MERS or the Mortgage Electronic Registration Systems, little known before the foreclosure tsunami struck, was developed in the early 1990’s by a number of financial entities, including Bank of America, Countrywide, Fannie Mae, and Freddie Mac, allegedly to allow consumers to pay less for mortgage loans, streamline the mortgage process through electronic commerce, and eliminate the need to prepare and record assignments when trading residential and commercial mortgage loans. MERS describes itself as "innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked." Sounds nice, right?
Well, as detailed by Floyd Norris of the New York Times in his article "Some Sand in the Gears of Securitizing," and elsewhere, MERS has been under attack for its part in the massive securitization of the American housing market.
Indeed, as alleged in a Nevada class action called Lopez vs. Executive Trustee Services, et al., MERS was a very serious contributor to the financial crisis: "Before MERS, it would not have been possible for mortgages with no market value . . . to be sold at a profit or collateralized and sold as mortgage-backed securities. Before MERS, it would not have been possible for the Defendant banks and AIG to conceal from government regulators the extent of risk of financial losses those entities faced from the predatory origination of residential loans and the fraudulent re-sale and securitization of those otherwise non-marketable loans."
In other words, without MERS, transparency would have ruled the day, counties would have been paid their recording fees, consumers, attorneys, and title companies could easily track chain of title, and foreclosures would have been processed much more effeciently. Instead, we have servicers with their own vested interests pitted against investors who cannot readily make decisions about their pooled notes; thus, the entire foreclosure process grinds away glacially, subject to legal attack at every turn.