Yesterday's Globe reported that Attorney General Martha Coakley, at the urging of Essex South Register of Deeds John O'Brien, has launched an investigation of Mortgage Electronic Registration Systems Inc for failure to pay required recording fees in Massachusetts. MERS came into existence in the late 1990s as a type of agent for the mortgage industry. The theory was because the underlying promissory notes to mortgages were being rapidly and frequently bought and sold by lenders and investors, the traditional practice of recording an assignment of mortgage at the registry of deeds with each trade of the note was inefficient. Under this new system, MERS would become the record owner of the mortgage as the agent for whichever entity held the note.
For many years this system seemed to work quite well. I don't ever remember anyone raising questions about its legality until the housing bubble burst just a few years ago. But now across the country courts are scrutinizing the basis of MERS and questioning the legitimacy of mortgages held by the company.