What MERS has done is circumvented the county recording systems, so that when a mortgage is transferred, real Assignments of Mortgage aren't necessarily created; instead, MERS electronically tracks the ownership, and the necessary documents are sometimes only created when they need to be shown. In the old days, each Assignment would be recorded, and you could look at the land records to see who held what. Now you never know until they tell you.
Lenders typically file a foreclosure action including a count for a "Lost Note & Mortgage." All they really have to prove is that at *some point* they physically had them. That can get tricky, though, because in reality a lot of times they never did. They do generally need to have the physical Promissory Note to enforce the personal obligation to pay the debt, or prove it was lost or destroyed after they took ownership.
In the past, lenders didn't have much trouble eventually producing the original note and proof of the chain of ownership of the mortgage. That seems to have changed in some cases. The "robo-signing" scandal showed that the servicers and big law firms were sometimes forging Assignments of Mortgage. What's been danced around is that the lenders knew or should have known this, because the practice arose when the lenders or servicers couldn't produce the documents, but still insisted the law firms forge ahead with the foreclosures.
You could demand that whomever is asking for your mortgage payment demonstrate they hold the debt, but you may or may not get a satisfactory answer. If you have a general beef with the lender, you can make a Qualified Written Request under RESPA.
http://www.mortgagesfinancingandcredit.org/mortgages/complaints-regulatory/lender-complaint-letter.htmRachel had a piece on this last night. Some states attorney general, including Joe Biden's son, are looking at suing MERS under state deceptive trade practices laws. I think they've got a good point. MERS was begun as a convenience for lenders that was assumed to be harmless, but it's become a huge source of confusion for consumers and it's helping cover up the subprime mess.