A closing package names MERS as nominee for the lender on the security instrument for a $312,000 loan. What role does MERS have when named as nominee on the security instrument?
Correct Answer
D) MERS holds the security interest as nominee; the note is owned elsewhere
D. MERS acts as nominee in the security instrument, not as the beneficial owner of the loan merely by being named. The nominee role concerns the mortgage or deed of trust in the land records. Ownership of the debt and servicing are distinct roles; naming MERS does not make it the lender collecting payments or an insurer. Scope and exceptions: This is a role-identification question, not a universal conclusion about foreclosure authority. Instrument language and governing law matter. Source: What is MERS?; Does MERS collect mortgage payments? — https://www.mersinc.org/about/faq
Why This Is the Correct Answer
D. MERS acts as nominee in the security instrument, not as the beneficial owner of the loan merely by being named. The nominee role concerns the mortgage or deed of trust in the land records. Ownership of the debt and servicing are distinct roles; naming MERS does not make it the lender collecting payments or an insurer. Scope and exceptions: This is a role-identification question, not a universal conclusion about foreclosure authority. Instrument language and governing law matter.
Why the Other Options Are Wrong
Option A: MERS is the lender of record here, and payments go to MERS after the closing
MERS does not collect borrowers’ monthly mortgage payments.
Option B: MERS insures the loan, which is why it appears on the instrument
A nominee designation is not mortgage insurance.
Option C: MERS is the title insurer for the transaction and holds the policy
MERS is not a title insurer.
Exam Tip
Distinguish mortgagee of record, loan owner, servicer and insurer.
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