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For MERS members with fewer than 1000 active MINS before March 31st of the current year (CY), an internal reviewer must be assigned. A key member and role on the MERS compliance internal control team, as discussed in the prior post, he or she is responsible for completing and signing the eAnnual Report on behalf of the organization.
To demonstrate compliance, the internal reviewer should be able to answer “yes” to applicable questions on the eAnnual Report by performing the following testing functions:
- Validating MERS® System Member information against the Member’s internal documentation.
- Evaluating a sample selection of MERS® System transactions applicable to the Member’s line of business and determining if they are accurate and timely according to the MERS requirements.
- Confirming the policies and procedures regarding the Corporate Resolution Management System (CRMS) and verifying the validity of the officers named as MERS Signing Officers.
- Verifying that the Member is reconciling MERS® System data to its internal system of record by viewing at least one internal reconciliation and confirming that exceptions are being tracked and corrected timely.
- Reviewing a sample of MERS recordable documents for compliance applicable to both general and state-specific MERS requirements.
- Requesting evidence of the Member’s MERS® System internal reports applicable to the organization’s lines of business to verify tracking, reviewing, and necessary actions.
For any instance where evidence cannot be obtained or verified for the above, the reviewer must answer “no” and provide comment on the findings within the eAnnual Report.
Given the heavy market volume in the last two years, we saw an increase in the number of MERS Members who found themselves required to engage a third party because their active MINS were greater than 1000 in this most recent reporting cycle. As such, my reviews showed a greater degree of non-compliance by organizations that had previously utilized an internal reviewer for annual reviews.
Common missteps included:
- Insufficient knowledge by the reviewer of the MERS requirements necessary to make an informed evaluation of the organization’s processes and procedures in meeting the requirements
- Lack of updated policies and procedures to meet the current MERS requirements as outlined in the most recent MERS Procedures Manual and Rules of Membership. The organization was correctly following outdated policies but not the newer requirements.
- Attestation was made in good faith based on questions and answers, in lieu of actual testing of the controls
For the key role of internal reviewer to be successful, they must be familiar with the most current MERS compliance requirements found in the Procedures Manual and Rules of Membership. Additionally, I can’t stress enough that current policies and procedures should be well-documented and accessible. Combine this with strong overall internal controls and a Member organization is well-positioned for MERS compliance.
LoanLogics provides both internal control process reviews and annual 3rd party reviews for required Members. Reach out with inquiries on both here.
