Many homeowners find out their existing mortgage is listed as “inactive.” An inactive status can refer to the transfer of their mortgage to another loan servicer, or to a few other factors as noted below.
The difference between having an inactive or an active MERS (Mortgage Electronic Registration System) loan may determine if the property owner has any improved or worsened home equity, or a truly saleable asset.
What is MERS?
MERS functions as a centralized electronic registry of mortgages, and it was supposed to track the ownership of these mortgages, which are typically sold multiple times during the loan’s life. MERS potentially affects upwards of 60 million residential mortgage loans nationwide, and almost completely crashed the U.S. housing market by itself because of so many problems with the packages.
MERS was created by lenders and title insurance companies, so it would be easier to transfer the beneficial interests to other secondary market lenders. Yet, some mortgages ended up significantly discounted due to packaging problems, which made them inactive.
The MERS Scandal
Missing documents, notary fraud, and “robo-signing” led the way.
There was a lot of chaos involved with MERS mortgage packets, which contained no original promissory notes (the “IOU” for the mortgage debt) in these same MERS files.
Knowledgeable homeowners were able to completely stop their home foreclosures by pointing out that the foreclosing entity, such as the mortgage servicing company, didn’t have a legal right to foreclose on their homes, since they didn’t have all of their valid mortgage paperwork in their files.
These questionable ownership interests in the mortgages led to foreclosure moratoriums, court settlements, and inactive statuses.
There were a large number of allegations of notary fraud in which real or fake notaries such as “Linda Green” were allegedly part of the massive “Robo-Signing Scandal” nationwide.
It has been suggested that promissory notes, deeds of trust or mortgages, and other loan or title documents were forged, left blank, or illegally assigned to numerous mortgage investors. Since MERS was set up to become as paperless, speedy, and efficient as possible, there was not enough third party oversight to check whether these documents were valid.
Questionable Beneficial Interests
“No Note = No Debt” became the mantra for homeowners who were in the midst of their own foreclosures due to the weaker U.S. economy. Some savvy property owners were able to legally void their existing mortgage debt altogether by proving that the foreclosing mortgage company had no valid beneficial interests in the existing mortgage, and thus had to legal right to collect any payments.
Other homeowners were able to show that their MERS files had fraudulent notary signatures signed on behalf of both owners and lenders, which moved their file designations over to “inactive” as well.
Mortgage lenders that have collapsed or imploded since the official start of the Credit Crisis (www.thecreditcrisis.net) back in 2007, such as Countrywide, Indy Mac, Lehman Brothers, World Savings, Downey Savings, and Washington Mutual still figuratively exist by way of their asset or beneficial interest transfers to the “strawman” named MERS.
MERS, may pay no taxes or employ anyone. Without the proper assignment of these MERS mortgages, these same imploded mortgage companies’ loans could have ceased to exist.
The Shadow Inventory & MERS
Instead of upwards of 60 million residential MERS mortgages becoming inactive or possibly even completely voided and worthless, many of the largest banks and mortgage service companies worked closely with the U.S. government to create the National Mortgage Settlement in early 2012. This insanely small $25 billion settlement is but a mere fraction of the potentially trillions of dollars of MERS mortgages nationwide.
The National Mortgage Settlement of 2012 and MERS Scandal were two of the primary reasons why home listings nationally dropped dramatically.
There were potentially millions of Shadow Inventory homes (mortgage payments are more than 90 days late), which may not have valid promissory notes, or other mortgage or title instruments or documents, in the files. The lack of listed home inventory led to a rapid increase of home prices between 2011 and 2013 (also partly due to the record low mortgage rates).
The “Inactive” MERS Designation
An inactive MERS designation may relate to the loan having been refinanced or paid off, discounted, or completely voided due to the invalid mortgage documents in the file. Or, the mortgage loan was assigned out of the MERS system to a completely new mortgage servicing company.
A property owner with a MERS mortgage can find the status of their loan by searching for their 18-digit Mortgage Identification Number (MERS MIN). Then, the same person may search online for the MERS Servicer ID system in order to check the status of their mortgage.
Before attempting to pay off a MERS loan, it ‘s very important to find out if all of the mortgage payments have been properly applied to the account. The vast majority of MERS mortgages have been assigned to multiple mortgage investors over the years, so it is very important to check your own payment history over the years in order to determine if all of your payments have been credited to every mortgage servicing lender’s accounts.
It’s imperative that the owner pays off the correct amounts, which may mean more money back to the owner, and much less money for the current mortgage loan servicer. As such, a little research and loan analysis by a property owner on their personal payment histories can save them a lot of money and headaches.