Banking Agencies Examining MERS, Lender Processing Services

Federal banking regulators are examining two nonbank service providers at the epicenter of the foreclosure-documentation mess – Lender Processing Services Inc. and Merscorp Inc.’s Mortgage Electronic Registration System.
 
The Office of the Comptroller of the Currency is leading the on-site review of MERS, in coordination with the Federal Deposit Insurance Corp., the Federal Housing Finance Agency and the Federal Reserve Board, acting Comptroller John Walsh said in prepared remarks for a Congressional hearing scheduled for Thursday.
 
The Fed is leading the interagency review of LPS, a publicly traded company based in Jacksonville, Fla., that provides foreclosure-related services to banks, Walsh said.
 
The agencies have the authority to examine these firms under the Bank Service Company Act, he said.
 
Neither MERS nor LPS could immediately be reached for comment Wednesday afternoon.
 
MERS is part of the foreclosure controversy because it has been listed as the lienholder of record in foreclosure proceedings, prompting numerous lawsuits from borrowers who claim the company has no legal standing to foreclosure.  The electronic loan registry, owned by an industry consortium, was created so lenders could avoid paying fees to county recorder offices by publicly filing a mortgage assignment.
 
A subsidiary of LPS is being investigated by the Florida Attorney General's Office for allegedly forging documents so foreclosures could be processed more quickly.
 
The OCC will assess MERS’ corporate governance, control systems, accuracy and timeliness of information maintained in its system, Walsh said. Examiners also will visit the largest servicers to determine how they fulfill their roles and responsibilities relative to MERS, he said.
 
Previously disclosed on-site exams of eight major servicing operations and the others will be completed by mid-to late- December, with a report expected by the end of January, he said. The servicers include Bank of America Corp., Citibank, JPMorgan Chase, HSBC, MetLife, PNC, Wells Fargo & Co. and U.S. Bank.
 
“Obviously, for a host of reasons – from fair treatment of borrowers to the fundamentals of the mortgage marketplace – mortgage servicers must get this right,” Walsh said.
 
The agency can impose any of a range of informal and enforcement actions on servicers that are found to have error or deficiencies in their operations. Such actions could include informal memoranda of understanding, civil financial penalties, criminal penalties and possible removal from the banking industry, Walsh said.