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.