Revisiting "MERS"


Although the Mortgage Electronic Registration Systems (“MERS”) is apparently very successful in other states, some problems have surfaced in Connecticut with the procedure here. These may be based on a general lack of understanding as to its purpose, and to the fact that it is a new concept and is contrary to normal conveyancing customs.

The purpose of MERS is to provide for “off the record” Assignments of Mortgage. Lenders contract with MERS for it to act as nominee for its mortgages. MERS then acts as nominee for the original lender as well as all the assignees of the mortgage. No assignment is recorded. This accomplishes two things beneficial to title examiners and other conveyancing professionals. The first is that if a mortgage to MERS is assigned, no matter how many times, the record mortgage remains in the name of MERS as nominee for the original mortgagee or its assigns. All assignments are done “in house”. A searcher doesn’t have to track down all the different entities to which the mortgage has been assigned if the mortgage remains in the MERS system. Of even more benefit is the fact that a Release of a MERS mortgage is relatively simple to obtain. No matter how many times the mortgage has been assigned off the record, MERS must still be the signatory on the Release. This of course alleviates the growing problem of having the most recent holder of the mortgage being outside the chain of title because an assignment hasn’t been recorded.

We have seen problems in the past with a mortgage to MERS being assigned by a purported holder of the mortgage rather than by MERS as its nominee. This defeats the whole purpose of MERS. The lender cannot assign the mortgage. (MERS may, however, assign its mortgage out of the MERS system and back to a lender.) The latest concern is whether the lender has the capacity to modify its mortgage when its mortgage has been granted to MERS as nominee for that lender. Some lenders have asked whether they can modify a mortgage without MERS being a signatory to the modification. The answer is no. MERS is the mortgagee. MERS, and not the lender, is the only entity that can sign a Mortgage Modification. When a lender asks us to insure a mortgage as modified, when the mortgage has been granted to MERS as nominee, and the lender, and not MERS has executed the Modification, we cannot do it. Not only is the Modification outside the chain of title, but there is no way to know whether the lender signing the Modification is still the holder of the Mortgage.

MERS has their own sample modification, which can be found on their website, www.mersinc.org. Under “Manuals and Forms”, go to “Sample Forms”. Then under "Sample MOM", you’ll find their Loan Modification Agreement.

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