Most consumers have no idea what the Mortgage Electronic Registration System (MERS) is, but it is estimated that one out of every two loans in the United States are “owned” by it. And it has also become a tool used by debtors to hide their assets. If you have debtors that invest in mortgages, you need to know about MERS.
MERS is a legitimate private US corporation that solved one very expensive problem: how large amounts of mortgages can be bought and sold by investors without generating the fees charged by counties to record the change of ownership. A large group of loans could incur thousands, if not hundreds of thousands, of dollars in recording fees, every time an investment in a loan pool is made. MERS neatly solved this by simply operating an electronic registry. Transfer your loan into it, and MERS is now the nominee owner. You’re free to buy, sell and transfer your loan to other investors within the registry, without having to record the change of ownership with the local County Recorder. The Federal Government has backed the system as a way to create a liquid market for investors.
However, some state County Recorders have started to fight back. They are claiming MERS is nothing more than a work-around to avoid the proper paying of recording fees that are used to support the records office.
We have also seen cases where debtors use MERS to hide their assets by making sure their ownership is not publicly recorded, and they have then failed to disclose their ownership of these assets. The good news is that once we have identified debtors that are involved with MERS, we now have a decided advantage for uncovering current ownership and proving fraudulent transfers: the MERS system itself!
It is important to know that each loan transferred into the MERS system is assigned a Mortgage Identification Number (MIN), and will have this number for the life of the loan, no matter who the current owner is. Once we build the master list of loans owned (past or present) by the debtor, we follow the ownership transfers by date to develop the status of an investment pool. Post-judgment transfers can also lead to other entities that are sheltering the ownership of the assets for the debtor that we may have not known existed.
So be aware that MERS is an effective tool that a debtor can use to hide assets, and that it is an even better tool to use for recovery.