There has been much talk about the recent foreclosure crisis that led to major banks – like Bank of America and JPMorgan Chase – to suspend on foreclosure sales and proceedings. One of the topics that arose in the recent foreclosure mess is the role of mortgage registry in tracking down who has the right to foreclose on homes. Recent debates on the topic just might shed some light into the foreclosure mess.

The Mortgage Registration Systems Inc. allows banks to electronically register home loan sales. Its role in home foreclosures, if there is any, is currently being debated in a number of courts. The turnout of the debate can determine if the registry system can share the blame for the defective foreclosure process and the clouded titles for millions of properties.

MERS has played a big role in the process of bundling mortgages into securities. If a ruling against MERS happens, the same process will surely slow down.

“MERS is the central device by which the banks have tried to opt out of the legal system and the real-property record system. They have taken it upon themselves, with the supposed consent of the borrowers, to violate a system of property record-keeping that we’ve had going back centuries,” says U.S. Representative Alan Grayson of Florida.

MERS, whose parent company is Reston, Virginia-based Merscorp Inc., prides itself in being the provider of “support services to mortgage industry”. Created in 1995 by industry leaders, it claims to have saved the industry $2.4 billion by charging $6.95 for loans registered. Under its system, MERS is allowed to act as the nominee (or agent) on the lender’s mortgage or deed of trust.

Now MERS is under hot water since, as a law professor pointed out, one entity cannot act as both agent and principal to the same property. The necessary steps to own the note was not taken by MERS, meaning it is supposed to have no right to foreclose on 45 of 50 states. Even Arkansa, Kansas, and Maine supreme courts agree, saying that since MERS does not lend the money, it is not losing anything.

Another thing that MERS is being criticized for is its being a facilitator of securitization. The company has allowed a faster, easier, and cheaper selling and reselling of home loans.

In its own defense, MERS says in an emailed statement that what it merely did was provide transparency and clarity. It aided the volume of securitization that came in, allowing county record officers from being overwhelmed.

The debate is far from over, with cases still being heard almost all over the country. How everything pans out just might help in predicting where the real estate market is headed.