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MERS and the Recording Act
In Merscorp. v. Romaine (see infra), Suffolk County Supreme Court was faced with a clash between the traditionally local real property recording system and the increasingly national secondary mortgage market. The County Clerk's office had refused to accept for recording instruments filed in the name of MERS (Mortgage Electronic Recording Systems, Inc.), prompting a proceeding by MERS and the operating company that owns the MERS system for a writ of mandamus compelling the County Clerk to record and index MERS instruments. The case resulted in a split decision: The County Clerk is required to record MERS mortgages, but not assignments or certificates of discharge. The court's opinion, however, reveals some misunderstanding both of the MERS system and of the recording act.
The Traditional Recording Process
In New York, as in most other states, the recording act is designed to safeguard prospective purchasers and lenders against double-dealing by property owners. The prospective purchaser or lender can check at the county recording office to assure that the property to be purchased, or the property to serve as security for a mortgage loan, is not encumbered by any interests the property owner has failed to disclose. The system does not rest on any verification by the state of the validity of any recorded instruments; the system's effectiveness rests solely on notice. Prospective purchasers or lenders are on notice of all recorded instruments; once they have notice, it is up to them (or their title insurers) to determine the validity and effect of those instruments.
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