The organization has issued a policy update to its members stating that no foreclosure proceeding may be initiated in the name of MERS and no legal proceedings in a bankruptcy may be filed in the name of MERS.
Before a lender or investor starts a foreclosure or files a bankruptcy motion, they must execute an assignment of the security instrument from MERS to themselves as the mortgagee and record the transfer with the applicable county clerk or public land records office, MERS said.
Amid an onslaught of court filings and foreclosure-related investigations, MERS proposed a rule change in early
March that would ban its members from using MERS as the foreclosing agent.
The policy change was officially adopted last week and carries an effective date of July 22, 2011.
Fannie Mae, Freddie Mac, several large servicers, and a number of foreclosure attorneys representing lenders have stopped foreclosing in the name of MERS already.
MERS was developed by the mortgage industry to keep track of the servicing rights and note ownership for home loans.
It was designed as a paperless property registry to facilitate the transfer of mortgages. The system is also used by communities to identify parties responsible for vacant properties.
MERS’ ongoing court appearances around the country have become a ‘win some, lose some’ state of affairs.
Rulings in such states as New York, Kansas, and Michigan came out against the electronic mortgage registry, while judges in California, Minnesota, and Massachusetts ruled in favor of MERS and its role in the foreclosure process.
Attorneys general in Massachusetts and Delaware have reportedly launched their own independent investigations of MERS to determine if the registry has violated state foreclosure and real property statutes.
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