Foreclosure: A Thumbnail Sketch of MERS

Posted on April 27, 2011


The law requires physical possession of the mortgage note by the mortgage company. Possession of the note has to be recorded in the jurisdiction where the property is located, usually with the Recorder of Deeds.

Banks have been recording possession of the note because they know where it is: at MERS. They no longer had actual possession on the note.

The MERS plan was to hold the physical mortgage while banks traded them in bulk as bonds on a market, similar to the bond market. The problem is MERS lost the notes. Maybe they exist in a warehouse somewhere, but MERS can no longer find the loan upon request. The problem, besides that one, is property cannot be foreclosed on without proof of possession of the note. But foreclosures have been happening anyway. Demands for proof of possession on the note have not been accorded the diligent review by the courts that the law requires. now that is starting to change.