through “warehouse” lines of credit. The lender most of the times used warehouse line instead using their own money and that had been advanced to the lender by major Wall Street firms like J.P. Morgan. 3. The lender “sold” the loan to the Wall Street lender, earning from 2.5 – 8 points per loan. This entity is known also as the mortgage aggregator. 4. The loan, and thousands like it, are sold together to an investment banker. 5. Securities banker buys loans from Investment banker 6. Securities banker sells the loans to the final investors, as a Securitized Instrument, where a Trustee is named for the investors, and the Trustee will administer all bookkeeping and disbursement of funds. 7. The issue with the securitization process is that when the Securitized Instrument was sold, it was split apart and sold in tranches, (in slices like a pie). There were few or no records kept of which notes went into which trancheand there are no records of how many investors bought into each particular tranche. Additionally, there were no
Assignments designed or signed in anticipation of establishing legal standing to foreclose. 8. Rating Agencies rated the tranches at the request of the Investment Bankers who paid the Rating Agencies. 9. When the tranches were created, each “slice” was given a rating, “AAA, AA, A, BBB, BB, etc. which tranche got “paid” first out of the monthly proceeds determined the ratings. If significant numbers of loans missed payments, or went into default, then the AAA tranche would receive all money due, and this went on down the line. The bottom tranches with the most risk would receive the leftover money. These were the first tranches to fail. Even if the defaulting loans were in the AAA tranche, the AAA tranche would still be paid and the lowest tranche would not. Wall Street, after the 2000 Dot.com crash, had large amounts of money sitting on the sidelines, looking for new investment opportunities. Returns on Investments were dismal, and investors were looking for new opportunities. Wall Street recognized that creating Special Investment Vehicles offered a new investment tool that could generate large commissions. Other Pertinent Facts of Securitization 1. In Wall Street pooling agreements they defined in the agreements that the loans that they would accept for each investment vehicle. The lenders were executed agreements by them, with the lenders and then immediately issued warehouse lines of credit to the lenders. 2. Lenders then informed brokers to know the loan parameters to meet the pooling agreement guidelines and the brokers went out and found the borrowers. 3. Wall Street took all the loans, packaged them up and sold them as bonds and other security instruments to other investors, i.e. Joe’s Pension, and paid off original investors or reissued new line of credit, and earned commissions on both ends. 4. The process was repeated time and again. 5. What we do know now is that in most cases, the reality is that the reported lender on the Deed of Trust was NOT the actual lender. The actual lender who lent the money was the Wall Street Investment Bank. They simply rented the license of the lender, so that they would not run afoul of banking regulations and/or avoid liability and tax issues. For all purposes, Wall Street was the true lender and there are arguments that suggest that Disclosures should have been required naming Wall Street as the lender. Now it can be easier to understand how possession of the Note and ownership of the Note play a vital role. In most cases, which tranche will contain any particular note, it is unknown. And will not it be known how many investors, and who bought the individual tranches without significant and time-consuming investigation. Hence, any foreclosure that was securitized may be completely unlawful. Without the “True Owners” of the note stepping forward to demand foreclosure,
Assignee Liability Assignee liability is another issue being contested. Under TILA and RESPA, If on the face of the loan documents gives evident that there are violations of the statutes, then assignees have a significant liability when they assume the loan. Moreover, the question arises as to if assignee liability can be claimed only if there are no violations on the face of the documents. It is believed that MERS became the “beneficiary” for so many notes to address the Assignee Liability problem. Since MERS works as the beneficiary, and it doesn’t keep the record of assignments, it becomes more difficult to determine assignee liability and holder in due course issues. This could offer “cover” for all the parties who are participating in the Securitization process, since no there were recorded of Assignments and “proof of ownership” of the note could not be easily determined. Tracking the monthly payments made to the investors, determining which party received the monthly payment will be the only way to determined ownership of the Notes. This would be time consuming and likely only Discovery would prove the process necessary to get this information. In Cazares v Pacific Shore Funding, CD. Cal. Jan 3, 2006, assignee that actively participated in original lender’s act and dictated loan terms may be liable under UDAP. The question then arises as to assignments further down the “chain of title”. Under these circumstances, to attack the lenders, the UDAP codes can be utilized. The contracts can be “voided or rescinded for showing fraud and other causes of action, ” common law and UDAP codes, especially CA B&P § 17200, and CA Civil Code §1689, which allows for contract rescission.
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Geographic coordinates of Elektrostal, Moscow Oblast, Russia
Coordinates of Elektrostal in decimal degrees
Coordinates of elektrostal in degrees and decimal minutes, utm coordinates of elektrostal, geographic coordinate systems.
WGS 84 coordinate reference system is the latest revision of the World Geodetic System, which is used in mapping and navigation, including GPS satellite navigation system (the Global Positioning System).
Geographic coordinates (latitude and longitude) define a position on the Earth’s surface. Coordinates are angular units. The canonical form of latitude and longitude representation uses degrees (°), minutes (′), and seconds (″). GPS systems widely use coordinates in degrees and decimal minutes, or in decimal degrees.
Latitude varies from −90° to 90°. The latitude of the Equator is 0°; the latitude of the South Pole is −90°; the latitude of the North Pole is 90°. Positive latitude values correspond to the geographic locations north of the Equator (abbrev. N). Negative latitude values correspond to the geographic locations south of the Equator (abbrev. S).
Longitude is counted from the prime meridian ( IERS Reference Meridian for WGS 84) and varies from −180° to 180°. Positive longitude values correspond to the geographic locations east of the prime meridian (abbrev. E). Negative longitude values correspond to the geographic locations west of the prime meridian (abbrev. W).
UTM or Universal Transverse Mercator coordinate system divides the Earth’s surface into 60 longitudinal zones. The coordinates of a location within each zone are defined as a planar coordinate pair related to the intersection of the equator and the zone’s central meridian, and measured in meters.
Elevation above sea level is a measure of a geographic location’s height. We are using the global digital elevation model GTOPO30 .
Elektrostal , Moscow Oblast, Russia
The largest country in the world at 17,075,400 square kilometres (or 6,592,800 sq mi), Russia has accumulated quite an impressive reputation. Covering more than an eight of the Earth's land area, 142 million people live there making it the ninth largest nation by population . Still known for its impressive days as the expansive Union of Soviet Socialist Republics (USSR), Russia was the world's first and largest constitutionally socialist state. A recognized superpower, the USSR was known for its excellence in both arts and science winning many awards in both fields.
Russia changed drastically after the dissolution of the Soviet Union in 1991, but it continues to be a powerful and important nation. It has one of the world's fastest growing economies and the world's eight largest GDP by nominal GDP. Russia is also one of the five countries which officially recognized nuclear weapons states. In conjunction with this title, Russia is also a permanent member of the United Nations Security Council, the G8, APEC and the SCO, and is a leading member of the Commonwealth of Independent States.
A European city in a country that lies over a vast part of Asia, Moscow holds one-tenth of all Russian residents . The city is located in the western region of Russia and is the capital and epicentre of political, economic, cultural, religious, financial, educational, and transportation happenings. "Muscovites" , as residents are known, tend to be cultured and worldly. This may be due to the many scientific, educational, and artistic institutions that are based here. An intoxicating mix of the exotic and the familiar, it is the largest city in Europe with the Moscow metropolitan area ranking among the largest urban areas in the world.
The city is situated on the banks of the Moskva River which flows through much of central Russia. Moscow is actually located in a basin for the Volga, Oka, Klyazma, and Moscow rivers. The city of Moscow is 994 sq. km with 49 bridges spanning the rivers and canals that criss-cross the city.
Forests are another part of Moscow's make-up. They coveer over a third of the territory in the region. A variety of animals like elk, wild boar, deer, foxes, weasels, lynx, martens, and birds make their home here.
Located in the UTC+3 time zone , Moscow has a humid continental climate. The summers tend to be warm and humid and the winters are long, cold, and hard. High temperatures occur during the warm months of June, July and August at about 23 °C (73 °F). Heat waves sometimes grip the city anywhere between May to September with temperatures spiking up to 30 °C (86 °F). Winters are harshly chilly with temperatures dropping to approximately 9 °C (15.8 °F). There is consistent snow cover for 3 to 5 months a year, usually from November to March.
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