Bulletin: SLS00161

Overview

MERSCORP, Inc., is a mortgage industry created corporation that:

1. operates a national electronic registry to track the changes in servicing rights and beneficial ownership interest in mortgage loans; and,

2. its subsidiary, Mortgage Electronic Registration Systems, Inc. ("MERS"), acts as the mortgagee of record on all mortgages that are registered with MERSCORP, Inc. The MERS System provides easy access to the correct loan servicer for loan payoffs and minimizes errors in the public records because of missing assignments.

MERS legally operates in all 50 states.

Lenders, servicers, and title companies may become members of MERS. However, title companies are not required to be members of MERS in order to obtain the name of the current loan servicer.

How does MERS become the Mortgagee of Record?

MERS can be the mortgagee of record in one of two ways:

1.On newly originated loans

Fannie Mae, Freddie Mac, FHA and VA have approved MERS to be the Original Mortgagee of Record (MOM) by being named in the mortgage or deed of trust as the mortgagee or beneficiary. To accommodate this, the agencies published authorized changes to the Uniform Security Instrument for each state.

For example, the following or similar language may appear in the mortgage or deed of trust: "Mortgage Electronic Registration Systems, Inc. ("MERS"), solely as nominee for Lender, as hereinafter defined, and Lender's successors and assigns. MERS is the mortgagee under this security instrument. MERS is organized and existing under the laws of the state of Delaware, and has an address and telephone number of P.O. Box 2026, Flint, MI 48501-2026, tel. (888) 679-MERS. __________________ ("Lender") is organized and existing under the laws of _______ , and has an address of ______,

2.On a seasoned loan

Instead of being the Original Mortgagee of Record, MERS may be an assignee of the mortgage or deed of trust. The assignment will name "Mortgage Electronic Registration Systems, Inc" as assignee. The assignment does not use the nominee language because it is not required that the actual beneficiary of a mortgage loan disclose the appointment of a nominee.

Once the mortgage, deed of trust, or assignment names MERS, any future transfer of the loan or servicing from one MERS Member to another MERS Member will be tracked electronically on the MERS System, and will not be shown in the local real property records. The mortgagee lien will remain immobilized in MERS name.

MERS does not obtain title to or possession of the promissory note unless necessary under state law at the time of foreclosure.

MERS is described in detail at http://www.mersinc.org/

Payoff

The assignment, mortgage or deed of trust will show a Mortgage Identification Number (MIN), an 18-digit number which is unique to that loan. The MIN can never be duplicated or used again.

Along with the MIN, the assignment, mortgage or deed of trust will state a toll free number to contact MERS for the name of the current loan servicer: (888) 679-MERS (888-679-6377).

This toll free number is to a Voice Response Unit (VRU). If you call that phone number, you may secure the name of the current loan servicer if you provide one of the following: the MIN, the borrower's name, property address, or the social security number of the borrower. The VRU provides you with the option of having this information faxed to you.

You do not have to pay a fee to use that phone number to obtain the name of the loan servicer.

You may obtain the loan payoff from the named loan servicer. Appointed employees of the loan servicer are empowered by a MERS Corporate Resolution to be officers of MERS. This resolution authorizes them to execute a release, satisfaction, discharge or reconveyance of the mortgage or deed of trust.

Company Policy: You may rely on a written payoff figure from the loan servicer whose name is provided by MERS in order to issue a new title policy.

Name of Insured on Loan or Mortgagee Policy

You will be required to name the original beneficial owner of the loan as an insured on the Loan or Mortgagee Policy. You may show Mortgage Electronic Registration Systems, Inc., as an additional insured if the mortgage or Deed of Trust names MERSâ as nominee and if you are requested to do so.

Company Policy: You may show the original beneficial owner shown on the mortgage as the insured. If requested and MERS is the nominee of the beneficiary on the mortgage, you may show Mortgage Electronic Registration Systems, Inc. as an additional insured.

Foreclosures

When MERS is the mortgagee of record, a foreclosure can be brought in the name of MERS in all states under the current state foreclosure procedures. In two states (Rhode Island and New Hampshire) and the Parish of Orleans, Louisiana, an assignment from MERS is required to Fannie Mae if Fannie Mae is the investor. This is a requirement of Fannie Mae regardless of whether MERS is the mortgagee or the loan servicer is the mortgagee.

If the deed of trust or mortgage names MERS as the MOM, the deed of trust or mortgage will expressly authorize MERS to conduct a foreclosure sale. The mortgage or deed of trust will contain language such as the following: "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 and 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."

Where necessary under state law to foreclose, MERS will secure possession or endorsement of the note.

Judicial Foreclosures

A judicial foreclosure can be initiated in the name of MERS, if MERS is the mortgagee of record. In most cases, by assigning the foreclosure judgment or foreclosure sale bid, title can pass directly to the true beneficial owner, which is typically a secondary mortgage market investor. In a handful of states, MERS can take title at the conclusion of the foreclosure sale and then execute a subsequent deed to the true beneficial owner.

Non-judicial Foreclosures

If the deed of trust or mortgage is assigned to MERS, you should be satisfied that state law allows an agent, such as MERS, to proceed with foreclosure (including the naming of a substitute trustee, where applicable). Since MERS is not the beneficial owner, it derives its authority to act from an agency agreement with the beneficial owner. That agreement with the beneficial owner allows MERS to conduct foreclosures on behalf of the beneficial owner. In some cases, MERS will purchase at foreclosure on behalf of the beneficial owner and then convey to that beneficial owner.

Company Policy: You may rely upon a judicial or non-judicial foreclosure undertaken by MERS, provided that MERS is shown as the mortgagee on the mortgage or deed of trust or assignment and if the foreclosure otherwise complies with state law. You must verify (by inquiry of a knowledgeable party) that the former owner and those claiming under the former owner are no longer in possession of the land.

Footnote:
MERS is a registered trademark.