Does the New York county clerk have to index Mortgage Electronic Registration Systems (MERS) as the mortgagee when MERS is just a nominee and has no actual interest in the loan?

Plain-English summary

Nassau County's clerk was being asked to record mortgages where Mortgage Electronic Registration Systems, Inc. (MERS) appeared as the "mortgagee of record," even though MERS itself had no ownership interest in the loan. MERS is an industry-created nominee designed to centralize mortgage assignment tracking by letting MERS sit on the public record while the underlying lender (and any subsequent assignees) trades the note privately. The Nassau County Attorney asked: (1) what is the legal effect of the language MERS uses ("FOR PURPOSES FOR RECORDING THIS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD"), and (2) what is the clerk's duty in indexing such filings?

The AG concluded the clerk has no obligation to record MERS as the mortgagee and that doing so is inconsistent with the recording statutes.

The reasoning. Real Property Law § 291 directs the clerk to record a conveyance (which includes a mortgage, per § 290(3)) on request of "any party," provided the conveyance is properly acknowledged. The clerk's recording duty is real but it is tied to the conveyance's actual character. Real Property Law § 316 then requires the clerk to maintain general indexes, including a separate index for mortgages with two alphabetical lists keyed to mortgagors and their mortgagees and to mortgagees and their mortgagors. The index is part of the record of each instrument.

The statute's text presumes the names in the index are the actual mortgagor and mortgagee. If MERS has no legal interest in the mortgage, MERS is neither mortgagor nor mortgagee, and the clerk cannot substitute MERS's name for the actual mortgagee in the index. MERS's self-declaration ("for purposes of recording, MERS is the mortgagee") has no legal effect on this.

The AG also worked through the policy purpose. The New York recording act (Article 9 of the Real Property Law) protects innocent purchasers by giving them constructive notice of prior encumbrances. The Court of Appeals confirmed this in Andy Associates, Inc. v. Bankers Trust Co., 49 N.Y.2d 13 (1979). Constructive notice depends on accurate indexing under § 316. Baccari v. De Santi, 70 A.D.2d 198 (2d Dep't 1979), and Federal National Mortg. Ass'n v. Levine-Rodriguez, 153 Misc. 2d 8 (Sup. Ct. 1991), confirm that indexing errors that misrepresent the mortgagor or mortgagee vitiate constructive notice. If the indexed mortgagee is MERS but the actual mortgagee is a bank that has assigned the note multiple times, a purchaser searching the index cannot reliably trace the encumbrance, especially if MERS goes out of business.

The AG framed the conclusion narrowly. The clerk's duty to record under § 291 is not in dispute. The clerk must record the mortgage. What the clerk cannot do is record MERS as the mortgagee. The clerk must record the actual mortgagee.

Currency note

This opinion was issued in 2001. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What is MERS and why was it created?

Mortgage Electronic Registration Systems, Inc. is an industry-organized entity that holds the position of "mortgagee of record" while letting the actual underlying loan trade among lenders without each transfer being recorded in the county's land records. The system was designed to reduce recording fees and speed loan transfers, particularly for loans bundled into mortgage-backed securities.

Does this opinion mean MERS-related mortgages are invalid?

No. The mortgage between the borrower and the actual lender is valid. The opinion is about how the clerk should record the mortgage in the public record, specifically what names should appear in the mortgagor and mortgagee indexes. The clerk should record the mortgage but list the actual mortgagee in the index.

What is constructive notice and why does indexing matter?

Constructive notice is the legal doctrine that someone who would have found a prior recorded encumbrance with a reasonable search of the public records is treated as if they did find it, even if they did not. For real estate transactions, constructive notice is what protects a recorded mortgagee against later purchasers who might otherwise take free of the mortgage. If the index does not accurately identify the mortgagee, constructive notice may fail and the mortgage may be vulnerable to junior interests.

Did this AG opinion settle the issue, or did courts later reach a different conclusion?

This is a 2001 informal AG opinion. New York case law on MERS has developed since then, including significant litigation in foreclosure contexts. A reader interested in current MERS law should look at recent appellate decisions rather than relying on this opinion's conclusion as a current statement of the law.

What practical change should a county clerk make based on this opinion?

The clerk should require the actual mortgagee's name in the indexing fields and not accept MERS as a substitute. If MERS submits a mortgage with the standard "MERS is the mortgagee of record" language, the clerk's indexing should still capture the actual lender (typically named elsewhere in the document) and put that lender in the mortgagee index.

Background and statutory framework

Article 9 of the Real Property Law (the Recording Act). The umbrella statute for recording real property instruments in New York.

Real Property Law § 290(3). Defines "conveyance" to include written instruments by which an interest in real property is mortgaged.

Real Property Law § 291. Sets the clerk's duty to record a conveyance on request of any party, with the conveyance properly acknowledged.

Real Property Law § 316. Requires the clerk to maintain general indexes that include separate mortgagor and mortgagee indexes, and provides that the indexes form part of the record of each instrument.

Constructive notice doctrine. Andy Associates v. Bankers Trust Co., 49 N.Y.2d 13 (1979), confirms the recording act's two purposes (protect innocent purchasers, establish public records with constructive notice) and the proposition that a purchaser is charged with notice of what an accurate index would have revealed. First National Bank v. Riccio, 236 A.D.2d 697 (3d Dep't 1997), reinforces that an accurate mortgagor-mortgagee index entry provides constructive notice. Baccari v. De Santi, 70 A.D.2d 198 (2d Dep't 1979), and Federal National Mortg. Ass'n v. Levine-Rodriguez, 153 Misc. 2d 8 (Sup. Ct. 1991), confirm that indexing errors that obscure the mortgagor or mortgagee vitiate constructive notice.

Statutory interpretation principles. People ex rel. Harris v. Sullivan, 74 N.Y.2d 305 (1989) (plain meaning of statute); People v. Finnegan, 85 N.Y.2d 53 (1995) (effectuate legislative intent).

Citations

• Real Property Law § 290(3) (conveyance includes mortgage).
• Real Property Law § 291 (county clerk recording duty).
• Real Property Law § 316 (mortgagor and mortgagee indexes as part of the record).
• People ex rel. Harris v. Sullivan, 74 N.Y.2d 305 (1989) (plain-meaning rule).
• People v. Finnegan, 85 N.Y.2d 53 (1995) (legislative intent).
• Andy Associates, Inc. v. Bankers Trust Co., 49 N.Y.2d 13 (1979) (recording act purpose and constructive notice).
• First National Bank v. Riccio, 236 A.D.2d 697 (3d Dep't 1997) (accurate index provides constructive notice).
• Baccari v. De Santi, 70 A.D.2d 198 (2d Dep't 1979); Federal National Mortg. Ass'n v. Levine-Rodriguez, 153 Misc. 2d 8 (Sup. Ct. 1991) (indexing errors vitiate constructive notice).

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/I_2001-2_pw.pdf

Original opinion text

REAL PROPERTY LAW, ART 9, §§ 290(3), 291, 316.
County Clerks have no obligation to record Mortgage Electronic
Recording Systems (MERS) as the mortgagee of record where MERS is
not the actual mortgagee. Doing so (1) violates the terms of N.Y.
Real Property Law § 316, and (2) tends to frustrate the legislative
intent of the Real Property Law's recording provisions.

April 5, 2001

Alfred Samenga, Esq.
County Attorney
County of Nassau
Ralph G. Caso Executive
& Legislative Building
One West Street
Mineola, NY 11501-4820

Informal Opinion
No. 2001-2

Dear Mr. Samenga:
You have advised that Mortgage Electronic Recording Systems,
Inc. ("MERS"), in its capacity as nominee, has been submitting
mortgages to the Nassau County Clerk for purposes of recording.
You further indicate that MERS has no legal interest in the
mortgages it submits. Your inquiries are:

1. What are the potential consequences of
   MERS' use of the following language inserted
   in a mortgage: "FOR PURPOSES FOR RECORDING
   THIS MORTGAGE, MERS IS THE MORTGAGEE OF
   RECORD."?
2. What is the duty of the County Clerk with
   respect to indexing such documents?
   We conclude that N.Y. Real Property Law § 316 prohibits the Nassau
   County Clerk from naming MERS as mortgagee for the purposes of
   recording a mortgage where MERS holds no legal interest in that
   mortgage.
   Accordingly, MERS' inserted statement has no legal
   effect. The Clerk must record the mortgage under the name of the
   actual mortgagee.
   Under New York Real Property Law, a county clerk "shall"
   record a "conveyance of real property" upon the request of "any
   party," so long as that conveyance has been "duly acknowledged by
   the person executing the same," or proved and certified as
   required. N.Y. Real Prop. Law § 291 (McKinney 1989 & Supp. 2000).
   The term "conveyance" includes a written instrument by which an
   interest in real property is mortgaged. See id. § 290(3).
   In general, the clerk or registrar of each county must form
   "general indexes of instruments recorded in his office" to afford
   "correct and easy reference to the records in his office." Id.
   § 316.
   The statute requires a separate set of indexes for
   "mortgages or securities in the nature of mortgages," and specifies
   that this set must contain
   two lists in alphabetical order, one
   consisting of the names of the . . .
   mortgagors . . . , followed by the names of
   their . . . mortgagees . . . , and the other
   list consisting of the names of the . . .
   mortgagees . . . , followed by the names of
   their . . . mortgagors . . . .
   . . .
   Such indexes shall form a part of the
   record of each instrument hereafter recorded.
   Id.
   We believe that the plain meaning of N.Y. Real Property Law
   § 316 precludes MERS's effort to designate itself as mortgagee
   solely for recording purposes.
   See People ex rel. Harris v.
   Sullivan, 74 N.Y.2d 305, 309 (1989) ("When [a statute's] language
   is clear and unambiguous, it should be construed so as to give
   effect to the plain meaning of its words."). The statute requires
   the county's clerk or registrar to index mortgages by the names of
   mortgagors and their mortgagees. If MERS has no legal interest in
   the mortgage it seeks to record, then MERS can be neither mortgagor
   nor mortgagee. Therefore, MERS's name cannot substitute for the
   name of the actual mortgagee in the county's general index for
   recorded mortgages.
   MERS's effort to designate itself as mortgagee solely for
   recording purposes also undermines the general purposes of the Real
   Property Law's recording provisions.
   See People v. Finnegan,
   85 N.Y.2d 53, 58 (1995) ("The governing rule of statutory
   construction is that courts are obliged to interpret a statute to
   effectuate the intent of the Legislature . . ."). The Legislature
   enacted "the recording act, which is embodied in article 9 of the
   Real Property Law," to (1) "protect the rights of innocent
   purchasers who acquire an interest in property without knowledge of
   prior encumbrances," and (2) "establish a public record which would
   furnish potential purchasers with notice, or at least 'constructive
   notice', of previous conveyances and encumbrances that might affect
   their interests."
   Andy Associates, Inc. v. Bankers Trust Co.,
   49 N.Y.2d 13, 20 (1979) (citations omitted).
   Accordingly, "a purchaser of an interest in land . . . has no
   cause for complaint under the statute when its interest is upset as
   a result of a prior claim against the land the existence of which
   was apparent on the face of the public record at the time it
   purchased." Id. (citations omitted). See First National Bank v.
   Riccio, 236 A.D.2d 697, 698, 652 N.Y.S.2d 908, 909 (3d Dep't 1997)
   ("[E]ntries in the appropriate mortgagor and mortgagee indices,
   setting forth all required information concerning the mortgage to
   defendant's assignor and showing no discharge thereof, provided
   plaintiff with constructive notice of defendant's lien.")
   (citations omitted).
   By the same token, errors in indexing may vitiate constructive
   notice, because section 316 provides that the index "shall form a
   part of the record of each instrument hereafter recorded," N.Y.
   Real Prop. Law § 316. See Baccari v. De Santi, 70 A.D.2d 198, 203,
   431 N.Y.S.2d 829, 832 (2d Dep't 1979) ("[S]ince the index has, by
   statute, been made part of the record of filed instruments, an
   erroneous indexing by the clerk fails to give constructive notice
   of the existence and contents of the instrument."); Federal
   National Mortg. Ass'n v. Levine-Rodriguez, 153 Misc. 2d 8, 16,
   579 N.Y.S.2d 975, 980 (N.Y. Sup. Ct. 1991) ("Errors in indexing
   involving the name of the mortgagor are sufficient to vitiate
   constructive notice of record.").
   In this case, since MERS has no legal interest in the
   mortgages it seeks to file, designating MERS as the mortgagee in
   the mortgagor-mortgagee indices would not fully satisfy the intent
   of Real Property Law's recording provisions to inform the public
   about the existence of encumbrances, and to establish a public
   record containing identifying information as to those encumbrances.
   If MERS ever went out of business, for example, it would be
   virtually impossible for someone relying on the public record to
   ascertain the identity of the actual mortgagee if only MERS had
   been designated as the mortgagee of record.
   In sum, despite MERS' statement inserted in the mortgages it
   submits, the County Clerk has no obligation to record MERS as the
   mortgagee of record where MERS is not the actual mortgagee, because
   doing so (1) violates the terms of N.Y. Real Property Law § 316,
   and (2) tends to frustrate the legislative intent of the Real
   Property Law's recording provisions.
   The Attorney General renders formal opinions only to officers
   and departments of State government. This perforce is an informal
   and unofficial expression of the views of this Office.
   Very truly yours,
   JIM COLE
   Assistant Solicitor General In
   Charge of Opinions
   By:______
   SACHIN S. PANDYA
   Assistant Solicitor General