New to the MERS reconciliation process? Completely overwhelmed? MetaSource has you covered! With a proper MERS reconciliation program in place, you can streamline the process in no time. Here’s an overview of the steps to take to implement a MERS reconciliation program successfully:
1. Define your reconciliation needs
To begin, determine how often you need to reconcile, taking MERS’s frequency requirements into account. These requirements are driven by portfolio size. At the very least, MERS general Members are required to reconcile on a quarterly basis. However, when a Member reaches 1,000 active registered MERS loans on March 31st of any given year, MERS requires that they transition to a monthly process.
2. Request your MRE
Next, request your Member Reconciliation Extract (MRE). MRE reports are used to compare servicing system data against MERS’s system data for reconciliation purposes. MRE files are only available for a certain period of time, so it’s critical to export them promptly each month. You can find a Quick Reference Guide on requesting this report on the MERS Member website.
3. Identify your system of record
You must then identify the “system of record” you will use to build your MERS Member data reports. This could be your loan servicing platform or a sub-servicer’s system. If you maintain relationships with multiple sub-servicers, this also needs to be taken into account.
4. Build your “member data” report
Extract a report from your system of record that includes all required and conditionally required fields. It’s important to understand that conditionally-required fields are not optional, but instead, are only compared if the requirement is met. The required fields list is located in the MERS System Procedures Manual on the MERS Member website. If you’re utilizing a sub-servicer, contact them and inquire about whether or not they have a reconciliation report format they can provide you with.
5. Compare your system data to your MRE
There are many methods for comparing your system data to MERS data. You should choose your comparison method wisely. Many servicers use applications like Excel and Access. While these applications may suffice when comparing small data sets, there are limitations that you should be aware of. For instance, at 18 characters in length, mortgage identification numbers (MINs) are easy to “break” in Excel, which is accurate only up to 15 characters. Numbers that include more than 15 characters must be converted to text. Additionally, some programs may pose a problem when it comes to flagging discrepancies. What MERS considers a discrepancy may differ from what is flagged when you conduct a 1:1 match. In such an instance, if “Street” is in one data set and “St” is in the other, a discrepancy will be flagged. However, MERS would not consider this a finding. Ensuring only true MERS discrepancies are flagged can be daunting for Members, which is why many outsource the process to vendors who have the expertise and software necessary to accurately flag “true MERS defined” discrepancies. MetaSource’s MERS QA Compliance and Auditing Solution, mintrak®2™, knows what MERS considers to be discrepancies and flags fields accordingly.
6. Maintain evidence of comparison
Members need to retain evidence that all mandatory fields were reconciled at the required frequency. Most provide this evidence in the form of a findings report. If your findings report doesn’t indicate a field was compared because there were no discrepancies to note, you should include your compared field list in your procedures. You should also regularly track and clean up aged items, so time is not wasted reviewing the same discrepancies during each reconciliation cycle. For the eAnnual Review and to ensure MERS compliance, Members are required to keep a history of reconciliations for at least 12 months. As a best practice, MetaSource keeps a 15-month history via our reconciliation software, mintrak2. The solution stores both comparison and reconciliation data, which can be accessed at any time.
7. Identify who will complete the process and make corrections
Be clear about who is responsible for completing each reconciliation:
- Designate someone responsible for completing the comparison. This may be IT, someone data savvy in any number of internal departments, or your sub-servicer.
- Appoint someone responsible for making corrections to the exceptions identified. Often, this is best delegated to someone in QC, post-closing, servicing, or MERS departments. While you can assign this to anyone you choose, you want someone who recognizes the information and understands why an error might appear.
While the number of people assigned this responsibility can vary, we recommend having at least two people trained and up-to-date on your reconciliation processes. Whoever is designated to make corrections must be well-equipped to utilize the MERS System, documents, and your system to determine how and where to make necessary corrections.
8. Document everything!
At the end of the process, there should be a record of how to pull and compare data, who is responsible for each part of the process, and what should be done when discrepancies are discovered. If you’d like to learn more about how MetaSource and mintrak2 can help you make light work of your MERS reconciliation responsibilities, give us a call or click on the link below.
- It is not uncommon during the comparison process to come across unmatched MINs that exist only in the MERS data or your Member data. Usually, these are the result of timing issues in the data sets being compared, but they should be reviewed regardless. Keep in mind that every reconciliation includes timing issues. These are discrepancies that will cure themselves and are often the common cause of unmatched MINs. Timing issues may also appear in investor-related field updates in MERS.
- MERS will pull you for a Data Review at some point. This is a reconciliation performed by MERS, typically every two years. If you need assistance, be sure to let MERS vendors/sub-servicers know when you get selected. Keeping up with corrections will make the Data Review easier as well. Most annual report findings are related to reconciliation! Be sure you’ve got your processes buttoned down.
- If you choose to have a sub-servicer complete the reconciliation process and make corrections, be sure to work closely with them. You’ll need to understand how long it takes for them to make updates and how they would like updates reported to them.
- To avoid missing your MRE deadline, consider using a reconciliation software solution like mintrak2, which reminds you when it’s time to pull down your MRE.
- The Portfolio Analysis Report is not an acceptable report for MERS reconciliation as it does not include co-borrower data, which is conditionally required.