Your Guide To Understanding The MERS And Its Relationship To Your Mortgage

Each month, you send in your mortgage payment to your loan servicer. But do you know who actually owns your mortgage loan? And does that even matter?

Mortgage loans are sold often, especially loans that have long terms. If you are paying off a 15-year or 30-year fixed-rate mortgage, it's likely that your loan will be sold to new owners at least once, or possibly many more times, during the years in which you are paying it off.

Even if you are sending your monthly payment to the same loan servicing company, this doesn't mean that your loan hasn't been sold to a new party.

Most times, who owns your loan doesn't really matter. But it might if you want to refinance your mortgage under new programs offered by Fannie Mae and Freddie Mac. To qualify for these -- Freddie Mac's Refi Possible or Fannie Mae's RefiNow -- your mortgage loan must be owned or serviced by Fannie Mae or Freddie Mac.

Fortunately, finding out who owns your mortgage isn't overly complicated.

Banks and other financial institutions often sell the mortgages they originate. The most common buyers of mortgages are the two government-sponsored enterprises of Fannie Mae and Freddie Mac.

When your mortgage is transferred to a new owner, the buyer must send you a notice. 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 to send your payments to the same mortgage servicer that you’ve always sent them to. Just because your loan is sold, doesn’t mean that your mortgage servicer will change.

You can discover who owns your mortgage in several ways, either by searching on the websites of Fannie Mae or Freddie Mac, consulting a listing service known as the Mortgage Electronic Registration System (MERS) or calling your mortgage loan’s servicer.

Contact The Mortgage Servicer

You can start your search by contacting the company that services your mortgage. This is the company to which you send your mortgage payment each month.

If you are still sending in a paper statement and mailing checks, you can find your mortgage servicer’s contact information on your statement. You’ll also find your loan number, information that you’ll have to provide to the customer service representative with which you speak.

If you pay your mortgage online, log into your account. Again, you’ll find your loan number on your payment portal. You should also be able to locate the contact information for your loan servicer here.

Use Digital Lookup Tools

You can also rely on digital tools to look up the owner of your mortgage. Start with the loan lookup tools offered by Fannie Mae and Freddie Mac. These two government agencies own most mortgage loans originated 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 in the same way. Freddie Mac will ask you to provide your street address and the last four digits of your Social Security number. You can then click the "SUBMIT" button to determine if Freddie Mac owns your mortgage.

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

Equity is the difference between what you owe on your mortgage and how much your home is worth. If you owe $100,000 on your mortgage and your home is worth $180,000, you have $80,000 of equity in your home.

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 only 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 for these programs.

Check With MERS

You can also look up your mortgage through an electronic registry known as the Mortgage Electronic Registration System or MERS.

MERS is an electronic registry designed to track servicing rights and ownership interests in loans. What does this mean for consumers? They can use this system to look up who owns their mortgage loans.

To do this, log onto this page on the MERS site. You can search by your 18-digit Mortgage Identification Number (which you can find on your loan statements or online loan portal), property address and borrower details or FHA/VA/MI certificate number.

The MERS site also provides links to resources for homeowners provided by such agencies as Freddie Mac, Fannie Mae, FHA, Federal Trade Commission and other housing organizations.

When a bank or financial institution sells a mortgage, an assignment is prepared and recorded in the appropriate county land records. This assignment is a document that shows that the mortgage has been transferred to a new owner.

This can be a labor-intensive process, requiring the owners of a loan to create an assignment with the county recorder every time a loan is sold. Because mortgage loans can sell several times during their lifetimes, this would require a lot of paperwork and time from loan owners.

The mortgage banking industry created MERS to simplify this process. MERS runs a database that tracks mortgages for member companies as they are sold from one bank to another financial institution. This means that loan owners who are members of MERS no longer have to submit assignments on their own.

What does MERS mean for your mortgage loan? As a consumer, it doesn’t mean much. You’ll still need to send in your monthly payment no matter which company owns your loan.

But for the mortgage industry, it is an important way to make the recording of mortgage transactions a more efficient process.

What Is MERS’s Role In Mortgage Transactions? 

When you close on your mortgage loan, you’ll sign plenty of papers. Two of the most important, though, are the mortgage or deed of trust and the promissory note.

The mortgage or deed of trust is an agreement between you and your lender. It states that you will repay your mortgage and that your lender will hold the legal title to the property until you finish paying off your loan. The deed of trust also states what will happen if you don't repay your loan. Usually, the deed of trust states that your lender can foreclose on your property and take ownership of your home if you don't pay back what you owe.

A promissory note is a document that you sign stating how much money you are borrowing, the interest rate your lender is charging, your monthly payment amount, the number of payments you must make to repay your loan and your promise that you will repay the loan in full. This sounds similar to the deed of trust. The big difference? The deed of trust states what will happen if you stop making your loan payments. A promissory note does not include this information.

In some mortgage transactions, a mortgage will state that MERS is the mortgagee, or the lender. If you sign a deed of trust instead of a mortgage, MERS could be named as the beneficiary of your loan.

In the lending industry, these loans are known as “MERS as Original Mortgagee” or MOM loans. Why would your lender name MERS as the beneficiary or mortgagee? It saves time and recording costs. If a loan is designated as a MOM loan, lenders won't have to submit new assignments every time the loan is sold.

It's important to note that MERS never owns loan debt, even when it is named as the mortgagee or beneficiary in a loan. It also doesn't hold the loan's promissory note. Naming MERS as a mortgagee is just a way to streamline the process of recording and tracking loans as they are made and sold. It also won’t impact you: You’ll still send payments to your lender or servicer.

What Is MERS’s Role In Foreclosures?

If you stop making your mortgage payments, your lender has the right to begin foreclosure proceedings against your property. In a foreclosure, your lender takes over ownership of your home, forcing you to move. The lender will then try to sell the home to recover its costs.

In 2011, MERS enacted a rule stating that foreclosures cannot be started in its name, even if MERS is listed as the mortgagee or beneficiary of a loan. If these MOM loans do go into foreclosure, MERS will usually assign the loan back to the actual lender or the current owner of the mortgage. That lender will then be named as the party initiating foreclosure procedures.

There are two ways in which MERS can be named the mortgagee or beneficiary of a mortgage. First, as already mentioned above, MERS might be assigned as the mortgagee when the loan is first originated. In a deed of trust, MERS can be named as the beneficiary of the mortgage loan when it is originated.

But MERS can also be named as a mortgagee or beneficiary later in a loan's life. If this happens, MERS then tracks the transfers, or sales, of the loan as it is bought and sold. Again, this means that lenders won't have to create new assignments every time the loan is sold.

While MERS doesn’t have much impact to borrowers and homeowners, it is important for lenders. If a loan is tracked by MERS, lenders won’t have to submit new paperwork every time a loan is sold. If a loan is sold often during its lifetime, which does happen, this can save lenders a significant amount of time and paperwork.

MERS has little impact on homeowners paying off their mortgages. That said, there are some pros and cons of the MERS.

Pros

MERS does save lenders time. It also saves them money.

The hope is that this reduces the cost of originating a mortgage loan for consumers, too. It’s not certain if this actually happens.

Cons

The biggest con for homeowners? MERS can be confusing. If MERS is named as a beneficiary or mortgagee of your mortgage – a MOM loan – you might think that MERS has a more important role in your home loan than it actually does.

Lenders name MERS as a mortgagee or beneficiary to eliminate paperwork when a loan is sold. MERS does not take ownership of your loan or own your mortgage debt. You’ll still make your payments to your lender or mortgage servicer.

If you need to know whether your loan is a Fannie Mae or Freddie Mac loan, each government-sponsored enterprise has a look-up tool to help you. As a homeowner, you might never need to think about MERS. However, this electronic registry is a way to save time when loans are bought and sold. As a homeowner, this will play no role in how you make your monthly payments.