W. FLETCHER, Circuit Judge :

9th Circuit Court of Appeals - IN RE MERS (2014)


Mortgage Electronic Registration Systems, Inc. (“MERS”), a subsidiary of MERSCORP, Inc., operates an electronic mortgage registration system (“the MERS System”).

MERS is distinct from the MERS System.  The MERS System is a private electronic database that records the ownership of and servicing rights in home loans. Various financial institutions are members of the MERS System.

We described the operation of the System in our recent decision in Cervantes v.Countrywide Home Loans, Inc., 656 F.3d 1034, 1039 (9th Cir. 2011).  We have before us an appeal from an order of the district court dismissing plaintiffs’ claims related to the formation and operation of the MERS System.

I. Background

Under the MERS System, the lender owns the home loan borrower’s (or mortgagor’s) promissory note. MERS, as the “nominee” of the lender and of any assignee of the lender, is designated in the deed of trust (or mortgage) as the“beneficiary” (or mortgagee) under the deed of trust.  For convenience, we will use the terms “borrower,” “deed of trust,” and“beneficiary,” rather than “mortgagor,” “mortgage,” and “mortgagee.”

MERS rather than the lender or lender’s assignee is recorded as the beneficiary under the deed of trust in the recording system of the county where the property is located.

Use of the MERS System typically begins when…

  1. A borrower from a MERS member signs a promissory note and a deed of trust.

  2. The MERS member takes possession of the note, and

  3. MERS is recorded as the beneficiary under the deed of trust.

  4. The note is almost always assigned to others, often several times over.

  5. If the note is assigned to a MERS member, MERS remains the beneficiary under the deed of trust.

  6. MERS contends that there is no need to record the assignment of the note so long as the assignee is a MERS member.

  7. However, when an assignment is made to a nonmember of MERS, the identity of the assignee is recorded.


About half of the residential mortgages in the United States are now recorded with MERS named as the beneficiary under the deed of trust.

See Robo-signing, Chain of Title, Loss Mitigation, and Other Issues in Mortgage Servicing: Hearing Before the Subcomm. on Hous. and Cmty. Opportunity of the H. Comm. on Fin. Servs., 111th Cong. 101 (2010).  Statement of R.K. Arnold, President and CEO, MERSCORP,




The MERS System has been sharply criticized.

See, e.g., Tanya Marsh, Foreclosures and the Failure of the American Land Title Recording System, 111 Colum. L. Rev. Sidebar 19, 23–24 (2011) o Noting that MERS has been a “controversial innovation” and highlighting that the System’s “inherent opaqueness” may conceal “shoddy recordkeeping practices”.

Christopher L. Peterson, Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System, 78 U. Cin. L. Rev. 1359, 1374, 1407 (2010) o Outlining MERS’s “[q]uestionable” legal foundations and arguing that “[t]he shift away from recording loans in the name of actual mortgagees and assignees represents an important policy change that erodes not only the tax base of local governments, but also the usefulness of the public land title information infrastructure”.

Christopher L. Peterson, Two Faces: Demystifying the Mortgage Electronic Registration System’s Land Title Theory, 53 Wm. & Mary L. Rev. 111, 120, 125–27 (2011) o Criticizing the “incoherence of MERS’s legal position” regarding MERS’s status with respect to mortgages registered in the MERS System, which is “exacerbated by a corporate structure that is so unorthodox as to be considered arguably fraudulent,” and criticizing the unreliability of the MERS database.

David P. Weber, The Magic of the Mortgage Electronic Registration System: It Is and It Isn’t, 85 Am. Bankr. L.J. 239, 239–40, 264 (2011) o Describing MERS’s “imperfect implementation and lack of transparency”


See also Michael Powell & Gretchen Morgenson, MERS? It May Have Swallowed Your Loan, N.Y. Times, March 6, 2011, 03/06/business/06mers.html (describing the “mounting” legal challenges facing MERS).