12/19/2011 // Marlboro, NJ, USA // lesrkramskyesq // Jason Franco

Les Kramsky, a highly respected New Jersey and New York Mortgage Banking Attorney, Title Insurance Attorney, Real Estate Executive and General Counsel to the Money Store, discusses the pros and cons of the Mortgage Electronic Registration Systems (”MERS”).

MERS, based in Reston, Virginia, is a private company, which was founded it in 1995 to speed up legal record-keeping of mortgages and sales of mortgage loans through securitizations.

MERS, on behalf of lenders that own the mortgage loans, has initiated thousands of foreclosure actions around the country, as the “mortgagee of record” listed on homeowners’ mortgages. Homeowners’ lawyers contend that MERS has no right to initiate the actions because it doesn’t own the mortgage loans. Lending laws specify that only the actual owner of the loan can file a foreclosure action. Lawyers also have alleged that MERS bypassed laws requiring mortgages and refinancings to be recorded in county recorders offices. Issues have been raised in several court cases about whether MERS misled courts about ownership of the loans. MERS has strongly denied any misrepresentations or legal violations, and contends that its services have benefited homeowners as well as lenders.

However, the advantages of MERS according to Les Kramsky is “That the MERS system is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. MERS was created by the real estate finance industry and MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans. This standardization and simplification outweighs any revenue that a municipality might generate from the recording fees if these assignments were to be recorded.” Kramsky added “That the MERS system ultimately translates to savings for consumers who will not get hit by added costs from lenders passing on recording fees.”

Kramsky further stated “If the current lawsuits force the banks, and MERS, to re-evaluate and improve upon the electronic system, that could ultimately work out better for the industry.”

In a recent article that appeared in Law360 regarding MERS, Les Kramsky stated that “It might not be a bad thing for the real estate industry if the MERS sustain can be improved without being dismantled. Like anything else, sometimes you have to tweak the system to make it better.”

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