Bankruptcy court says MERS is alive and well and living in Massachusetts

MERS is doing OK here in Massachusetts.

Just in case you are not obsessed with the lingo of real-estate banking, MERS stands for Mortgage Electronic Registration Systems, Inc., a corporation whose sole business is filing mortgage documents at county registry of deeds nationwide.

If you check your mortgage doen at the Northern Essex registry of deeds in Lawrence, or the registry in Salem, Mass., there’s a good chance you will see MERS stamped somewhere on it. In fact, a casual reading of the mortgage might give you the impression that MERS owms your home.

The real idea behind MERS is that a single company could record all the mortgage, deeds, notes, and releases necessary to do a home sale. After the original transaction, any sale or transfer of the mortgage could then be done privately, “off the books,” with MERS keeping a data base of who owned what.

This allowed banks and finance companies to buy, sell, and trade mortgages willy-nilly, without having to go back to the registry and record more documents each time. The downside (for consumers and regulators) is that it is practically impossible to track who actually hokld a mortgage through the deed system anymore.

But MERS was really only an enabler in the housing boom or the last decade that became a bust. MERS is listed as a “nominee” on Massachusetts mortgage documents, meaning the owner (or “holder”) of the mortgage is likely someone else, and of course the servicer of the mortgage is likely to be still another company. Nice, eh?

Around the country, some aggressive attorneys have had some luck going at MERS-registerd mortgages, principally using an argument that a mere nominee has no right to foreclose.

But that argument didn’t fly when debtors tried to use it in a Massachusetts bankruptcy court before bankruptcy judge Melvin Hoffman. In the Marron case, number 10-45395 in June, Judge Hoffman found that the Massachusetts mortgage laws do indeed give a “mere” nominee the right to be initialte a foreclosure.

So at least in Massachusetts, it looks like MERS is going to be around for a while.

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