MERS® Compliance Health Monitor: Reconciliation Reporting Reminders

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Welcome back to another installment of my MERS Compliance Health Monitor blog series, which I began back in April.

As a MERS certified independent reviewer, I would be remiss if I did not make mention of the significance of performing a system-to-system reconciliation on all required and conditionally required fields in the MERS® System with the system of record. The system of record is most commonly the servicing system but, depending on circumstances, may be the origination system.

While typically not among the most commonly found errors in annual reporting, which tend to concentrate around recordable documents, I still see servicer’s challenged by monthly/quarterly reconciliation reporting.

Aside from general data integrity issues, which can be solved twofold – by starting with good data prior to loan boarding and using an automated reconciliation system – a general awareness around the who, what where and when to reconcile can trip some servicers up.

To level set, reporting timeline thresholds for MERS members are as follows:

• <1000 loans serviced as of March 31st each year report Quarterly
• >1000 loans serviced as of March 31st each year report Monthly

Typically, larger organizations are more aware of the broader reconciliation requirements and have proper controls in place.  I find that those who lapse in reporting are organizations that have not previously retained loans and are now servicing. Furthermore, it is often MERS Lite members who previously originated and sold loans within 90 days or originators who are participating in Agency programs. Another category of organizations is also those that are retaining more servicing due to the market and have moved from the quarterly to monthly requirement.

In addition to being aware of the above, below I share 4 quick reminders integral to the overall reconciliation process that reviewers expect and will check from reporting members.  

1. Know which fields are required and conditionally required. This can be found in the latest version of the MERS Procedures Manual, accessible at the MERS members-only portal. When it comes to optional fields, any field on the MERS System not listed in the required or conditionally required categories which contains data, must be reconciled.
2. The Member Reconciliation Extract (MRE) is available upon request from MERS.  This tool is used to help Members perform monthly or quarterly system-to-system reconciliation between their system of record and the MERS® System. Data from it can be extracted on a set schedule and is easily accessible from the Member’s MERS Reports folder. The MRE extract date should be the same date data is extracted from the system of record.  
3. Remediate identified exceptions. Once the data from both systems is pulled and extracted, a determination must be made which system houses the correct data and updating the other. Reviewers will validate exceptions appearing on the exception reports generated from the data comparison process have been corrected. If not corrected, they will want to see exceptions are being escalated or a remediation plan is being developed.
4. Aging reports must contain the aforementioned exceptions and their status until cleared. Members are expected to review and correct exceptions within 30 days. Independent third-party auditors, like myself, will continue to review servicer generated 30/60/90/120+ day aging reports for a significant lack of change in cleared exceptions. For example, if the number of exceptions for 60 days in august is the now the same number in the 90 days count in July there is a problem that must be addressed.

I hope the reminders above help support you in your MERS compliance efforts related to reconciliation. In addition to the independent annual reviews I perform that help ensure a well-rounded, comprehensive testing is performed on all aspects of a Member’s MERS Quality Assurance Plan, LoanLogics has new and existing solutions to support the fast and accurate transfer of loan file data between counterparties and systems.  Reach out to LoanLogics for information on both through our website

About the Author

Gary Vandeventer

GARY VANDEVENTER has over 18 years of hands-on experience with the MERS® processes including participation in the original design of the MERS System. He is arguably the country’s pre-eminent expert on the policies and procedures within MERS. He is the Vice President, Loan Servicing Consulting at LoanLogics. Gary is a frequent panelist and speaker at industry conferences on the topic of MERS and its processes. Prior to joining LoanLogics, he held the position of Vice President, Product Division for MERSCORP Holdings, Inc. In that capacity, he oversaw the actions of the Membership, Integration, Quality Assurance & Training and Development departments.