One More Nail Driven Into The Coffin of MERS
Fannie Bars Foreclosure Actions in the Name of MERS
Carrie Bay DSNews.com
In new policy guidelines released this week, Fannie Mae told servicers that they can no longer name MERS as the plaintiff in any foreclosure action, whether judicial or non-judicial, on a mortgage loan owned or securitized by the GSE.
MERS is widely used by the industry to keep track of the servicing rights on home loans. In fact, the top 100 mortgage originators and servicers employ the system. Its repository includes information on over 60 million home loans electronically registered by lenders.
MERS was created to be a paperless property registry to facilitate the quick transfer of mortgages between lenders and the inclusion of the loans in mortgage-backed securities, and in certain jurisdictions, MERS has the authority to initiate foreclosures on properties listed in its registry.
MERS is often designated as the “mortgagee of record” as a nominee of the actual mortgage holder. The service was designed to get around the slow and clumsy process of recording deeds at a county registrar and is similar to a broker serving as stockholder of record for a client.
But the system has become the centerpiece of a number of lawsuits, with foreclosed homeowners challenging the naming of the electronic system as mortgagee.
Fannie Mae stated in its new servicing guidelines that when MERS is listed as the mortgagee of record, the servicer must prepare a mortgage assignment transferring the position from MERS back to the servicer, and then bring the foreclosure in its own name.
In the event that the GSE requires the foreclosure be brought in the name of Fannie Mae, the servicer must conduct that transfer assignment as well. In all cases, the assignment from MERS to the servicer or Fannie Mae must be recorded before the foreclosure begins.
“Fannie Mae will not reimburse the servicer for any expense incurred in preparing or recording an assignment of the mortgage loan from MERS to the servicer or to Fannie Mae,” the guidelines read.
Since 2006, Fannie Mae has required servicers to file foreclosure actions in their own name in judicial states where proceedings take place in the courtroom, such as Florida, Illinois, and New York.
Beginning May 1, 2010, Fannie is adding that same stipulation to foreclosure petitions in non-judicial states, such as California, Massachusetts, and Texas, which allow lenders to foreclose without involving the courts.
See the new GSE guidelines here: https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2010/svc1005.pdfhttp://www.mfi-miami.com/?p=3532