11 Prob. & Prop. 33 (1997)
Yes, There Is Life on MERS; Arnold, R. K.

handle is hein.journals/probpro11 and id is 227 raw text is: Yes,         Is Life on

By R. K. Arnold
fter nearly four years on the drawing board, Mortgage Electronic Regis-
tration Systems, Inc., commonly known as MERSM, is a reality. MERS is the
result of an industry effort to reduce the need for mortgage assignments in
the residential mortgage market and thus increase efficiency and reduce
costs. MERS will act as mortgagee of record for any mortgage loan regis-
tered on the computer system MERS maintains, which is called the
MERS SystemTM. It will then track servicing rights and beneficial
ownership interests in those loans and provide a platform for mort-
gage servicing rights to be traded electronically among its mem-
bers without the need to record a mortgage assignment in the
public land records each time.
Some have called MERS the most significant event for the
mortgage industry since the formation of Fannie Mae and Fred-
die Mac. Others have compared it to the creation of uniform
mortgage instruments, which have become standard through-
out the residential mortgage industry. This suggests that the
journey to MERS will have a tremendous effect on the mort-
gage industry.
What Is MIERS?
MERS is a Delaware nonstock corporation owned by its
members, who, in most cases, are also its users. Members pay
annual fees to belong and transaction fees to execute electronic
transactions on the MERS System. Members exercise control of
the company through a board of directors who serve staggered
two year terms. The board is empowered to set rules, fees and
penalties for operating the MERS System.
MERS has three classes of membership: the Agency Class, com-
posed of Fannie Mae and Freddie Mac; the Lender/Servicer Class, for
companies engaged primarily in lending and servicing mortgage loans;
and the Related-Industry Class, which includes title companies, mortgage
insurance companies and others indirectly involved with the mortgage
business. The federal government agencies focused on housing-FHA, VA
and Ginnie Mae-serve on the MERS Advisory Council.
The MERS project formally began in October 1993 when Fannie Mae, Fred-
die Mac and Ginnie Mae published the Whole Loan Book Entry White Paper,
which analyzed the need for an electronic mortgage registration system for
mortgage rights. The acronym MERS was coined soon thereafter. The Mort-
gage Bankers Association of America played a key role until MERS was incor-
porated in October 1995 and is a charter member. The charter members initially
capitalized the company and the company hired an executive team to take
charge of the project on a full time basis in February 1996.
MERS awarded a contract to Electronic Data Systems (EDS) to develop the
technology system. MERS owns and controls the system; EDS services the sys-
tem for a set portion of the transaction fees. System development began in
earnest in July 1996 and MERS officially launched in April 1997.
The MERS System is a secure network. Access levels depend on a member's
relationship to a particular mortgage loan. For instance, servicers and investors

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