Components of a Compliant MERS QA Review and Audit Program
Another audit type that lenders must perform or have performed is a MERS QA Review and audit. For a MERS audit, it’s all about the MINs. A Mortgage Identification Number (MIN) is an 18-digit number that uniquely identifies a mortgage loan registered on the MERS® System. A MIN is permanently assigned to a mortgage at registration and cannot be duplicated or reused. To process information on the MERS® System, you must enter the MIN and you should never have duplicate MINs. Each year, if your organization is identified as of March 31st as having LESS than 1,000 MINs, you are required to reconcile your portfolio with the MERS system every quarter in addition to performing an annual internal certification for MERS. This means confirming that all your MERS Quality Assurance policies and procedures are up to date and your staff is following these procedures. Send your certification to MERS along with an updated copy of your MERS Quality Assurance procedures. Follow these same steps until the number of MINs in your portfolio exceeds 1,000.
When you have MORE than 1,000 MINs you must reconcile your portfolio monthly as well as engage a third party to review and certify your process against your MERS Quality Assurance plan. The third party will perform a detailed quality assurance audit to certify the effectiveness of your organization’s MERS policies and procedures.
The first step in preparation for the audit is to make sure your policies and procedures are up to date and being followed. The third-party MERS auditor will be examining your policies and procedures, otherwise known as your MERS Quality Assurance Plan. The auditor will also compare how you perform the activity to the steps in the quality assurance plan. The activity performed should match the process steps. When the performance of the activity does not match your quality assurance procedures then your procedures will need to be updated in order to pass your audit.
The next and perhaps the most important thing you can do to ensure a successful audit, is to confirm the data in your source system matches the MERS registry EXACTLY. As part of the third-party audit, the data from the source system fields will be compared to the data in the MERS registry through examination of tracking and aging reports. All fields should match exactly. If the borrower has a middle name in your system, they should have a middle name in MERS. If the property street in MERS is Main St then the property street in the source system should be Main St. In preparation for the data reconciliation portion of the audit it is helpful to have a solid process in place. As a time saving best practice, any MINs that fail should be resolved prior to the audit.
Ensuring the authorized signing officers are recertified by the last day of October for the coming year seems pretty straight forward, but often causes findings for some lenders. A best practice to incorporate is creating an annual reminder to review the list of officers named in MERS and confirm they have the required, current certifications. Those that are not up to date should be reminded they need to do their annual MERS certifications in the coming year prior to the next MERS audit AND before the due date. If these officers are not currently signing any documentation, you might consider removing them from MERS to save time and resources.
MERS QA standards require periodic internal audits of the data. The third-party auditor will review the documentation to confirm the internal audits are reviewing and sampling the required data per your QA plan. As a best practice, make sure this process is being followed and have your internal auditors and documentation available during the third-party review.
Keeping your MERS data up to date and in order can be challenging especially as your portfolio continues to grow. As long as you are putting in the effort to manage your MINs it will be reflected in the audit. The annual audits should serve as a tool to help you improve processes and reduce costs at the same time ensuring you are managing your MERS portfolio accurately and efficiently.