The CEO of Merscorp Inc. told the Senate Banking Committee Tuesday that the same mortgage tracking technology that’s recently come under fire by robo-signing critics should be more widely adopted by the mortgage industry and federal regulators.
Merscorp President and CEO R.K. Arnold advocated a series of initiatives to solidify the Mortgage Electronic Registration Systems’ place in the mortgage origination process and use its database of unique mortgage identifiers, called MINs, to comprehensively track residential real estate.
“The MERS database, coupled with the Mortgage Identification Number, is a powerful tool that can be harnessed by Congress and the industry to improve the mortgage finance system,” he said in prepared testimony.
Arnold’s proposals include attaching MINs to all residential mortgages, not just those controlled by MERS member lenders and servicers, so they can be tracked on a MERS-run national database. He also advocated using that database to track the physical custody of original promissory notes.
Arnold told the panel that the cost of registering a mortgage on the MERS database should be an origination fee disclosed on the HUD-1 form at closing. He added that MINs should be issued earlier in the origination process and should be required to remain attached to the mortgage until payoff and lien release, even when they’re transferred to a non-MERS member.
With these new applications in place, Arnold championed to the committee mandatory integration of MIN identifiers on all federal data systems that deal with home loans, “so that information regarding loans can be linked across multiple data sources,” he said.
“The FHA should be able to look at HUD data, and FDIC should be able to look at SEC information, always knowing that they are comparing apples to apples,” Arnold added. “State and local government agencies should also be encouraged to adopt the number.”
Arnold spent most of the testimony both defending his company and providing a step-by-step explanation of the mortgage origination process and the role MERS plays in serving as mortgagee, a process outlined in recent
Arnold said his company has strict rules in place to guide mortgage servicers’ use of the technology, adding that the company routinely amends and strengthens processes to ensure appropriate use of its software and database.
“Earlier this year, when we became aware of acceleration in foreclosure document processing, we grew concerned that some certifying officers might have been pressured to perform their responsibilities in a manner inconsistent with our rules,” Arnold said. “When we did not get the assurances we thought were appropriate to keep this from happening, we suspended our relationships with those companies.”
“When we discovered that some so-called ‘robo-signers’ were MERS certifying officers, we suspended their authority until they could be retrained and retested,” he added. “We are asking our members to provide us with specific plans outlining how they intend to prevent such actions in the future.”
It’s these certifying officers who hold joint authority at their servicer employers and with MERS to initiate foreclosures. They’re also the same employees accused of improperly processing foreclosure affidavits in the robo-signing scandal that prompted the Senate hearing.
When a servicer forecloses in the name of MERS, the company requires the servicer to present the promissory note in the proceedings, even when individual state laws don’t require it. Arnold added that MERS prohibits the use of lost note affidavits in lieu of the actual note when members began abusing the practice.
“We take our role as a mortgagee very seriously and we see our database as a key to moving toward better access to information and transparency for consumers,” he said.
