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11/6/2019
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MERS® eRegistry: Role of the Rightsholders webinarNovember 6, 2019
Tiffany Toale Ann Ploetz
Training and Development Analyst
Our Moderator and Panelists
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Sharon HorstkampJames Macmillan
MERSCORP Holdings Inc.
Co-Head, Document Custody
Deutsche Bank
Senior Product Manager
MERSCORP Holdings Inc.
Director, Chief Legal and Legislative Officer
MERSCORP Holdings Inc.
PROPRIETARY
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• Overview of Legal Framework for establishing validity of eNotes
• The Role of MERS® eRegistry
• MERS® eRegistry Rightsholders• Q & A
• Introduction of Secured Party field • Q & A
Agenda
PROPRIETARY
Surge in eNotes
4
Source: MERSCORP Holdings, Inc.
2956
38884376
5082
6257
78748338
70267593
9102
12,360
14,726
17100
OCTOBER NOVEMBERDECEMBER JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER
2018 2019
eNotes Registered on the MERS® eRegistry
PROPRIETARY
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Legal Framework – Legality of eNotes
• The criteria for an eNote:• The eNote contains only the same terms and conditions that are permitted in
a paper negotiable promissory note;
• The eNote includes specific terms mandated by investors;
• The eNote is electronically issued and signed;
• The issuer of the eNote (the borrower) has expressly agreed that it should be treated as a “transferable record” under the UETA or ESIGN (as applicable); and...
PROPRIETARY5
Legal Framework – Legality of eNotes (Continued)
• The identity of the person entitled to enforce the eNote (the “Controller”) can be reliably determined from:• the eNote itself, or
• a method employed for recording, registering, or otherwise evidencing the transfer of interests in the eNote.
• The Controller has the same rights as a holder of a negotiable promissory note.
PROPRIETARY6
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eNote Language
PROPRIETARY7
eNote Language
8 PROPRIETARY
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MERS® eRegistry Overview
• The legal system of record for identifying the Controller (holder) and Location (custodian) of the authoritative copy of a registered eNote
PROPRIETARY9
Paper World Electronic World
Negotiable Instrument Transferable Record (‘eNote’)
Original Note Authoritative Copy of eNote
Possession Control
Holder Controller
Custodian Location
Endorsement and Delivery Transfer of Control
Chain of Endorsements and Delivery Transferable Record Audit Trail
Wet Signature Electronic Signature
All transactions on the MERS® eRegistry are system-to-system and are typically initiated via interfaces with an eVault
eNotes are Electronic Files and Can be Duplicated
PROPRIETARY10
OriginatorWarehouse
LenderInvestor Servicing Agent
Document Custodian
Copy of eNote Copy of eNote Copy of eNote Copy of eNote Copy of eNote
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• MERS® eRegistry: Integrated with MERS® eDelivery, allowing secure transfer of copies of eNotes and other eMortgage documents
• For each eNote Record, it stores: Key loan info
Tamperseal of eNotes
Changes to rightsholders
Life of loan events
MERS® eRegistry
PROPRIETARY
MERS® eRegistry vs. MERS ® System: What’s Different?
PROPRIETARY12
MERS® eRegistry MERS® System
Legal System of Record that identifies the party that has control of the eNote (“Controller”)
Electronic registry that tracks changes in Mortgage servicing rights and beneficial ownership interests in loans secured by residential real estate
All transactions are system-to-system Transactions may be initiated manually via MERS® OnLine
Location field is required Document Custodian is not required
Servicing Agent is not required Servicer is required
Transfer transactions are processed real time Transfer transactions require an overnight cycle to process
MERS® eDelivery transactions available to deliver copies of eNotes to trading partners
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PROPRIETARY 13
Standard eNote Flow
eNote is generatedby the eVault/eClosingplatform
Borrower(s) electronically sign the eNote
Signed eNote is Tamper-sealed
eNote is stored inthe eVault
eNote is registered on the MERS® eRegistry
Copy of the eNote is sent to trading partner(s) via MERS® eDelivery
Authorized Rights Holder positions for the eNote Record are transferred on the MERS® eRegistry to applicable trading partners
PROPRIETARY
The Record at Registration
PROPRIETARY14
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Controller
• The party named on the MERS® eRegistry that has control of the authoritative copy of the eNote
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What Can They Do? Who Is Typically Named?
• Register an eNote• Initiate most Transfers (i.e. Control, Location,
All, etc.)• Report Assumptions and Modifications• Update data• Add a document• Deactivate an eNote• View an eNote Record
• Originator/Lender• Warehouse Lender• Investor• Servicer (or the party
foreclosing on a loan)
PROPRIETARY
Location
• The party named on the MERS® eRegistry that maintains the authoritative copy of the eNote and any electronic documents that modify the terms of the eNote
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What Can They Do? Who Is Typically Named?
• Confirm incoming Transfers of Location• View an eNote Record
• Originator/Lender• Warehouse Lender• Document Custodian• Investor
PROPRIETARY
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Servicing Agent
• The party authorized by the Controller to perform certain MERS®
eRegistry transactions on the Controller’s behalf
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What Can They Do? Who Is Typically Named?
• Initiate and confirm Transfer of Servicing • Report Assumptions and Modifications• Update data • Add a document• Deactivate an eNote Record• View an eNote Record
• Servicer• Subservicer• Any authorized party
PROPRIETARY
Delegatee for Transfers
• A Participant that is authorized by the Controller to perform certain MERS® eRegistry transactions on the Controller’s behalf
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What Can They Do? Who Is Typically Named?
• Register an eNote• Initiate Transfer of Control• Initiate Transfer of Control and Location• View an eNote Record• Remove itself from an eNote record
• Investor• Custodian
PROPRIETARY
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Secured Party - Background
• Warehouse lenders and the Federal Home Loan Banks requested that their security interests in electronic promissory notes (eNotes) be distinguishable on the MERS® eRegistry from that of a loan originator or investor, and represented in a distinct field with supporting functionality.
• MERSCORP consulted with subject matter experts, including legal counsel in eCommerce laws, to review and evaluate the intended use of the Secured Party field.
19 PROPRIETARY
Secured Party - Definition
• Definition: “The Participant named on the MERS® eRegistry that has been sold, pledged, assigned, or granted a security interest in the eNote by the Controller.”
• Available for use in the MERS® eRegistry November 18, 2019
20 PROPRIETARY
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Controller Names
Secured PartySecured Party
Controller Initiates Transfer of
Control/LocationTransfer Complete
The Secured Party can…• Receive notification of
eNote activity• Release its interests• Restrict eNote
deactivations until its interests are satisfied
How Does Secured Party Work?
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The Controller can…• Include the Secured Party
at time of eNote Registration
• Or, add the Secured Party post-Registration
The Secured Party can…• Also initiate of Transfer
of Control/Location to another participant or itself
The Secured Party…• Is cleared from the eNote
record once the transfer is complete
PROPRIETARY
Secured Party – Participant Considerations
• The Secured Party field is intended to be used as a part of a Participant’s legal and operational constructs to ensure that its interests in eNotes are protected
• Use of Secured Party field will be optional.
• Participants may use either the Secured Party or Controller fields, to reflect their interests in eNotes, as appropriate and in accordance with their counterparty agreements.
• Use of the field supports, but does not replace, external counterparty agreements or UCC-1 filings
22 PROPRIETARY
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Getting StartedPerforming Research
and PlanningEvaluating Technology
Communicating with Trading Partners
Have you …• Obtained executive
sponsorship?• Created a business case?• Secured a budget?• Designated a project
manager/team?• Attended a webinar?
Have you …• Defined project scope
(hybrid or full eClosing)?• Estimated volume?• Identified internal
stakeholders?• Verified a target date?
Have you ...• Identified technology
resources needed (eVault, digital closing room, MERS® eRegistry)?
• Started the RFP process?• Identified internal
platform updates needed?
Have you …• Talked to your
warehouse lenders and aggregators?
• Discussed with servicer/subservicer?
• Held meetings with Fannie Mae/Freddie Mac?
Implementing the Digital Mortgage: Where Are You?
23 PROPRIETARY
Integrating with the MERS® eRegistry
• Once a MERS® System Member is able to answer of those questions, they can submit a MERS® eRegistry Addendum• Member executes the MERS® eRegistry Addendum, requesting to become a
MERS® eRegistry Participant (“Participant”)
• MERSCORP assigns a Business Integration Manager (MERS BIM) to work with the Participant
• The MERS BIM and Participant work closely through the first live transaction
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MERS® eRegistry Integration: Phase I
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Will the Participant:
Originate, sell, purchase, fund, or service?
Perform custodial duties for eNotes?
Use an eVault provider, vendor, or build their own vault?
Utilize MERS® eDelivery to send/receive copies of eNotes to and from trading partners?
Provide an overview of the integration
process
Explain eNote and MERS® eRegistry terminology and
concepts
Obtain key integration data
MERS BIM conducts a meeting to:
PROPRIETARY
MERS® eRegistry Integration: Phase II
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Review and finalize Procedures document
Set up and activate the MERS®
eRegistry profile
Perform practice transactions in the MERS® eRegistry
based on use cases
Complete and monitor the first
production transaction
MERS BIM and Participant will:
PROPRIETARY
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Resources For You
• MERS® Webinars with Evergreen Home Loans, Fannie Mae, GinnieMae, and the Federal Home Loan Banks!• November 12: Operational Stakeholders: Prepare People and Processes for
eNote Implementation
• November 14: eNote Updates from Ginnie Mae, the Federal Home Loans Banks, and MERS
• Visit mersinc.org/webinars to register
• eMortgage webpages• MERS website or contact your Regional Director (Bob Pathman, Ron Crowe,
or Laurinda Clemente)
• Fannie Mae
• Freddie Mac
27 PROPRIETARY
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