The Case Against Allowing Mortgage Electronic Registration Systems, Inc. (MERS) to Initiate Foreclosure Proceedings

Nolan Robinson

Benjamin N. Cardozo School of Law

March 21, 2011

32 Cardozo Law Review, Vol. 32, No. 4, p. 1621, 2011

Few American homeowners know much about the small, Virginia-based company that has revolutionized the mortgage industry over the past fifteen years. Yet, Mortgage Electronic Registration Systems, Inc. (MERS) is the named mortgagee on nearly two-thirds of all newly originated residential mortgages in the United States. Industry leaders – including Freddy Mac, Ginnie Mae, and a host of private lenders – created MERS in the mid-1990s to help facilitate a burgeoning market in mortgage-backed securities.

At the time MERS was created, a robust and lightly regulated secondary market for mortgage-backed securities seemed like a good idea. The recent subprime mortgage crisis, which has impacted millions of American homeowners and played a key role in a global recession, has done much to challenge that presumption. One unfortunate byproduct of the subprime mortgage crisis has been a dramatic increase in the number of American homeowners facing foreclosure. For many of these homeowners, the MERS system may compound their hardships by effectively masking the identity of the owner of their loans. One of the benefits of MERS membership, according to MERS, is the legal right to foreclose on a defaulting homeowner in MERS’s name rather than in the name of the entity who actually owns the mortgage. This can mean that homeowners have no way of ascertaining the identity of the party with whom they can negotiate their loans.

Several state courts have considered challenges to MERS’s right to initiate foreclosure actions in its own name. MERS claims to have the legal authority to initiate foreclosure proceedings throughout the United States, but not every court has agreed. Some jurisdictions have expressly upheld MERS’s right to foreclose, while some have questioned or limited MERS’s foreclosure rights. Still other courts have reserved judgment, expressing frustration and confusion regarding MERS’s role in an increasing number of foreclosure and bankruptcy proceedings, and the ostensible connection between MERS and the subprime mortgage crisis.

MERS is currently a plaintiff in as many as forty percent of pending foreclosure actions in some locales. This Note argues that foreclosure actions brought in MERS’s name, without joining the real party in interest, are unlawful. Furthermore, this Note reveals how granting standing to MERS in foreclosure actions threatens to undermine the protections for homeowners that foreclosure law has traditionally provided, and violates important property law doctrines that ensure the proper functioning of the recording system and minimize clouds on title.

Number of Pages in PDF File: 34

Keywords: MERS, Mortgage, Foreclosure, Recording Act

working papers series

Download This Paper

Date posted: March 26, 2011 ; Last revised: June 4, 2011

Suggested Citation

Robinson, Nolan, The Case Against Allowing Mortgage Electronic Registration Systems, Inc. (MERS) to Initiate Foreclosure Proceedings (March 21, 2011). 32 Cardozo Law Review, Vol. 32, No. 4, p. 1621, 2011. Available at SSRN: http://ssrn.com/abstract=1791896 or http://dx.doi.org/10.2139/ssrn.1791896

Contact Information

Nolan Robinson (Contact Author)
Benjamin N. Cardozo School of Law ( email )
55 Fifth Ave.
New York, NY 10003
United States
Feedback to SSRN

Paper statistics
Abstract Views: 4,924
Downloads: 832
Download Rank: 15,669

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.422 seconds