The Rutgers Computer and Technology Law Journal

In light of the economic collapse beginning in 2006, thousands of Americans continue to default on residential mortgages, falling prey to mortgage foreclosure actions. A plaintiff in a foreclosure action has standing “where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced.”[1]  Following the traditional mortgage-recording route, a lender-mortgagee maintains ownership of both the promissory note and the mortgage by having the mortgage recorded within the county registry and keeping the note.[2]  Thereafter, any transfer of the property’s title allows the lender to sell both the mortgage and the note, which serves as the underlying security interest in the property.[3]

However, as local regulations and mortgage database systems became more complex over time, recording mortgages within county registries became less desirable. Thus, a number of powerful contributors to the real estate mortgage industry created the Mortgage Electronic Recording System (MERS) in 1993 as a means to reduce delays associated with the traditional mortgage-recording route.[4]  Specifically, MERS developers sought to “streamline the mortgage process by using electronic commerce to eliminate paper.”[5]  Thus, “[m]ortgage lenders . . . subscribe to the MERS system and pay annual fees for the electronic processing and tracking of ownership and transfers of mortgages. Members contractually agree to appoint MERS to act as their common agent [also known as a “nominee”] on all mortgages they register in the MERS system.”[6]  In other words, a MERS transaction requires the borrower to execute a promissory note in favor of the lender and the mortgage in favor of MERS.[7]

[The Rutgers Computer and Technology Law Journal]

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