Foreclosures in Washington cannot proceed unless a mortgage deed is recorded in a public filing, Peter Nickles, the district's attorney general said Wednesday.
Some notices of foreclosure "may mislead homeowners and violate the district's consumer protection law," Nickles said in a press release.
The announcement is a major setback for MERS, which purports to track more than 64 million mortgages.
The system is owned by some of the industry's biggest players, including Fannie Mae and Freddie Mac.
Washington requires that each deed or document transferring a mortgage interest be recorded with the Recorder of Deeds within 30 days of execution.
A foreclosure notice also must identify a "holder of the note" and a "security instrument recorded in the land records of the District of Columbia."
"This requirement is not satisfied by private tracking of mortgage interests," Nickles said.
He said he may consider bringing enforcement actions to stop foreclosure proceedings and seek restitution for consumers.