What Is MERS Mortgage: A Simple Guide to Understanding It
If you have a mortgage, you may not be aware that there is something known as the Mortgage Electronic Registration System, or MERS, that tracks its registry as well as any other mortgages that originated in America.
The confidential database is used by companies throughout the real estate financial industry for trading and recording residential and commercial mortgages. The electronic registry makes it easier for lenders to register transfer details with the relevant county recorder whenever a loan is sold from one servicer to another.
While this may seem like a shady proposition for borrowers, it was actually created just to simplify and improve the efficiency of county land records, which can provide benefits to everyone. Plus, it’s a program that’s been approved by government agencies such as the Department of Veterans Administration (VA) and Federal Housing Administration, as well as government-sponsored entities such as the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association — better known as Freddie Mac and Fannie Mae.
Below, we provide a detailed look at what MERS is and how it works.
How MERS Works in the Mortgage Industry
MERS is basically just a database that allows for electronic registration of mortgage loans and deeds. It tracks mortgages for all member companies as they are sold from one financial institution to another, which happens relatively often.
After MERS was created, members no longer had to submit assignments manually to individual county recorders any time they bought or sold a loan. This helps to simplify the process and make it more efficient and accurate at the same time.
MERS plays a huge role in the mortgage banking industry, and is used by title companies, document custodians, lenders (warehouse, wholesale and retail), settlement agents, mortgage servicers and originators, county recorders, investors and even consumers.
The system digitizes all loans by assigning them a mortgage identification number, known as a MIN, when it’s registered in the database.
Benefits of MERS
There are many benefits that MERS provides to both lenders and borrowers. Because the process of recording loans and loan transfers is now simpler and more efficient, the cost of doing so is cheaper. This savings is realized not just by the lenders, though, but is also passed onto borrowers in the form of lower closing costs.
There are so many documents that are contained in a mortgage loan, and many steps that must be taken to record it properly. MERS helps to simplify the process by creating a one-stop shop for mortgage documents.
MERS doesn’t just reduce costs and improve efficiency, though. It also significantly improves transparency in tracking mortgage loans. The database is free for homeowners to access, allowing them to look up information on any of their mortgages that might be registered with the system.
This free public access to information about home mortgages is a great step in ensuring that homeowners can easily look up which company owns their loan, in case there are any questions about it — or need to contact the company.
MERS and Real Estate
Some transactions of home loans will designate MERS as the mortgagee or the lender. These types of loans are referred to as “MOM” loans, or “MERS as Original Mortgagee.”
For deeds of trust, MERS might be named as your loan’s beneficiary, and the organization can act as your nominee. Loans can also be assigned to MERS as the sole nominee, which makes there no reason to have separate assignments every time a loan is transferred.
For the most part, MERS has little if no impact on homeowners who are paying off their mortgages. However, it has been criticized in the past for making it challenging to determine which company owns a mortgage.
For instance, during the housing crisis of 2008, some homeowners who were facing foreclosure or seeking relief from their loans had trouble figuring out which company owned their loan and, therefore, which company they needed to contact for help.
Pros and Cons of MERS
There are many pros and cons that MERS provides to the mortgage industry.
As mentioned before, the database can save lenders and borrowers time and money by creating efficiency in the process of recording mortgage loans. It’s a convenient system for tracking mortgage loans and servicing rights that also creates transparency in the industry.
At the same time, there are some downsides to the database.
The biggest downside for homeowners is that MERS can be confusing. While there is free public access to the system, it’s not always easy to navigate or figure out where information is.
One reason for this is that lenders look to save time and recording costs by putting the loan in MERS’ name as the nominee in the land records. This potentially hides what company actually owns the loan, which creates confusion and frustration.
Looking Up Your Mortgage on MERS
If you want to look up your mortgage on MERS, you can do so by visiting MERS’ website. Once there, you can search for your mortgage by its 18-digit MIN — which is often printed on your servicer’s online portal or loan statements.
You can also look up your mortgage with a certificate number provided by the VA or FHA, your borrower details or your property address.
If your home loan is provided by Fannie Mae, Freddie Mac or some other organization, MERS’ site provides resources for how you can look up your information.
Alternatively, you can contact the company that services your mortgage to figure out how to find your property on the MERS database. Freddie Mac and Fannie Mae also offer loan lookup tools right from their website.
Importance of MERS for Borrowers
The biggest question borrowers might have is how MERS is relevant and important for them. Knowing who owns your mortgage loan is essential if you want to make any changes to your loan.
For instance, if you want to refinance your mortgage but don’t have enough equity in your home to do so through traditional means, you’ll need to know whether Freddie Mac or Fannie Mae owns your loan. This is because each agency offers different refinancing programs — and requirements — and steps that you need to follow to apply.
Even if you don’t want to refinance your home, though, it’s important to know which company owns your mortgage in case you ever need to contact them for relief options or for simple questions.
MERS Makes Recording Mortgages Easier and Cheaper
Knowing what MERS is and how it works can serve you well if you ever need help from your mortgage company. The private electronic database tracks new mortgage loans, servicing rights and ownership.
In addition to streamlining the process of recording mortgages and transfers for the mortgage industry — thereby saving time and money for lenders and borrowers alike — MERS also creates transparency for homeowners.
Anyone can look up information about home mortgages for free on the MERS website, through an 18-digit Mortgage Identification Number (MIN) that’s assigned to every loan in the system.
While MERS operates in the background for many homeowners, it’s an important tool for borrowers, lenders and the mortgage industry as a whole.
