Fannie Bans Mortgage Servicers from Naming MERS in Foreclosure Action
Fannie Mae (FNM) servicers can no longer name MERS, the industry-wide loan tracking system administered by MERSCORP, as a plaintiff in nonjudicial foreclosure actions as of May 1, 2010. The new rule, announced in a servicing guide distributed Tuesday (download here), applies to foreclosures referred on or after May 1 on mortgage loans owned or securitized by Fannie. It applies a previous restriction in judicial actions to nonjudicial actions, as well. MERS is the mortgagee of record either when a mortgage names MERS as the original mortgagee as recorded in the applicable land records, or when a completed and recorded assignment names MERS as the mortgage assignee, Fannie said. "Therefore, when MERS is the mortgagee of record, the servicer must prepare a mortgage assignment from MERS to the servicer, and then bring the foreclosure in its own name, unless Fannie Mae specifically requires that the foreclosure be brought in the name of Fannie Mae," the servicing guide reads, in part. A source at the GSE said this week's guideline applies to nonjudicial foreclosure actions, whereas a change made in 2006 applied the rule to judicial foreclosure actions. With Tuesday's servicer guide, the restriction on naming MERS as a plaintiff extends to both judicial and nonjudicial foreclosure actions. Write to Diana Golobay. Disclosure: the author holds no relevant investment positions.