October 3, 2013
by Ken Pollock
Hunt Leibert – USFN Member (Connecticut)
Effective July 15, 2013, the state of Connecticut enacted new legislation that has dramatically increased the recording fees charged for documents where MERS (Mortgage Electronic Registering System) is acting in a capacity as nominee for a mortgage lender. Although the new laws do not mention MERS specifically, the charge applies to documents containing a nominee for the actual mortgage lender. Currently, MERS is the only such business entity operating in this fashion.
Presently, to record a mortgage that does not contain language indicating that MERS is acting as the nominee for the lender, the first page of the document costs $53 to record and $5 for each additional page. Under the new plan, if that exact same mortgage refers to MERS as the nominee for the lender, the cost of the first page more than doubles to $116 and there is an added surcharge of $43 per document regardless of the number of pages. The MERS mortgage is still charged the further $5 per additional page; that charge was not modified.
What this means is that any person who buys a home or refinances an existing mortgage runs the risk of paying substantially more in recording fees if MERS has a role in the new loan. A typical mortgage recorded in Connecticut contains anywhere from ten to fourteen pages. A ten-page mortgage without the presence of MERS would cost $98 to record ($53 for the first page and $45 for the nine additional pages). If that same ten-page mortgage were to list MERS as nominee for the lender, however, the recording cost now increases to $204 — more than double.
If the Connecticut legislature intended to derive new revenue directly from MERS, the initiative missed the mark. The recording fee is charged to the borrower as a closing cost on the HUD-1 for the closing. In the overall scheme of things, it is still a relatively small amount when compared to the loan amount, but the cost is borne by the borrower and it is something that is completely out of the borrower’s control. Borrowers do not decide whether or not MERS has a place in their mortgage transaction. That arrangement is made directly by the lender.
Until the passage of this measure, the presence of MERS on a mortgage deed was a benign, invisible presence that meant nothing to the borrower. Now the presence of MERS results in more money coming out of the borrowers’ pocket at closing. Against a typical $150,000 mortgage, the result is almost negligible as a percentage of the money involved. However, for the affected individuals, it does represent one more creative way that the state is reaching into the pocket of the borrower.
The measure has already survived one attack. MERS filed a complaint in the Superior Court of Connecticut, Judicial District of Hartford, challenging the constitutionality of §§ 97 and 98 of Public Act 13-184 and §§ 81 and 82 of Public Act 13-247. On July 11, 2013, MERS was denied a temporary restraining order in its lawsuit. The lawsuit remains pending.
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