MERS Adds Commercial Loans
MERS Commercial has officially opened for business, with a $300 million loan closed by Bank of America last month.
The electronic loan registry system - designed for use by issuers, master servicers, custodians, originators and special servicers - helps eliminate assignments when trading mortgage loans, with MERS remaining the mortgagee of record.
Borrowers name MERS as mortgagee and nominee for the lender on the deeds of trust and mortgages recorded in county land records.
This eliminates the need to record an assignment of security interest when a loan is sold, resulting in cost reduction.
R.K. Arnold, president & CEO, MERS, said that the initiative "was mainly driven by a need in the commercial marketplace for a simpler loan process, elimination of paperwork and cost savings."
The system also takes care of the problem of missing interim assignments, making the lien release process more efficient for commercial servicers and allowing special servicers to foreclose more efficiently.
Accessible through the Internet, the system supports loan structures with multiple promissory notes and multiple properties in the collateral structure, and also provides a method to identify how many security instruments and UCC documents were present at the time of loan closing.
The Bank of America loan was collateralized by over 40 properties in over 20 states, MERS said.
Joe Forte, senior partner at Dechert, said, "MERS Commercial allowed us to more easily originate this complex loan for Bank of America. I believe that the use of MERS Commercial will quickly become the standard in CMBS transactions."
The Mortgage Bankers Association, together with the Commercial Mortgage Securities Association, had earlier initiated a joint commercial mortgage-backed securities Loan Document Integrity Task Force in order to facilitate the creation of MERS Commercial and other similar projects.
Mary Anne Ashmore, chair of the task force and first vice president of ABN Amro/LaSalle Bank, said, "We are excited about the potential for MERS Commercial. In addition to reducing the risks associated with collateral documents, it also significantly reduces the costs associated with assigning the collateral to the trusts. This makes it a perfect solution for our industry."
The MERS Commercial initiative has been funded by Banc of America Securities, Bear Stearns, GE Capital Real Estate, GMAC Commercial, John Hancock and Wells Fargo.
While modeled on the MERS Residential initiative, the commercial initiative has been changed to reflect the needs of the commercial mortgage side, MERS said.
For instance, while MERS Residential allows for only one security instrument per promissory note, the commercial system allows for loans that may be cross-collateralized.
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