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 ones that have long terms, like 15-year and 30-year fixed-rate mortgages.

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 government-sponsored enterprises. To qualify for 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 is easy thanks to the Mortgage Electronic Registration System (MERS). Let’s take a closer look at what MERS is and how it works.

MERS is an electronic registry designed to track servicing rights and ownership interests in loans.

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 indicates 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.

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

How To Use MERS To Look Up Your Mortgage

Homeowners can visit the MERS website to look up the owner or servicer of their mortgages.

To do this, log onto this page on the MERS site. You can search with 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 agencies such as Freddie Mac, Fannie Mae, the Federal Housing Administration, the Federal Trade Commission and other housing organizations.

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. Your lender might name MERS as the beneficiary or mortgagee to save 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’s named as the mortgagee or beneficiary in a loan. It also doesn’t hold the loan's promissory note nor store the eNote – or electronic promissory note – from your eMortgage. Naming MERS as a mortgagee is just a way to streamline the process of recording and tracking loans as they are made and sold.

This won’t impact you as you’ll still send monthly payments to your lender or servicer.

The Role Of MERS 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.

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

Pros Of MERS

MERS saves lenders time and money. The hope is that this reduces the cost of originating a mortgage loan for consumers, too. But it’s not certain if this actually happens.

Cons Of MERS

The biggest con for homeowners is that 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 – but it doesn’t. It’s mostly designed to help lenders. You still make your payments to your lender or mortgage servicer.

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, it doesn’t mean that your mortgage servicer will change.

Aside from consulting MERS, you can discover who owns your mortgage in several ways, either by searching on the websites of Fannie Mae or Freddie Mac 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’re still sending in a paper statement and mailing checks, you can find your mortgage servicer’s contact information on your statement as well as your loan number.

If you pay your mortgage online, log into your account and you’ll find your loan number on your payment portal. You should also be able to contact your loan servicer online.

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 of the 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.

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.

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 have 3% equity in your home – Fannie Mae’s RefiNow^TM and Freddie Mac’s RefiPossible^Ⓡ. But your loan must be owned by Fannie or Freddie for these programs.

The Mortgage Electronic Registration System (MERS) is an electronic registry that tracks the servicing rights and ownership interests of residential and commercial mortgage loans. 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.

Looking to learn more about what happens when a mortgage is sold? Read about mortgage servicing companies and how they work.