2021 MERS® Compliance Challenges with Recordable Documents

In my last post, I discussed how resource staffing issues and business model changes likely played a role in some of the compliance missteps I observed during my 2021 MERS annual compliance reviews. I encourage you to read it, if you haven’t already, to understand some of the top pervasive issues and compare them against your organizations own controls.

Another common theme last year with MERS compliance was errors found on recordable documents. This should come as no surprise as MERS has strict guidelines for what verbiage can and can’t be used in a MERS document.

Common deficiencies identified included:

• Incorrect use of MERS’ Name – Subject to state requirements, MERS’ name must appear and be written in one of seven permissible ways identified in the MERS Procedures Manual. Depending on the original security instrument type, MERS’ capacity is identified as mortgagee, beneficiary, or grantee. (e.g., Mortgage Electronic Registration Systems, Inc., as mortgagee). The naming convention should be consistent throughout applicable documents.

• MERS is described as a licensed financial institution in Louisiana – MERS strictly prohibits being identified as such and to do so is a violation of La. R.S. 9:5174. We continue to see Members utilizing subservicers who do not comply with this requirement.

• Modification agreements leveraging older forms. The problem herein this deficiency is older forms contain verbiage that state all loan documents that are affected by the modification agreement have been assigned to the investor. Unless there is an assignment from MERS to that effect, this verbiage is incorrect and should be modified. Specific instructions on how to adapt the modification agreement form for a MERS registered loan are available on both Fannie Mae’s and Freddie Mac’s websites.

I hope both of my recent posts summarizing my 2021 annual audit findings help your organization reflect on changes your organization should make to its MERS policies and procedures in the year ahead. If you feel you might benefit from our deep domain expertise on MERS compliance or any of these topics specifically, please reach out for a discussion.

My next post on MERS compliance will cover the importance of internal controls. Read it here.

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About the Author

Gary Vandeventer

GARY VANDEVENTER has over 18 years of hands-on experience with the MERS® processes including participation in the original design of the MERS System. He is arguably the country’s pre-eminent expert on the policies and procedures within MERS. He is the Vice President, Loan Servicing Consulting at LoanLogics. Gary is a frequent panelist and speaker at industry conferences on the topic of MERS and its processes. Prior to joining LoanLogics, he held the position of Vice President, Product Division for MERSCORP Holdings, Inc. In that capacity, he oversaw the actions of the Membership, Integration, Quality Assurance & Training and Development departments.

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About Gary Vandeventer

GARY VANDEVENTER has over 18 years of hands-on experience with the MERS® processes including participation in the original design of the MERS System. He is arguably the country’s pre-eminent expert on the policies and procedures within MERS. He is the Vice President, Loan Servicing Consulting at LoanLogics. Gary is a frequent panelist and speaker at industry conferences on the topic of MERS and its processes. Prior to joining LoanLogics, he held the position of Vice President, Product Division for MERSCORP Holdings, Inc. In that capacity, he oversaw the actions of the Membership, Integration, Quality Assurance & Training and Development departments.