By using MERS, the lenders and investors who are the real parties in interest avoid the need to file assignments in county land records, which lowers costs for lenders and, they claim, consumers by reducing county recording fee expenses resulting from real estate transfers[12] and provides a central source of information and tracking for mortgage loans.

The MERS system is purported to have fulfilled the “Safe Harbor” requirements in the state-led Uniform Electronic Transactions Act (UETA) and E-SIGN (Electronic Signatures in Global and National Commerce Act of 2000) adopted by Congress in the documents filed by MERSCORP, Inc. nka MERSCORP Holdings, Inc. with the United States Trademark and Patent Office.

In the late 1960s and early 1970s, the American securities industry was drowning in paper because of the sheer complexity of physically exchanging thousands of stock certificates every day.

By "immobilizing" physical stock certificates and later replacing them altogether with book entries, DTCC enabled the development of the modern computerized securities industry.

The underlying problem is that a mortgage loan transferred into an MBS (Mortgage-Backed Security) must become "bankruptcy remote" from the originating lender.

If the borrower defaults, the loan servicer will record an assignment on behalf of Mortgage Electronic Registration Systems, Inc. to the real party in interest (i.e., an investment bank in its capacity as trustee for a MBS) and initiate foreclosure.

It enables consumers, title companies and other real estate professionals to easily identify the current holders of registered mortgages and obtain discharges despite any transfers of the mortgages or mergers or acquisitions of the lenders and investors in interest that may otherwise make it difficult to trace ownership, if it is accurately maintained by the MERSCORP Holdings, Inc. membership.

Information contained in the MERS system can help to identify possible mortgage fraud involving the identity of a prospective buyer and owner-occupancy issues.

[19] Built by MERSCORP Holdings, Inc. with the endorsement of the Mortgage Bankers Association (MBA) and launched in 2004, the MERS system eRegistry allegedly satisfies the "safe harbor" requirements of E-SIGN and UETA legislation.

[20] Both Fannie Mae[21] and Freddie Mac[22] require the registration of eNotes on the MERS system eRegistry before they are eligible for purchase.

The blur of the actual identities of the "MERS" related entities has led to confusion within the court system and foreclosure process.

He issued his decision in 5 of the 18 cases (In re Chong, In re Pilatich, In re Cortes, In re Medina and In re O'Dell) on appeal but declined to hold that "MERS would not be able to establish itself as a real party in interest had it identified the holder of the note or provided sufficient evidence of the source of its authority.

"The problem arises from the difficulty of attempting to shoehorn a modern innovative instrument of commerce into nomenclature and legal categories which stem essentially from the medieval English land law," Schwartz wrote.

(Brittany Davis, Miami Herald blog, May 10, 2012) On August 14, 2009, the Minnesota Supreme Court ruled that MERS could foreclose under state law as the mortgagee of record.

On August 28, 2009, the Kansas Supreme Court in Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834 (Aug 28, 2009), issued a decision involving MERS that focused on finality of judgments.

The plaintiffs alleged that a small fee charged by mortgage lenders, which was then paid to MERS, violated provisions in the Real Estate Settlement Procedures Act (RESPA).

[31] On October 27, 2010, DC Attorney General Peter Nickels issued a statement which concludes that "a foreclosuring may not be commenced against a D.C. homeowner unless the security interest of the current noteholder is properly supported by public filings with the District's Recorder of Deeds.

[33] Gomes expressly cited to and relied upon the state supreme court's 2010 decision in Lu v. Hawaiian Gardens Casino, Inc.,[34] which clarified that a certain conservative method of statutory analysis (first articulated by Associate Justice Frank K. Richardson in 1979 and adopted by a majority of the court in a 1988 opinion by Chief Justice Malcolm M. Lucas) applies to all California statutes, not just the California Insurance Code.

The court found itself constrained by the Rooker-Feldman doctrine to give effect to a prior state-court judgment of foreclosure, but went on to consider several arguments MERS advanced about its legal status and authority, noting that it had held off on deciding dozens of additional cases until those matters were clarified.

The court observed, MERS and its partners made the decision to create and operate under a business model that was designed large part to avoid the requirements of the traditional mortgage recording process.

[35]In April 2011, in Residential Funding v. Saurman, the Michigan Court of Appeals decided two consolidated cases holding that MERS did not have standing to foreclose non-judicially pursuant to MCL 600.3204(1)(d) because it did not actually own any interest in the debt.

Rather, as a record-holder of the mortgage, MERS owned a security lien on the property, the continued existence of which was contingent upon the satisfaction of the indebtedness."

[37] On September 12, the Fourth District Court citing its own May decision in Gomes v. Countrywide, stated that "the statutory scheme...does not provide for a preemptive suit challenging standing.

"[38] In March 2012, Kristin Bain of Tukwila, WA filed suit against MERS (and a subsidiary) for foreclosing on her house without even disclosing the actual owner of her mortgage.

[39] In August 2012, the Washington Supreme Court ruled with Bain, saying that MERS was not a lawful beneficiary of her deed and did not have the right to appoint trustees.

The decision states: "A plain reading of the statute leads us to conclude that only the actual holder of the promissory note or other instrument evidencing the obligation may be a beneficiary with the power to appoint a trustee to proceed with a nonjudicial foreclosure on real property.

[41] Mortgage Electronic Registration Systems, Inc. has generated much debate, controversy, and criticism among litigators and academics in "some of the most widely read law review articles of the past few years.

"[42] Dustin A. Zacks,[43] for example, criticized Mortgage Electronic Registration Systems, Inc. for taking directly inconsistent positions in various courts around the country.

[44] Zacks' article found favor with the Bain Court which cited him for the proposition that "MERS's officers often issue assignments without verifying the underlying information, which has resulted in incorrect or fraudulent transfers.