Mortgage Electronic Registration Systems (MERS) remains at the heart of the foreclosure fiasco in the minds of some, who are convinced that it simply cannot legitimately act as a stand-in for creditors. The Reston, Va.-based company--the child of GSEs and big banks--has claimed its business has been upheld repeatedly by states courts. But not in every single case.

In fact, JPMorgan said it hasn't used the MERS system since 2008 as a foreclosure agent because some local courts did not sanction it. The banks still uses MERS for mortgages originated by other lenders. In addition, some state supreme courts--in Kansas and Maine, for example--have tossed foreclosure cases because they did not think MERS, and its electronic registry, had the right to foreclose for banks.

We're also seeing some officials in various localities suggest that electronic registration isn't going to cut it. The latest challenge comes from a Virginia state lawmaker who is asking the state attorney general to look into MERS activity and whether its electronic system is capable of properly transferring and recording titles in the state, and the legal implications of not paying certain fees.

MERS claims all borrowers sign a document agreeing that MERS can act as a foreclosure agent and that all mortgages in its database are recorded in county registrars (though it's unclear exactly what this means if it is done electronically).

The problem for banks and servicers is that we're hearing these questions in multiple states. A global solution here would be preferable. By the way, MERS issues have crept into the CMBS market as well--as if the industry needs more madness. 

For more:
- here's an article on the Virginia situation in Housing Wire

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