Ginnie Mae Plays Leadership Role in MERS Initiative
Ginnie Mae has announced the eligibility of multifamily mortgages that are registered with MERS Commercial effective immediately, becoming the first secondary market agency to take this step in promoting the use of the electronic registry for tracking ownership of loans.
Pools may contain both MERS registered and non-registered loans.
"MERS is delighted that Ginnie Mae has taken a leadership position in adopting MERS Commercial in the multifamily industry," said Dan McLaughlin, executive vice president at MERS. "As a result, it will be less costly for mortgage companies to originate multifamily loans, which will contribute to making multifamily housing more affordable."
Registration of multifamily loans with MERS Commercial is voluntary and offers benefits including increased security of the Ginnie Mae collateral position, reduced letter of credit (LOC) costs for uncertified pools and lower costs in origination and servicing.
Because registration with MERS eliminates assignments, it will reduce trailing assignments that sometimes require lenders to expend capital on LOCs until a pool can be certified, Mr. McLaughlin said.
He said MERS has a good relationship with Ginnie Mae and wanted to recognize the leadership Ginnie Mae officials have demonstrated in supporting MERS Commercial.
Membership in MERS Commercial is required for registering loans. MERS Commercial is an electronic registry designed to eliminate the repurchase risk and costs associated with preparing, recording and tracking assignments. Borrowers name MERS as mortgagee on the security instrument and other documents that are recorded in the county land records. MERS Commercial is an extension of the use of MERS in the residential mortgage industry, where over 19 million loans have been registered on the MERS system.
Mr. McLaughlin told MSN that the commercial mortgage world presents some challenges not present in the residential lending industry. For instance, in many cases, multiple properties serve as collateral for a loan. And sometimes multiple notes are involved in a commercial real estate deal.
And loan documents are not standardized to the same degree they are in the residential industry.
And there are different relationships among parties to the loan, including the widespread use of a special servicer to manage loans that go into default.
"To accommodate that cross-collateralization structure, we basically created a new system," he said.
Ginnie Mae has taken a lead in extending MERS Commercial to the multifamily mortgage world, but MERS plans to approach Fannie Mae and Freddie Mac about gaining their approval for MERS-registered loans next year. The government-sponsored enterprises have been enthusiastic backers of MERS in the residential world, and Mr. McLaughlin is confident that they will support MERS Commercial as well.
MERS introduced its electronic system for tracking commercial mortgages in April, and recently, Bank of America became the first lender to register commercial mortgages as part of a CMBS transaction. About seven major CMBS market participants sponsored and funded the development of MERS Commercial. Mr. McLaughlin notes that only about 7,000 CMBS loans are made each year, and so MERS has different expectations for the commercial registry than for the residential one, which is now registering about 25,000 to 30,000 loans per day.
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