Strong MERS® Compliance is Rooted in Solid Internal Controls

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Spring brings a fresh perspective on many things. Some find time to grow a vegetable garden, others organize their garages or begin an outdoor fitness routine. Many of my annual audit clients are taking this time to button up internal controls around MERS compliance.  

In my summary of the 2021 key audit findings, I noted a general lack of internal quality assurance (QA) controls and monitoring as a top reason for non-compliance.  Holes were evident in processes across the board, as servicers juggled several pressing market conditions. 

There’s a saying that contends, “a fresh pair of eyes can often find problems.”  That’s why it’s prudent to consider engaging an external 3^rd party to perform a one-time review to assist in identifying any current gaps and deficiencies in an organization’s controls, policies, and procedures.

LoanLogics can be that pair of eyes and help set you up for this year’s annual review. Just reach out on our website, if you’d like to discuss this service option in more detail.

As you consider the option, below are a few baseline internal controls that can help firm up compliance and ensure it remains effective at its core within the organization.  

• Build a strong team. Depending on the size of your organization your MERS staff roster may look different from another Member organization.  At a minimum seek to identify someone responsible for:
  • MERS reconciliation
  • MERS written procedures and controls
  • Internal or external 3^rd party review, whichever is applicable
  • Overall servicing QA
  • Executive sponsor

• Set regular internal meetings, quarterly at a minimum, with all MERS stakeholders to touch base on each area of accountability mentioned above and review any changes since the last meeting (i.e. staffing, registry volume, MERS announcements).

• If you are under the March 31^st current year (CY) 1000 active MIN threshold, know who can serve as your Member company’s internal reviewer. This person can be either the QA Officer, Legal MERS® System contact, or any other employee of the Member company who is not affiliated with the Member’s MERS® System operations.

• If you are over the March 31^st CY 1000 active MIN threshold and are required to engage an independent 3^rd party for annual reviews, touch base with them on a periodic basis to discuss what was identified during internal meetings.  Ask questions on the effectiveness of new or retiring controls the organization has planned.

• MERS tends to update its Procedural manual on an annual basis, typically in (but not limited to) the Spring timeframe.  Ensure your teams are on the distribution list for each new release and spend time reviewing it in detail. Make adjustments to your policies accordingly.  

• Document, document, document.  Don’t let your internal policies live as institutional knowledge of the long-time staff at your organization. Should staff choose to leave you don’t want to be left without this critical compliance know-how available to new associates.    

Given the significance of the role of the internal reviewer, a key member of the internal control team, keep a lookout for a future post on ensuring strong organizational MERS controls.

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.