Federal Agencies Examining Loan Servicers, MERS, and LPS

Mortgage Electronic RegistrationrnSystems (MERS) and Lender Processing Services (LPS) will be joining eightrnmortgage servicers as the subjects of “examinations” by federalrnregulatory agencies according to testimony prepared for presentation today at arnHouse Financial Services hearing on Robo-Signing, Chain of Title, LossrnMitigation, and Other Issues in Mortgage Servicing.  </p

Acting Comptroller of the Currency (OCC) JohnrnWalsh reported that his agency along with the Federal Reserve and the FederalrnDeposit Insurance Corporation, have already begun on-site assessments of thernservicers; they will be joined by the Federal Housing Finance Agency in lookingrnat MERS while OCC and the Federal Reserve are participating in the probe of LenderrnProcessing Services Inc. (LPS).</p

The key objective of thernexamination of the servicers is to determine the adequacy and effectiveness ofrngovernance over the foreclosure process, Walsh said, and thern”extensive” examinations include assessments of each servicer’srnforeclosure policies and procedures, organizational structure and staffing,rnvendor management, quality control and audit, loan documentation andrnforeclosure workflow.  The examiners are lookingrnat borrower files, handling and resolution of foreclosure-related complaints, andrnthe financial reporting and will interview personnel involved in the processingrnof foreclosure documents.</p

MERS’, which has emerged fromrnobscurity in the wake of the robo-signing controversy, provides a central registryrnfor mortgage documents.  By registeringrnmortgages in MERS name, the mortgage industry is able to repeatedly sell loansrnwhile maintaining a consistent nominee for the mortgage.  LPS makes software for banks to track homernloans and helps process the paperwork banks use in processing foreclosures.  The company has been accused in recentrnlawsuits of fabricating loan assignments through a subsidiary, DocX, which itrnrecently closed.</p

Walsh said the examination willrnlook at MERS corporate governance, control systems, accuracy and timelines ofrninformation and examiners will also visit on-site foreclosure examinations inrnprocess at the largest mortgage services to determine how servicers arernfulfilling their roles and responsibilities relative to MERS.  He expects that the examinations and analysisrnwill be completed by the end of January.</p

In testimony he delivered at arnSenate Banking Committee hearing on much the same topic earlier in the week,rnMERS President and CEO R. K. Arnold, strongly defended the role of hisrnorganization, citing the multiple roles it plays assisting borrowers, lenders,rnlaw enforcement, and local communities. rnArnold insisted that the use of MERS is based on sound legal principlesrnand its validity has been upheld in a number of courts.  Mr. Arnold will also be testifying at thernHouse hearing.

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