Mortgage-backed Security - Recording and MERS

Recording and MERS

One of the critical components of the securitization system in the United States market is the Mortgage Electronic Registration Systems (MERS) created in 1990s, which created a private system wherein underlying mortgages were assigned and re-assigned outside of the traditional recordation process done at the county level. The legitimacy and overall accuracy of this alternative recording system have faced serious challenges with the onset of the mortgage crisis: as the US courts flood with foreclosure cases, the inadequacies of the MERS model are being exposed, and both the local and federal governments have begun to take action through suits of their own and the refusal (in some jurisdictions) of the courts to recognize the legal authority of MERS assignments. The assignment of mortgage (deed of trust) and note (obligation to pay the debt) paperwork outside of the traditional US County courts (and without recordation fee payment) is subject to legal challenge. Legal inconsistencies in MERS originally looked trivial, but may reflect dysfunctionality within the entire US mortgage securitization industry.