Introduction: Why So Much Confusion?

Across the country, people are confused about MERS. Lawyers are confused about MERS. Economists and journalists are confused about MERS. Law Professors and State Supreme Court Justices are confused about MERS. Even MERS is confused about MERS. The confusion runs wide, and it runs deep, from coast to coast. In response to this confusion, I have created this site, with two goals in mind.

The first goal is to make all critical court cases concerning MERS available in one location. At the moment, MERS is involved in litigation in all 50 states. In the accompanying database: MERS in the Courts, the most important court cases from across the county are sorted by state. The full text of these cases, when available, have been uploaded.

The second goal is to resolve the confusion concerning MERS by examining exactly what is MERS real interest in property. To that end, I have created this tutorial.

Why has MERS suddenly become the focus of so much litigation, news exposure, and law review articles? The reason stems from the foreclosure crisis. MERS is an electronic registry of mortgage documents – over 60 million in fact. And millions of those mortgages are in foreclosure. Since one of the (only) powers that MERS has is to initiate foreclosure actions, MERS is suddenly the plaintiff in foreclosure suits in every state of the Union. Defendants naturally respond with various, legitimate questions such as:

1) MERS claims to be the nominee of the lender in some cases, and the beneficiary of the lender in other cases. How can the same entity be the nominee and the beneficiary at the same time? (This tutorial will explain all of these terms and concepts).

2) How can MERS ever be the beneficiary of a mortgage document – isn’t the lender always the beneficiary?

3) Shouldn’t the lender always be the plaintiff in a foreclosure action? After all, it is the owner of the note that has the right to enforce the note, not the holder of the mortgage!

To answer these questions, we need to analyze the following three sets of legal concepts:

1) The difference between ownership in title and ownership in equity;
2) The difference between lien theory and title theory; and
3) The difference between a mortgage and a deed-in-trust.

In each case, we will have to refine the terms used and – when necessary – we will have to coin some new terms and concepts.

Why should new terms be used for legal concepts that have been well established for hundreds of years? First of all, MERS did something that had never been done before (not necessarily a bad thing) and in doing so, no-one, not even MERS, realized that new categories of property rights were being created. Secondly, several terms which were already suffering from fatigue have been dealt fatal blows by the foreclosure crisis. Finally, because of the multitude of court cases, it has become clear that some well known terms mean different things in different jurisdictions.

The goal of this Tutorial is to clarify, define, and even coin the terms and concepts necessary to deal with the new reality created by MERS. As George Orwell said so clearly, one cannot think clearly without using clearly defined words.

PART 1: What is a Note? Mortgage?

(Please note – that while the first five parts of this Tutorial cover basics terms and concepts already in use – by Part 6 new terms will be introduced.)