Q: I register my loans with the Mortgage Electronic Registration Systems, Inc. ("MERS"). Am I required to perform an annual MERS audit?
A: It depends on your MERS membership type. MERS Quality Assurance Standards require all MERS General Members to perform an independent quality assurance ("QA") review annually and certify to same as part of the Annual Report due December 31st. Depending on the size of your servicing portfolio, the review may be conducted by an internal department or you may need to engage an outside independent third party to perform the review.
If your organization is the servicer on less than 1,000 active Mortgage Identification Number ("MIN") records as of March 31st of the current year you may conduct the review in-house and are responsible for sending an annual certification to MERS along with an updated copy of your MERS QA Plan. The reviewer may be an internal resource or you may choose to utilize an external entity. Upon deciding to use an internal resource within your organization, that internal resource must be a QA Officer, a Legal MERS system contact, or an employee who is not affiliated with the MERS System operations.
If your organization is the servicer on 1,000 or more active MINs, you must engage an outside third party review organization. Third party review organizations can be external QA auditors or third-party compliance/consulting organizations. The third party reviewer must sign the Annual Report confirming that all quality assurance provisions have been met.
The objective of the review and Annual Report is to certify your QA performance against your MERS QA Plan. The report identifies and evaluates your organization's system-to-system reconciliation process, your reject/warning report process, and adherence to your QA Plan. As such, keeping your MERS QA Plan up to date for accuracy and effectiveness is an important measure in passing the MERS audit. It is also important to ensure that your staff is following your written MERS policies and procedures, that all applicable forms of recordable documents contain the necessary MERS language, and that reconciliations are being performed timely.
Consequences of not performing an annual audit or not passing an annual audit could result in fines, penalties, and revocations as your program will be out of compliance.