What is the MERS System for mortgages?

Navigating the mortgage process can feel overwhelming, especially when you receive a letter saying your loan has been transferred to a new lender or you need to pay a different servicer. That’s where the MERS System comes in.

Run by Mortgage Electronic Registration Systems Inc., the MERS System is a national database tracking who services and owns mortgage loans. Instead of relying on paper trails and local county records every time a loan changes hands, the MERS System keeps everything in one easy-to-access place.

While you’ll rarely need to use the MERS System, it’s good to know you can track your loan if you need to.

How does the MERS System work?

The MERS System is an electronic registry that tracks mortgage loan servicers and ownership. Established in the 1990s by the mortgage banking industry, the MERS System simplifies the process of transferring mortgage ownership and servicing by eliminating the need to record changes in ownership at the county level.

As a homeowner, the MERS System lets you easily find out who owns and services your mortgage, as long as it’s included in the MERS database. For lenders, it offers a streamlined system with lower costs when transferring loans to different lenders, such as Fannie Mae, Freddie Mac, Ginnie Mae, or when the loan becomes part of a mortgage bond.

When a bank or financial institution sells a mortgage, an assignment document indicating that a mortgage has been transferred to a new owner, is prepared and recorded with the county. Before the MERS System, this was a manual, labor-intensive process. The mortgage banking industry created the MERS System to simplify and automate the process.

When a loan is registered with the MERS System, MERS becomes the mortgagee (lender) in the county’s land records and acts as a nominee for the actual lender and subsequent buyers. Instead of recording every sale or transfer with the county, the change in ownership is recorded electronically in the MERS System.

The MERS system efficiently tracks and manages mortgage ownership. Lenders and investors with access to the MERS System no longer must submit assignments independently, significantly reducing paperwork and administrative costs. The system provides clarity and ease of access for both lenders and borrowers.

How to use the MERS System to look up your mortgage

If your lender participates in the MERS System, you can visit its website to look up the owner or servicer of your mortgages.

To look up your mortgage, head to the MERS ServicerID page. You can look up a loan using your 18-digit Mortgage Identification Number, usually found on your loan statements or online loan portal; property address; or borrower details. You also can use your Federal Housing Administration loan, Veterans Affairs loan, or mortgage insurance certificate number.

MERS System controversies

Prior to the 2008 financial crisis, the MERS System played a behind-the-scenes role in accelerating the sale and securitization of home loans. But while the MERS System improved efficiency, it also obfuscated loan ownership. When foreclosures surged, many borrowers had no idea who to contact for help or who had the legal right to seize their homes.

That lack of transparency caused confusion in the legal system, with some states ruling MERS had no standing to foreclose while others allowing it. Though designed for efficiency, the MERS System contributed to a wave of preventable foreclosures.

Additionally, local governments lost out on billions in recording fees, leading to many lawsuits from counties looking to recoup those funds from MERS System operator and owner MERSCORP Holdings Inc.

Pros and cons of the MERS System

The MERS System has little effect on homeowners paying off their mortgages. That said, there are some pros and cons to consider.

Pros

• Saves time and money: The MERS System reduces the need for repeated assignments and recording fees, potentially lowering borrowing costs.
• Simpler mortgage tracking. The MERS System simplifies mortgage ownership tracking, making it easier for borrowers to determine who owns their loan.
• Streamlines mortgage processes. The electronic registration system streamlines mortgage servicing and transfer processes. This can lead to faster transactions and potentially quicker loan modifications or refinances.

Cons

• Confusion for homeowners: If the MERS System is named as a beneficiary or mortgagee of your mortgage, you might mistakenly think that MERS has a significant role in your home loan. It’s mostly designed to assist lenders. You still make your payments to your mortgage lender or servicer.
• Potential lack of transparency: Some consumers may feel like the MERS System lacks transparency because it separates the mortgage ownership from the local county records. This can make it difficult to trace the actual owner of the mortgage.
• Legal challenges: There have been legal challenges and controversies surrounding the MERS System, with some courts questioning its standing in foreclosure proceedings, which can create uncertainty for borrowers.

Other ways to determine who owns your mortgage

The mortgage buyer, usually another mortgage company or investment company, must notify you if your mortgage is transferred to a new owner. When this happens, you might have to send your mortgage payment to a new address or use a new website to make your payments if you pay online. But often, you’ll continue sending your payments to the same mortgage servicer you’ve always worked with for your loan.

In addition to consulting the MERS System, you can find out who owns your mortgage by searching the websites of Fannie Mae or Freddie Mac, if they’re involved with your loan, or calling your mortgage loan’s servicer.

Contact the mortgage servicer

You can start your search by contacting the company servicing your mortgage. This is the company to which you send your mortgage payment each month. For example, if your home loan is with Rocket Mortgage®, there are several ways you can contact us to get your questions answered.

If you’re still receiving paper statements, you can find your mortgage servicer’s contact information and your loan number on your statement. If you pay your mortgage online, log into your account, and you’ll find your loan details on your payment portal. You should be able to contact your loan servicer online through that portal or the servicer’s website.

Use digital lookup tools

If you’re comfortable handling your finances online, you can use digital tools to find out who owns your mortgage. Start with the loan lookup tools offered by Fannie Mae and Freddie Mac, the two largest mortgage loan agencies in the United States.

To use Fannie Mae's Loan Lookup Tool, you'll need to enter your name, street address, and the last four digits of your Social Security number. Once you do, Fannie Mae will tell you if it owns your mortgage. Freddie Mac's Loan Look-Up Tool works similarly.

Why does it matter who owns your mortgage?

Knowing if Fannie or Freddie owns your home can be especially important if you want to refinance your mortgage loan but don't have enough home equity

Lenders usually require that you have at least 20% equity in your home to refinance. Freddie Mac and Fannie Mae, though, now offer refinance programs that allow you to refinance even if you have 3% equity in your home – Fannie Mae’s RefiNow™ and Freddie Mac’s Refi Possible?. But your loan must be owned by Fannie or Freddie to access these programs.

FAQ

Here are answers to some common questions about the MERS System.

Is the MERS System a loan servicer?

The MERS System is not a loan servicer, it acts as a recordkeeping system to track which servicer is assigned to each loan, among other details. You can use the MERS System to find your loan’s servicer, but it does not take payments for mortgage loans.

What is the MERS System’s fee for mortgages?

MERS charges lenders a membership fee, and lenders or borrowers must pay the fee to register a loan in the MERS database. Annual membership fees range from around $500 to $7,500 per year, and the current transaction fee is about $25 per loan.

Why do mortgage lenders charge a fee?

Mortgage lenders charge a range of fees for their services when originating or refinancing a mortgage loan. Like all companies, lenders use the fees to pay staff and cover other expenses related to running their mortgage lending business.

Can I remove my mortgage from the MERS System?

In most cases, you can’t remove your mortgage from the MERS System. The decision of whether to use the MERS System for your loan is up to the lender, not the borrower.

How did the MERS System contribute to the 2008 housing crisis?

The MERS System was designed to simplify mortgage transfers, but during the 2008 financial crisis, it contributed to confusion about who owned millions of home loans. The lack of transparency exposed gaps in the system and sparked lawsuits and legislative scrutiny.

The bottom line: The MERS System tracks mortgage ownership and servicing

The MERS System is a behind-the-scenes tool that tracks who owns and services mortgages. While you may never need to interact with it directly, the MERS System makes loan transfers smoother and more efficient. Knowing how it works can help you feel more informed and confident as you navigate your homeownership journey.

Ready to take the next step in your homeownership journey or refinance your current loan? Start your mortgage application today to find the best option for you.