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New MERS® Compliance Penalties: Everything You Need to Know

Financial stability is top of mind for organizations in the mortgage industry. In fact, according to Fannie Mae’s recent sentiment survey, cost-cutting was ranked the #1 business priority for the second year in a row. With this in mind, it’s no surprise that any potentially bank-breaking news isn’t necessarily welcome throughout the industry.

This makes the new MERS compliance penalties that are going into effect on December 1, 2023 unfortunate and anxiety-inducing for Members.

The Updated Penalties, Explained

What are these new penalties, you might ask? Let’s dive into them…

Several smaller changes are going to be made, including the merging of the “Failure to Comply with Annual Report Requirements” and the “Failure to Comply with Quality Assurance Plan Requirements” violations. This particular update will actually be beneficial to Members since MERS opted to stick with the latter’s amount of $1,000 instead of the prior’s amount of $2,500.

However, not all of the forthcoming updates are as advantageous to Members. In an attempt to reduce more critical violations, MERS is doubling the penalty for failing to meet review requirements and, come December, will be charging $5,000 per review for the violation.

While that’s a hefty increase, the update with the most potential to break the bank is the addition of a new violation regarding the reconciliation process. When MERS first distributed the new penalty schedule, this new violation’s category was simply “Failure to Comply with Reconciliation Requirements.” After receiving several concerning comments, MERS updated the category to include “resulting in incorrect information on MERS® System and/or MERS® eRegistry for a loan that was not identified by MERSCORP during a Data Review.”

This addition clarifies that Members will only be flagged for the violation if MERS uncovers reconciliation failures that led to inaccurate data on MERS® System or MERS® eRegistry, making proper reconciliation and remediation crucial.

The clarification is helpful, but it doesn’t make the penalty amount of $1,000 per loan any less painful for Members…

How to Avoid MERS Compliance Violations

The good news is there’s a way for you to avoid getting hit with this $1,000 per loan fine: adopt industry-leading data reconciliation and remediation software. With the right solution, you can ensure you meet MERS data reconciliation requirements and provide proof that you’re doing so.

Look for a system that truly takes the guesswork out of data reconciliation. The ideal solution will automatically compare your system data to the MRE report from MERS, flag discrepancies, assist in getting corrected data into the appropriate flat file format, send your completed files to MERS, and track and report on your progress. With MERS compliance reports right at your fingertips, you can say goodbye to time-consuming spreadsheets and seamlessly prove that you’re reconciling monthly.

A system that streamlines both reconciliation and remediation can also really help less experienced staff members better manage MERS compliance functions. This is a critical point to consider, especially after MetaSource discovered staffing issues were a major source of MERS QA findings in 2022. Not to mention, overcoming these issues with the right solution can result in less errors and, therefore, a lower chance of being flagged for reconciliation deficiencies.

Want to learn more about the top MERS QA findings for 2022? Get your copy of our free report!

And there’s more good news: there are solutions for avoiding other MERS compliance penalties as well. For instance, you can avoid being charged up to $5,000 for failing to meet review requirements with expert review services from a trusted partner. The ideal vendor will be a one-stop shop for all your MERS compliance needs, offering loan QA reviews, third-party annual review services, and MERS data reconciliation and remediation software.

The Right MERS Compliance Partner

MetaSource offers all of the above. Our reconciliation and remediation software solution, mintrak, features a user-friendly interface, provides an audit trail, and can even submit electronic flat files of updated data directly to MERS for you.

See how mintrak2 works for yourself! Check out our educational video.

MERS Members leverage mintrak2 to reduce error rates to less than 4%, reconcile inconsistent data fast, efficiently correct data, and, ultimately, meet MERS QA requirements.

And in addition to our software, MetaSource offers loan QA reviews and MERS third-party review and annual report services that can help you avoid some of the other violations included in MERS’ new penalty schedule, which Members can access on the MERS Member Website.

If you’re interested in learning more about how mintrak2 and MetaSource’s review services can help you avoid costly MERS compliance penalties, contact us to speak to an expert.

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