Opinion ID: 2812450
Heading Depth: 1
Heading Rank: 1

Heading: mers

Text: In Texas, when a borrower obtains a home loan, the borrower executes two documents in favor of the lender: (1) a promissory note that creates the borrower’s legal obligation to repay the lender, and (2) a deed of trust that grants the lender a lien on the property as security for the debt. To give notice to subsequent purchasers and creditors, the deed of trust may be recorded in the county where the property is located. Despite the legal significance of recording a deed of trust, recording is optional in Texas. See Tex. Prop. Code Ann. § 12.001(a). MERS has changed this recording practice for millions of mortgages. MERSCORP is a privately held company that was created in the mid-1990s. It operates a national electronic registry called MERS that tracks servicing rights and mortgage ownership in the United States. 1 MERS is a membership organization whose members include residential mortgage lenders and servicers, such as Bank of America. When a borrower obtains a home loan from a MERS-member bank, MERS is listed as the “beneficiary” on the deed of trust. The promissory note, however, is executed in favor of the bank. MERS does not loan money, hold the promissory note, service the mortgage, or collect payments. The bank registers the loan on the MERS system and submits the deed of trust to the county clerk to be recorded in county land records. Because MERS is listed as the beneficiary of the deed of trust, the county clerk will ordinarily index MERS in the land-records index as a grantee. Because their corporate identities are not relevant in this appeal, we refer to MERS, 1 MERSCORP, and the MERS system all as “MERS.” 2 Case: 14-10392 Document: 00513095770 Page: 3 Date Filed: 06/26/2015 No. 14-10392 The borrower and the MERS-member lender contractually agree to this arrangement. The deed of trust that the parties execute contains language that states: “MERS is a separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns. MERS is a beneficiary under this Security Instrument.” The deed of trust also states that “Borrower understands and agrees that MERS holds only legal title to the [secured] interests granted by Borrower in this Security Instrument” and that “MERS (as nominee for Lender and Lender’s successors and assigns) has the right . . . to foreclose and sell the Property.” If the lender later transfers the promissory note (or its interest in the note) to another MERS member, no assignment of the deed of trust is created or recorded because, according to Defendants, MERS remains the nominee for the lender’s successors and assigns. Under this theory, because MERS is always listed as the beneficiary on any deed of trust that a MERS member originates, MERS-member banks and entities can repeatedly assign a promissory note secured by that deed of trust to other MERS members without recording those transfers in a public-records office. Because it is the promissory note (not the deed of trust) that is assigned, there is, in theory, nothing to record. These assignments are therefore tracked on the MERS system for priority purposes, but not necessarily in counties’ land records. If a promissory note is transferred or negotiated to a non-MERS member, only then is an assignment of the deed of trust created and executed from MERS to the nonMERS member, and the assignee (the new deed of trust beneficiary) files the assignment in the public land records. In short, MERS streamlines successive sales of mortgages and makes these transfers cheaper. Banks no longer pay county recording fees after a MERS deed of trust is first recorded. Instead, they pay MERS membership and 3 Case: 14-10392 Document: 00513095770 Page: 4 Date Filed: 06/26/2015 No. 14-10392 transaction fees and record interim promissory-note assignments using the MERS system.