maine mers assignment

• Bankruptcy & Finance

MERS’s “Maine” Purpose: Recognizing Key Differences Between MERS Mortgages

• A line of judicial opinions from Maine’s Supreme Court calls into question the ability of foreclosing lenders to rely on mortgage assignments from Mortgage Electronic Registration Systems, Inc. when proving ownership of the mortgage.
• However, not all MERS mortgages are the same. Some have key differences that could distinguish them from Maine’s more problematic MERS rulings.
• Before writing off assets or otherwise determining courses of action on MERS mortgages, foreclosing lenders in Maine should check whether they can distinguish the language in their mortgage from the language Maine’s Supreme Court found controlling.

Maine’s Supreme Court recently held that a foreclosing lender’s equitable interest in the mortgage does not by itself equate to ownership of the mortgage and does now allow courts to compel the mortgage’s assignment. * Beal Bank USA v. New Century Mortg. Corp. , 2019 ME 150, ¶ 15. The opinion revives concerns over the viability of foreclosing Maine mortgages involving Mortgage Electronic Registration Systems, Inc. (MERS).

MERS operates as an electronic mortgage registry whereby borrowers taking out mortgage loans give the mortgage to MERS as nominee for the lender’s successors and assigns. Although MERS mortgages generally include standardized language, different model mortgages utilize different descriptions of MERS’s core functions and purpose. Typically, the different MERS language makes little substantive difference in its powers. However, where state courts interpret MERS’s authority based on specific language in the mortgage, as Maine’s courts do, foreclosing lenders should check their specific mortgage language before proceeding.

In 2010, Maine’s Supreme Court analyzed MERS language with the following description in the paragraph defining MERS: “For purposes of recording this mortgage, MERS is the mortgagee of record.” Mortg. Elec. Reg. Sys. v. Saunders , 2010 Me. 79, ¶ 9 (emphasis removed). Relying at least in part on this language, the court held that MERS lacked standing to foreclose because the borrower gave MERS the right to only record the mortgage. Four years later, the court extended its MERS analysis from Saunders to mortgage assignments from MERS, holding that the assignments transfer only MERS’s right to record the mortgage. See Bank of America, N.A. v. Greenleaf , 2014 Me. 89, ¶ 17. This can create problems for foreclosing lenders who often rely on assignments from MERS to demonstrate their ownership of the mortgage.

Maine’s Supreme Court recently confirmed that the original lender can ratify a prior MERS assignment to give it the same effect as if the original lender assigned its interests in the mortgage rather than MERS. U.S. Bank N.A. v. Gordon , 2020 Me. 33, ¶ 10. This allows foreclosing lenders to correct the chain of assignments with an assignment or other document from the original lender acknowledging the transfer. Similarly, language in later documents, such as loan modification agreements, sometimes separately conveys full rights in the mortgage to a subsequent entity other than MERS, validating mortgage assignments from those entities.

What can foreclosing lenders do when the original lender no longer exists, and no other documents can demonstrate a transfer of the original lender’s full mortgage interest to the foreclosing lender? Before writing off the asset or making other decisions about how to proceed, lenders should confirm that their specific mortgage includes the same relevant MERS language that Maine’s Supreme Court considered controlling in Saunders and its progeny. As discussed below, some MERS mortgages include key differences relevant to the Saunders analysis.

Proof of Mortgage Ownership

Maine law requires the lender to establish the following elements to foreclose a delinquent mortgage: (1) the existence of the mortgage; (2) proof of ownership of the mortgage and note, including all assignments and endorsements; (3) a breach of the condition in the mortgage; (4) the amount due on the note, including attorney’s fees and costs; (5) the order of priority and any amounts that may be due to other interested parties; (6) evidence of a properly served notice of default and a mortgagor’s right to cure per 14 M.R.S. § 6111; (7) proof of completed mediation (or a waiver or default of mediation); and (8) SCRA compliance affidavit. See Chase Home Fin. LLC v. Higgins, 2009 ME 136, ¶ 11.

For the second element (proof of ownership of the mortgage and note), most foreclosing lenders rely on their status as the mortgage note’s holder along with a chain of mortgage assignments from the original lender to the foreclosing lender. Under the MERS system, the borrower usually gives the mortgage note to the original lender while separately conveying the mortgage to MERS as nominee for the original lender and the original lender’s successors and assigns. See, e.g., Saunders , 2010 Me. 79, ¶ 8. In many judicial foreclosure states, MERS then assigns the mortgage to a subsequent note holder when necessary to permit foreclosure. Case law from Maine’s Supreme Court has long complicated this system.

Saunders , Greenleaf , and Beal

In Saunders , MERS filed a foreclosure action in its own name, seeking to foreclose the mortgage as the nominee for the note holder. Maine’s Supreme Court held that MERS lacks standing to foreclose under Maine law. Saunders , 2010 Me. 79, ¶ 15. The court specifically quoted the applicable language in the mortgage at issue there:

C) “MERS” is Mortgage Electronic Registrations Systems, Inc. MERS is a separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns. MERS is organized and existing under the Laws of Delaware, and has an address and telephone number of P.O. Box 2026, Flint, MI 48501- 2026, tel. (888) 679-MERS. FOR PURPOSES OF RECORDING THIS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD. * * * [Borrowers] mortgage, grant and convey the Property to MERS (solely as nominee for Lender and Lender’s successors and assigns), with mortgage covenants, subject to the terms of this Security Instrument, to have and to hold all of the Property to MERS (solely as nominee for Lender and Lender’s [***9] successors and assigns), and to its successors and assigns, forever. * * * [Borrowers] understand and agree that MERS holds only legal title to the rights granted by [Borrowers] in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right: (A) to exercise any or all of those rights, including, but not limited to, the right to foreclose and sell the Property; and (B) to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument. * * * [Borrowers] grant and mortgage to MERS (solely as nominee for Lender and Lender’s successors in interest) the Property described [below].

Saunders , 2010 Me. 79, ¶ 9 (emphasis in original).

Relying on this quoted language, Maine’s Supreme Court found that “[t]he only rights conveyed to MERS in either the [borrower’s] mortgage or the corresponding promissory note are bare legal title to the property for the sole purpose of recording the mortgage.” The court noted that “[e]ach reference to MERS within the [borrower’s] mortgage describes MERS solely as the ‘nominee’ to the lender,” and it explained (quoting Black’s Law Dictionary 1149 (9th ed. 2009)) that “[a] nominee is a ‘person designated to act in place of another, [usually] in a very limited way,’ or a ‘party who holds bare legal title for the benefit of others or who receives and distributes funds for the benefit of others.’”

The Saunders court further noted that under the mortgage, the borrowers expressly gave the lender—not MERS—the rights provided for in the mortgage, and that the borrowers did not make any of the mortgage covenants to or in favor of MERS. Saunders , 2010 Me. 79, ¶ 10. Accordingly, the court determined that MERS did not qualify as a mortgagee under Maine’s foreclosure statute (discussing 14 M.R.S. §§ 6321–6325).

The Saunders court next considered MERS’s standing under traditional standing rules that require a plaintiff to “show that it has suffered an injury fairly traceable to an act of the mortgagor and that the injury is likely to be redressed by the judicial relief sought.” Saunders , 2010 Me. 79, ¶ 14. Noting again that “[t]he only right MERS has in the [borrower’s] mortgage and note is the right to record the mortgage,” the court held that “MERS lacked standing to institute foreclosure proceedings and could not invoke the jurisdiction of our trial courts.”

Maine’s Supreme Court later extended its Saunders ruling to mortgage assignments from MERS. See Greenleaf , 2014 Me 89. In Greenleaf , the court analyzed identical mortgage language as the language at issue in Saunders . As in Saunders , the court quoted the specific MERS language at issue, including the definition paragraph for MERS that read: “ FOR PURPOSES OF RECORDING THIS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD. ” (Emphasis in original.)

Based on this specific language, Maine’s Supreme Court reiterated that “the mortgage conveyed to MERS only the right to record the mortgage as nominee for the lender.” Greenleaf , 2014 Me. 89, ¶ 15. Thus, the court found that “[w]hen MERS then assigned its interest in the mortgage . . . it granted . . . only what MERS possessed—the right to record the mortgage as nominee.” Accordingly, the record the foreclosure plaintiff provided to show ownership of the mortgage “demonstrate[d] only a series of assignments of the right to record the mortgage as nominee, but no more.”

After Saunders and Greenleaf , foreclosing lenders in Maine “continued to argue that a holder of a note secured by a mortgage has an equitable pre-foreclosure right to compel an assignment of the mortgage.” Fannie Mae v. First Magnus Fin. Corp. , No. RE-2016-110, 2019 Me. Super. LEXIS 104 *3 (Penobscot C’ty Oct. 24, 2019). Unfortunately, Maine’s Supreme Court recently rejected that work-around. See Beal , 2019 Me. 150.

In Beal , the court considered Maine’s equitable trust doctrine that “one who takes a mortgagee’s title holds it in trust for the owner of the debt to secure the debt for which the mortgage was given.” 2019 Me. 150, ¶ 7 (quotations omitted). It rejected the plaintiff’s argument that it could compel the original mortgagee to assign it the mortgage because the original mortgagee held the mortgage in trust for the plaintiff. Noting that “the language of the mortgage was identical to that in [ Greenleaf ]”, the court held that applying the equitable trust doctrine in the situation presented “would be at odds with our holding in Greenleaf .”

These three decisions— Saunders , Greenleaf , and Beal —call into question the viability of mortgage foreclosures involving some MERS mortgages and assignments. However, they should not apply to all MERS mortgages in Maine.

Distinguishing Saunders , Greenleaf , and Beal

Importantly, Saunders , Greenleaf , and Beal all specified that the language in the mortgages at issue there included the identical “for purposes of recording this mortgage, MERS is the mortgagee of record” language. See Saunders , 2010 Me 79, ¶ 9; Greenleaf , 2014 Me. 89, ¶ 14; Beal , 2019 Me. 150, ¶ 3 n.4. Other courts in Maine to have considered issues affected by Saunders and its progeny have also expressly confirmed that the language is the same. See U.S. Bank v. Gordon , 2020 Me 33, ¶ 25 (Horton, J. concurring); Knope v. Green Tree Servicing , 2017 Me. 95, ¶ 3 n.1 (referencing specifically the “for purposes of recording this mortgage” language) (capitalization removed); First Magnus , 2019 Me. Super. LEXIS 104, *2 n.1.

However, not all MERS mortgages include the “for purposes of recording” language. For example, at least some MERS mortgages approved for use in Maine by the Fair Housing Association (FHA) instead read:

This Security Instrument secures to Lender: (a) the repayment of the debt evidenced by the Note, with interest, and all renewals, extensions and modification of the Note; (b) the payment of all other sums, with interest, advanced under paragraph 7 to protect the security of this Security Instrument; and (c) the performance of Borrower’s covenants and agreements under this Security instrument and the Note. For this purpose, Borrower does hereby mortgage, grant and convey to MERS (solely as nominee for Lender and Lender’s successors and assigns) and to the successors and assigns of MERS the following described property . . . .

* * * Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument; but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender, including, but not limited to, releasing or canceling this Security Instrument.

Mortgage, at 1–2 (emphasis added). These alternate MERS mortgages differ from the MERS mortgages discussed in Saunders and its progeny in key respects.

Whereas Maine’s Supreme Court interpreted the mortgage at issue in Saunders as limiting MERS’s status as nominee to “purposes of recording this mortgage,” the alternative MERS mortgages quoted above expressly confirm that the borrower grants the mortgage to MERS for the purpose of securing repayment of the debt to the lender. This distinction is important because even to the extent that Saunders and Greenleaf focused on MERS’s status as nominee, the term “nominee” by itself does not mean “party limited to recording a document.” Rather, Maine’s Supreme Court describes a nominee as “a person designated to act in place of another, usually in a very limited way.” Saunders , 2010 Me. 79, ¶ 10 (internal quotations omitted). Those limitations naturally arise from the contract itself, i.e., the specific mortgage language at issue.

The Saunders court construed the mortgage’s language there to mean that the borrower gave the mortgage to MERS as the lender’s nominee for the purpose of recording the mortgage. See Saunders , 2010 Me 79, ¶ 10. Yet under other MERS mortgages, the borrower conveys the mortgage to MERS for the purpose of securing repayment to the lender. The borrower further expressly agrees that the interest it gives to MERS—which it gives for the purpose of securing repayment—includes the right to exercise “any or all” of the lender’s interests “if necessary to comply with law or custom.” Those rights specifically include without limitation “the right to foreclose and sell the Property.”

Thus, under some MERS mortgages’ alternative language, the borrower grants MERS a mortgage interest allowing it to exercise the lender’s right to foreclose for the purpose of securing repayment. In other words, the mortgage bestows on MERS a contractual right to foreclose, or more importantly for this articles purposes, a contractual right to take any action “necessary to comply with law or custom” to secure repayment to the lender through foreclosure.

Maine’s Supreme Court has repeatedly recognized that MERS can assign only the mortgage rights it has. See, e.g., Greenleaf , 2014 Me. 89, ¶ 16. In Saunders and its progeny, the mortgages at issue limited those rights to “purposes of recording,” at least according to Maine’s Supreme Court. 2019 Me. 79, ¶ 9. The language in other MERS mortgages does not limit the rights to the purpose of recording; it limits them only to any interests necessary to comply with law or custom to secure repayment to the lender.

Moreover, MERS’s lack of standing to foreclose should not impact this analysis. Maine’s Supreme Court acknowledges that its standing analysis is separate and distinct from the question of mortgage ownership. See Greenleaf , 2014 Me. 89, ¶ 22 n.13. This suggests that MERS’s lack of standing to foreclose should not limit its ability to assign its contractual rights under the mortgage to a party who could demonstrate standing.

Under Maine law, MERS lacks standing to foreclose because it does not qualify as a mortgagee under the applicable statute and because it does not suffer an injury sufficient to give the court jurisdiction. See, e.g., Saunders , 2010 Me. 79, ¶¶ 10, 14–15. However, because standing and ownership are separate issues, Maine law could still allow MERS to assign its contractual rights under the alternative MERS mortgages, including its right “to exercise any or all of [the lender’s] interests, including, but not limited to, the right to foreclose.”

Put differently, MERS can assign whatever interest it has in the mortgage to another party. See, e.g., Greenleaf , 2014 Me. 89, ¶ 16. For MERS mortgages that do not limit MERS’s authority to recording purposes, those interests include rights beyond just recording. If MERS assigns those interests to a subsequent note holder who can establish standing, then the note holder should properly acquire all the same interests in the mortgage that the original lender had, and no legal mechanism should preclude the note holder from foreclosing.

Notably, this analysis fully comports with Maine’s traditional understanding of a nominee as holding “bare legal title for the benefit of others.” Saunders , 2010 Me. 79, ¶ 10. As nominee, MERS holds legal title to the mortgage interests for the benefit of the lender and the lender’s successors and assigns. When MERS assigns that legal title to the party for whom it holds it—i.e., the lender’s successor and assign—MERS’s legal title merges into the beneficiary-assignee’s interests, and the beneficiary-assignee acquires full rights under the mortgage. Where the mortgage limits MERS’s interest to “purposes of recording” under Maine case law, MERS can only transfer that limited interest. See, e.g., Greanleaf , 2014 Me. 89, ¶ 17. However, mortgages that do not limit MERS’s interest to recording purposes should not create similar impediments to foreclosure.

The impact of different MERS mortgage language under Saunders and Greenleaf appears untested in Maine courts. Until the Beal decision, lenders could still seek foreclosure under the position that the original lender holds any mortgage interest MERS itself could not assign in equitable trust for the party to whom MERS assigned its interests, meaning the foreclosing lender could compel a mortgage assignment from the original lender and continue with the foreclosure. See Beal , 2019 Me. 150, ¶ 8. Now that Maine’s Supreme Court has shot down the equitable trust argument, however, foreclosing lenders must seek alternative arguments to enforce their mortgage rights. Before they decide how to proceed, they should check their Maine mortgage to see how it describes MERS’s main purpose.

*  Kevin M. Hudspeth serves as of counsel to Maurice Wutscher LLP, a national financial services law firm, where he practices in the appellate, consumer credit, and regulatory compliance groups. He has extensive experience with real estate litigation in Ohio, Illinois, and other jurisdictions throughout the country. He regularly advises attorneys and clients about contested foreclosure issues arising in multiple states.

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Turning Over a New Leaf: Maine Law Court Provides Path for Foreclosing Entities to Cure Greenleaf Defects with Assignments of Mortgage and Signals That Reconsideration of Greenleaf May Be Warranted

In July of 2014, the Supreme Judicial Court of Maine (“SJC”), sitting as the Law Court (“Law Court”), decided Bank of America, N.A. v. Greenleaf ,[1] which upended residential mortgage foreclosures in Maine. In Maine and elsewhere, lenders routinely name Mortgage Electronic Registration Systems, Inc. (“MERS”) as the mortgagee to act as nominee for the lender and its successors and assigns.[2] Prior to foreclosure, MERS typically executes and publicly records a written assignment of mortgage to the foreclosing entity, generally the owner of the underlying promissory note, so that that entity will hold legal title to the mortgage, and thus have standing to foreclose. In Greenleaf , however, the Law Court held that an assignment of mortgage from MERS is ineffective to transfer an interest in the mortgage to another entity.[3] The Court concluded that MERS only had the right to record a mortgage on behalf of the lender — nothing more.[4] Greenleaf thus substantially impacted residential mortgage foreclosures in Maine because, thereafter, courts have routinely held that a MERS assignment in the chain of title may defeat the foreclosing entity’s standing to foreclose. The practical impact of Greenleaf has been that, in many cases, the noteholder lost the right to enforce the mortgage.

In the five years since Greenleaf was decided, foreclosing entities have worked to find a way in which to enforce security instruments that contained a MERS assignment in the chain of title.[5] On March 17, 2020, however, the Maine Law Court decided U.S. Bank, N.A., as Trustee v. Gordon ,[6] which provides a workable solution.

In Gordon , the Law Court considered whether the originating lender could cure a Greenleaf issue by executing and publicly recording a “Ratification of Assignment,” confirming that the original lender intended to assign all of its interests in the mortgage to MERS and any subsequent assignee, and not merely just the right to record. The Law Court concluded that ratification of a prior assignment of mortgage is a valid means to establish ownership of the mortgage.[7] Thus, Gordon provides a clear path forward, and much needed relief, to lenders who seek to overcome Greenleaf issues in the chain of title.[8] A copy of the Gordon decision can be found here .

Gordon also includes a welcome bonus for mortgagees operating in Maine. Justice Horton, who joined the SJC in February of 2020 (well after Greenleaf), authored a nearly 10-page concurring opinion questioning the legal basis for Greenleaf and its impact on future cases. While the majority held that ratification of the mortgage assignment passed legal title of the mortgage to the foreclosing entity, Justice Horton indicated that he would have gone even further and held that MERS’s original assignment of mortgage was sufficient under Maine law.[9] His conclusion is directly at odds with Greenleaf , a decision that Justice Horton asserts “depart[s] substantively from our longstanding precedent and from the modern rule regarding transfer of mortgages.”[10] This is because historically, ownership of a residential mortgage automatically followed ownership of the note that was secured by the mortgage.[11] In fact, in Justice Horton’s view, Greenleaf “departed from our previous view that MERS also held legal title to the mortgage” (in addition to the right to record it).[12] Justice Horton argues that by severing ownership of the note and mortgage regardless of the intentions of the parties, Greenleaf was “contrary to our precedent and the modern rule on the transfer of mortgages.”[13] And, as Justice Horton unabashedly stated: 

I would revisit our recent mortgage law jurisprudence in the interest of stare decisis. Due to the inherently draconian consequences of foreclosure and for other reasons, we should, and we do, require strict compliance by the plaintiff in any foreclosure action, and we can do so in keeping with longstanding precedent.[14]

Thus, Gordon is not only significant because it provides a clear framework to overcome Greenleaf issues, but it also signals a possible sea change in the thinking of Maine’s highest court when it comes to its recent foreclosure related jurisprudence. Perhaps soon, the Court will follow Justice Horton’s lead and revisit Greenleaf in its entirety. 

[1] 2014 ME 89.

[2] The MERS® System is a national electronic database owned and operated by MERS’s parent company MERSCORP Holdings, Inc., which tracks changes in servicing rights and beneficial ownership interests in mortgage loans registered in the MERS® System by MERS® System Members. MERS is named as the mortgagee of record in the mortgage so that the beneficial ownership and servicing rights of the promissory note, secured by the mortgage, may be transferred among MERS members without the need to publicly record assignments of mortgage. The mortgage lien is not assigned or transferred since MERS remains the common agent of the original and successor note owners until a lien release or assignment from MERS is recorded.

[3] See Greenleaf , 2014 ME 89, ¶¶ 14–17.

[4] Id . at ¶ 15.

[5] After Greenleaf , MERS advised its Members to obtain quitclaim assignments from the original lender (if possible) to show that any residual interest the original lender retained would be transferred to the current assignee of the mortgage. Although the Law Court had affirmed several judgments of foreclosure where a quitclaim assignment was in the record, it had not directly addressed whether a quitclaim assignment (or a form of a ratification of assignment, executed by the original lender) would be sufficient to transfer ownership of the mortgage.

[6] 2020 ME 33.

[7] Id . at ¶¶ 10-11.

[8] In footnote 4 of the Concurrence, Justice Horton recognized that in cases where the original lender is a defunct entity, a ratification may be impossible and that a Greenleaf defect may still be difficult to overcome.

[9] Gordon , 2020 ME 33, ¶¶ 13–14, 30 (Horton, J., concurring).

[10] Id . at ¶¶ 14, 25.

[11]  Id . at ¶¶ 15–24.

[12] Id . at ¶ 25. 

[13] Id . at ¶ 26.

[14] Id . at ¶ 29. 

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• Featured Articles
• / Selling Guide
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• / Subpart B8: Closing: Legal Documents
• / Chapter B8-7: Mortgage Electronic Registration System (MERS)

B8-7-01, Mortgage Electronic Registration Systems (MERS), Inc. (12/13/2023)

Introduction.

The MERS system is an electronic system that assists in the tracking of loans, servicing rights, and security interests. To initiate the electronic tracking, the seller/servicer assigns a special MERS Mortgage Identification Number (MIN) to the loan and registers it in MERS. This topic contains information about MERS, including:

• Naming MERS as the Nominee for the Beneficiary in the Security Instrument 
• Requirements for the Use of MERS in Specified Geographic Areas 
• MERS Registration 
• Use of the MIN 
• Mortgage Assignment to MERS 
• Termination of MERS 

Naming MERS as the Nominee for the Beneficiary in the Security Instrument

A seller/servicer that wants to register a newly originated loan (but not a co-op share loan) with MERS may prefer to designate MERS as the nominee for the beneficiary in the security instrument. Doing so, eliminates the need for a subsequent assignment of the security instrument should the seller/servicer sell (or transfer servicing of) the loan to another seller/servicer that is a member of MERS. In such cases, the applicable security instrument must be modified to:

show MERS as the nominee for the seller/servicer,

define and name the originating seller/servicer, and

obtain the borrower’s acknowledgment of MERS’ role in the mortgage transaction.

If the seller/servicer encounters a situation where Fannie Mae is the owner of record for a loan because the original assignment of the loan to Fannie Mae was recorded in the public records, the seller/servicer must correct the error before it completes the MERS registration by:

preparing an assignment of the loan from Fannie Mae to MERS,

sending the assignment to Fannie Mae for execution, and

recording the assignment in the public records.

Changes that must be made to create a standard MERS security instrument for each jurisdiction may be found in the Instructions document for each state-specific security instrument (see Fannie Mae's Legal Documents  website), with the exception of loans secured by property located in certain geographic areas, as described below.

The seller/servicer is responsible for the accurate and timely preparation and recordation of the security instrument and any MERS-related documents required to be used in specific geographic areas. Sellers/servicers must also take all reasonable steps to ensure that information pertaining to MERS is updated and accurate at all times.

Even when MERS is named as the nominee for the beneficiary in the security instrument, it has no beneficial interest in the mortgage. All actions that MERS takes with respect to a loan are based on the instructions initiated by the originating seller, Fannie Mae, or the servicer. The originating seller remains responsible for all of its Contractual Obligations and any liability that it or Fannie Mae incurs as a result of the MERS registration, any MERS transaction, or the failure of MERS to perform any obligation with respect to a MERS-registered loan. In addition, the seller/servicer is solely responsible for any failure to comply with the provisions of its MERS Member Agreement, Rules, and Procedures.

Requirements for the Use of MERS in Specified Geographic Areas

In the states listed below, sellers/servicers must use the Mortgage Electronic Registration Systems, Inc. Rider (MERS Rider) ( Form 3158 ) when a newly originated loan will be registered with MERS. Sellers/servicers must also follow the Instructions to the MERS Rider and the applicable security instruments to make changes to the standard security instruments for the following states:

Oregon, and

Washington.

As the MERS Rider must be used in these specified states, post-closing assignments to MERS are prohibited.

MERS Assignment Form - Maine

In the state of Maine, sellers/servicers must use the MERS Mortgage Assignment (Form 3749) to assign loans to MERS at origination or post-closing, as applicable. Loans in which the Maine security instrument has been modified to name MERS as the original mortgagee of record, solely as nominee for the seller/servicer, are ineligible for delivery to Fannie Mae.

MERS Registration

If a seller/servicer registers a loan on the MERS system before delivering it to Fannie Mae, the seller/servicer must ensure that the MIN is registered in MERS and names itself as the investor. Additionally, the seller/servicer must include the MIN in the delivery data. After Fannie Mae purchases or securitizes the mortgage, Fannie Mae notifies MERS to update its records to reflect Fannie Mae’s ownership interest in the loan.

Note : For loans registered in MERS iRegistration where MERS is not named as the nominee for the beneficiary in the security instrument, the MERS MIN should not be reported on the loan schedules, unless the loan is an eMortgage registered on MERS eRegistry.

If a seller/servicer registers a mortgage with MERS after Fannie Mae has purchased or securitized the loan, the seller/servicer must name Fannie Mae as the investor during registration and notify MERS of Fannie Mae’s ownership interest in the loan.

Use of the MIN

For each MERS-registered loan delivered to a document custodian, the seller/servicer must indicate the MIN on the security instrument and related documents. Because the status of a MERS-registered mortgage can change, the seller/servicer is not required to include the MIN on the note. Additionally, the seller/servicer is still responsible for making sure that the document custodian has sufficient information to determine whether a loan that is included in a subsequent transfer of servicing is registered with MERS at the time of the transfer. The seller/servicer must have adequate controls in its processes to enable it to readily identify MERS-registered mortgages.

The seller/servicer can choose from the following options:

place the MIN on the note when the loan is registered with MERS and, if the MERS registration is subsequently terminated for any reason, notify the document custodian to delete the MIN from the note;

wait to advise the custodian of the status of the MERS registration for a loan until a change in status actually occurs; or

notify the custodian about the status of the MERS registration for a loan at the time of a servicing transfer by providing the custodian with a listing of all MERS-registered loans that are included in the transfer and a certification that any and all other loans included in the transfer are not currently registered with MERS. (The listing may be prepared by the seller/servicer or, with the seller/servicer’s authorization, by MERS.) If there are more MERS-registered loans included in the transfer than there are unregistered loans, the listing may instead identify the unregistered loans—and, in that case, the certification should state that any and all other loans included in the transfer are currently registered with MERS.

Mortgage Assignment to MERS

If the originating seller/servicer is the beneficiary for a loan that it registers with MERS, they must prepare an assignment of the mortgage to MERS. Refer to the section above, entitled Requirements for the Use of MERS in Specified Geographic Areas , for additional information about, and restrictions on, assignments of loans to MERS. 

By delivering a MERS-registered loan to Fannie Mae, the seller/servicer:

warrants that MERS is the mortgagee of record (either by being named as an assignee in a recorded assignment of the security instrument or as nominee for the beneficiary in the security instrument); and

warrants that the MIN is valid and properly registered in MERS naming the seller/servicer as the investor.

Sellers/servicers are not required to include a copy of the assignment of the loan to MERS in the delivery package they submit to the applicable document custodian.

Termination of MERS

If the seller/servicer decides to discontinue the use of MERS, they must request from MERS that the loan be “deactivated” in MERS. MERS will notify Fannie Mae about the deactivation of any loan in which it has an interest.

If the seller/servicer’s membership in MERS is terminated, the seller/servicer must promptly notify Fannie Mae’s MERS Program Office (see E-1-02, List of Contacts ).

In the event that either its membership in MERS or the MERS registration for an active loan is terminated for any reason while Fannie Mae has an ownership interest in the loan, the seller/servicer must perform the functions outlined in the following table for each MERS-registered loan that it is servicing for Fannie Mae.

Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

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Maine supreme court decision limits scope of mers' ability to assign mortgages.

July 14, 2014

The full effect of the court's decision in Greenleaf remains unknown, particularly to the extent that it does not discuss or identify the procedure for addressing or correcting similar MERS assignments in pending or prospective matters.

On July 3, 2014, the Maine Supreme Judicial Court issued a ruling in Bank of America, N.A. v. Greenleaf , 2014 ME 89 (Me. July 3, 2014), significantly affecting the ability of Mortgage Electronic Registration System, Inc. (MERS) to assign mortgage rights as a "nominee" of a mortgage lender. This decision will likely have a considerable effect on the foreclosure process in Maine because it appears to limit the authority of MERS solely to the ability to record mortgages. 1

• the original promissory note;
• the 2006 mortgage;
• a recorded document purporting to demonstrate the assignment of the note and mortgage (the "Assignment") from MERS to BAC Home Loan Servicing, LP (f/k/a Countrywide Home Loan Servicing, LP) (BAC);
• a recorded certification that BAC merged with the Bank effective July 1, 2011;
• a copy of the notice of default and right to cure served as part of the foreclosure proceedings;
• a copy of the defendant's payment history; and
• an affidavit verifying that the defendant is not in the military.

The trial court entered a judgment of foreclosure in favor of the bank in September 2013. The defendant appealed on the ground that the Bank did not have standing to pursue the foreclosure action.

On appeal, the Maine Supreme Judicial Court first considered the Maine foreclosure statute, 14 M.R.S. § 6321 (2013), which provides that "the mortgagee or any person claiming under the mortgagee" may seek foreclosure of mortgaged property. Next, the court concluded that "[b]ecause foreclosure regards two documents—a promissory note and a mortgage securing that note—standing to foreclose involves the plaintiff's interest in both the note and the mortgage." Greenleaf , 2014 ME 89 at *P9. As to the note, the court confirmed that the Bank properly established that it was the holder of the note indorsed in blank and that, therefore, it enjoyed the right to enforce the defendant's debt. Id. (citing Maine's Uniform Commercial Code, 11 M.R.S. § 3-1301).

It is important to note that the court further determined that a foreclosing party's "interest in the note is only part of the standing analysis [because] to be able to foreclose, a plaintiff must also show the requisite interest in the mortgage." Id. at *P12. Recognizing that a mortgage is not a negotiable instrument, the court reasoned that "the mortgage portion of the standing analysis requires the plaintiff to establish ownership of the mortgage." Id. (emphasis original).

In this case, the Bank claimed ownership of the mortgage through the Assignment and the Bank's subsequent merger with assignee BAC. Upon review of the Assignment, however, the court determined that the Assignment did not support the Bank's claim of ownership. Looking to the language of the mortgage, the court concluded that "the mortgage in fact granted to MERS 'only the right to record the mortgage' as the lender's nominees, and 'having only that right, MERS [did] not qualify as a mortgagee pursuant to our foreclosure statute.'" Id. at *P14.

As a result, the court held that the mortgage conveyed to MERS only the right to record the mortgage as nominee for the lender, RMS. Accordingly, when MERS assigned its interest in the mortgage to BAC, it granted BAC only what MERS possessed: the right to record the mortgage as nominee. Likewise, upon merger with BAC, the Bank obtained only that which BAC possessed: again, the right to record the mortgage as nominee. The court ultimately vacated the judgment of foreclosure upon its determination that the record demonstrated no more than a series of assignments of the right to record the mortgage.

The full effect of the court's decision in Greenleaf remains unknown, particularly to the extent that it does not discuss or identify the procedure for addressing or correcting similar MERS assignments in pending or prospective matters. The immediate effect, however, is apparent: Parties now have to prove an appropriate interest in the note and mortgage in order to have standing to prosecute mortgage actions in Maine.

For Further Information

If you have any questions about this Alert , please contact Brett L. Messinger , Jarret P. Hitchings, Lauren A. Thomas, any of the attorneys in our Consumer Finance Litigation and Dispute Resolution Practice Group , any of the attorneys in our Business Reorganization and Financial Restructuring Practice Group or the attorney in the firm with whom you are regularly in contact.

• The court's decision in Greenleaf also requires the statutorily mandated notice provided to a defendant regarding his right to cure a default to contain a specific, fixed amount that will be accepted by the foreclosing party in order to cure the default.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer .

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18.5 Discharges Involving Mortgage Electronic Registration System (MERS)

When MERS is the record holder of a mortgage, the mortgage shall be discharged only by MERS.  A valid discharge may be issued by (1) MERS, or (2) a member of MERS acting through a certifying officer of MERS.

Comment 1.     MERS was created for the purpose of streamlining the mortgage process by eliminating the need to record assignments. When MERS is the mortgagee of record, a discharge is executed by an officer of MERS.  MERS may also act as nominee for the lender and servicer and, if named as nominee, MERS remains as nominee regardless of how often the mortgage is sold.

Comment 2:     MERS serves as mortgagee of record or as nominee for the beneficial owner of the mortgage loan. MERS becomes the mortgagee of record by assignment or in the original security instrument (MERS as Original Mortgagee or “MOM”). Once MERS is the mortgagee of record, subsequent assignments of the mortgage are not necessary upon a transfer of servicing to another MERS member or the sale of the beneficial interest in the note because MERS remains the mortgagee on behalf of the current owner and servicer. The servicer of a MERS-registered loan has the legal authority to discharge the mortgage on behalf of MERS because, as a member of MERS, authority was granted to their officers through a corporate resolution.  The person authorized to sign discharges is sometimes referred to as a “certifying officer” by MERS.

Comment 3:     A title examiner who finds a discharge signed by a member of MERS may presume that the signer was a duly appointed certifying officer.

Example: A Mortgage from “John and Mary Doe to MERS as nominee for ABC Bank” may be discharged by either: (a) a MERS certifying officer from ABC Bank or (b) by a MERS member other than ABC Bank acting through a certifying officer.

Comment 4:     For assistance in obtaining a discharge or getting help from MERS, determining whether a particular lender is a member of MERS, information may be obtained from:

• MERS website: www.mersinc.org
• MERS Help Desk: 1.888.680.6377
• provide the Borrower’s SSN or the Mortgage Identification Number (MIN) on the mortgage and the automated system will provide  the name of the current servicer.

Comment 5.     A title examiner may consider information within the discharge to determine that the discharge was executed on behalf of MERS and is, therefore, a valid discharge of a MERS mortgage.  Such information may include the existence of a MIN (MERS Mortgage Identification Number), a reference in the body or signature line to MERS, or a reference to an assignment to MERS.

September 26, 2008:        This standard was added.

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§770. Assignment of mortgage; words of transfer