As you’re sitting across from your mortgage lender who is going over, line by line, the charges and fees associated with your loan, he/she mentions MERS. It’s only costing you $4.95, so you don’t pay particular attention to it. I mean after all, $4.95 is nothing compared to the state tax stamp fee or other line items you see. But, aren’t you curious as to exactly what MERS is? At face value it sounds like something you should get an inoculation to avoid. But in actuality, it’s a little system that has revolutionized the mortgage industry.
MERS is kind of like a microwave. You never knew how much you depended upon it until you consider taking it away. Seriously. Our microwave was broken for a short period of time, and I couldn’t believe how much we used it or how much it simplified our lives. Half the food I cooked became a real trial to prepare the old fashioned way. Not to mention heating up leftovers. Ironically, it’s a very similar situation for the mortgage industry if they had to do away with MERS all of a sudden. It would be perplexing, annoying and time consuming.
MERS stands for Mortgage Electronic Registration System. If you visit the MERS website (www.mersinc.org), you can read their overview: “MERS was created by the mortgage banking industry to streamline the mortgage process by using electronic commerce to eliminate paper. Our mission is to register every mortgage loan in the United States on the MERS (registered trademark) System.” Nice. Everyone likes paperless systems these days.
In the old days, if you sold a loan on the secondary market, you had to assign the mortgage to the new buyer. You created a paper assignment and recorded it at the courthouse. If there was an error on the assignment, you had to correct it (have it initialed by the appropriate parties) and re-record it. Then you sent this original recorded document to the new buyer for them to keep. If they in turn sold the loan, they had to prepare another assignment, record it and forward it, along with the first recorded assignment, onto the new buyer. And so on and so forth. Lots of paper being printed, recorded, regenerated and reconstituted. MERS came up with a fabulous system to eliminate this nightmare. Now, when you sign a mortgage, MERS assigns a unique identifying number to that mortgage. The lender, upon closing, registers the loan with MERS to show it exists. Then, any transfers can be done electronically. The mortgage servicing and mortgagees can also be tracked electronically, which allows for title searches to be streamlined. It’s a beautiful thing. This system has saved a lot of time and energy for the industry.
However, if you were to tell a mortgage operations person that MERS was going away, and they were going back to paper assignments, it wouldn’t go over well. They would probably be at a total loss. Sort of like tossing someone a bag of popcorn and telling them to cook it without a microwave.
