Yes, I've seen this done. I lived in a condo for a while where the filter was in the return housing, not in the unit itself.

Any reasons why it should or should not be set up this way?

There's a few reasons it is done this way.

1. There are people who do not like going into the attic due to hazards up there. Like falling thru the ceiling by stepping somewhere you shouldn't.

2. In a HVAC system with multiple returns leading back to the HVAC system itself is a lot of duct work that will get filthy without the air being filtered.

3. Multiple returns reduce the number of 'hot spots' or places in the structure in which hot stale air in some cases colder air becomes trapped.

Under the should not category: If the structure is smaller, these kinds of things can be over kill so it depends on a variety of factors whether this layout is better than just a single air return system with only a single filter.

Thanks Austin air - I have never seen it done this way. Appreciate the reasons you gave for why; that is helpful. My attic does have stairs, so for me changing 6 filters in ceiling with 9 inch ceilings will be harder than it would have been to go in attic, but I understand the point.

Also as another data point to the comment on size, the HVAC only covers about 2500 sq feet (I have a basement but not part of system). So not a tiny house but not large. The bedroom that each have separate filters now are only like 12x 12. The condo I am in while finishing remodel is about 1600 sq foot and has just one filter (in machine, in storage area off deck so not in ceilings at all), which seems more normal to me.

Sounds like a better quality build with the larger home.

Cheaper builds will not have individual room returns. By negating the return in the room it is much harder to provide that room with 'better' comfort.

In a room that has no return ( a place for air to leave the room) will force air out thru cracks and crevices. The room gets blown up like a balloon with the door closed.

Remember air takes the path of least resistance. This probably won't seem that detrimental to you as the consequences vary. It falls under the premise of building science and what occurs to building pressure under certain conditions when the HVAC system is running.

In some cases the home without the return ducting to each room can undergo areas of the home under negative air pressure. The premise is that air added to a room takes up space that is occupied by air already there, that air has to go somewhere.

Hard to comprehend, because this is invisible to the human eye.

If the home without the air return to each individual room just left the door open to the room in question there is no problem that way because air has a place to escape the room.

Other options are what is called 'jumper ducts' or 'poor man's return' -- these are just merely a duct (typically over head) with a grill attached, no filter as the air escapes the room to an area outside the room to another duct with grill over it -- usually these are joined by other jumper ducts led to the area near a filtered return. The filtered return has a draw to it when the HVAC system turns on, by having the jumper duct / poor man's return ducting near by this relieves the air pressure of the HVAC system when the system turns on.

It's all about reducing 'pressure' and creating a more comfortable home. This pressure is invisible.

A home with a single return - depending on the size of the system can have an effect like that of a wind tunnel. Many times these single filter returns are placed down a hall way. Standing there with the system on you can feel the rush of air being pulled back. That is what I mean by 'pressure'.

Pressure causes less comfort, more wear and tear, higher electric bills. These are all gradual things. Over time they all add up. If you're in a more moderate climate not so cold and not so hot doing anything about it may not prove to be that big of a deal.