Mortgage Electronic Registration
Systems (MERS) and Lender Processing Services (LPS) will be joining eight
mortgage servicers as the subjects of "examinations" by federal
regulatory agencies according to testimony prepared for presentation today at a
House Financial Services hearing on Robo-Signing, Chain of Title, Loss
Mitigation, and Other Issues in Mortgage Servicing.
Acting Comptroller of the Currency (OCC) John
Walsh reported that his agency along with the Federal Reserve and the Federal
Deposit Insurance Corporation, have already begun on-site assessments of the
servicers; they will be joined by the Federal Housing Finance Agency in looking
at MERS while OCC and the Federal Reserve are participating in the probe of Lender
Processing Services Inc. (LPS).
The key objective of the
examination of the servicers is to determine the adequacy and effectiveness of
governance over the foreclosure process, Walsh said, and the
"extensive" examinations include assessments of each servicer's
foreclosure policies and procedures, organizational structure and staffing,
vendor management, quality control and audit, loan documentation and
foreclosure workflow. The examiners are looking
at borrower files, handling and resolution of foreclosure-related complaints, and
the financial reporting and will interview personnel involved in the processing
of foreclosure documents.
MERS', which has emerged from
obscurity in the wake of the robo-signing controversy, provides a central registry
for mortgage documents. By registering
mortgages in MERS name, the mortgage industry is able to repeatedly sell loans
while maintaining a consistent nominee for the mortgage. LPS makes software for banks to track home
loans and helps process the paperwork banks use in processing foreclosures. The company has been accused in recent
lawsuits of fabricating loan assignments through a subsidiary, DocX, which it
recently closed.
Walsh said the examination will
look at MERS corporate governance, control systems, accuracy and timelines of
information and examiners will also visit on-site foreclosure examinations in
process at the largest mortgage services to determine how servicers are
fulfilling their roles and responsibilities relative to MERS. He expects that the examinations and analysis
will be completed by the end of January.
In testimony he delivered at a
Senate Banking Committee hearing on much the same topic earlier in the week,
MERS President and CEO R. K. Arnold, strongly defended the role of his
organization, citing the multiple roles it plays assisting borrowers, lenders,
law enforcement, and local communities.
Arnold insisted that the use of MERS is based on sound legal principles
and its validity has been upheld in a number of courts. Mr. Arnold will also be testifying at the
House hearing.