Proposed legislation in Virginia, House Bill 1506, which if passed would eliminate the role of the electronic registry system MERS in that state by requiring every mortgage transfer to be recorded in the local courthouse, is having the salutary effect of exposing more information about this generally less than forthcoming company.
Various interested parties offered testimony about the bill. One particularly interesting presentation came from a process and systems expert, Daniel Pennell, who was operating in a private capacity as a concerned citizen. His presentation raises numerous red flags about MERS.
We’ve pointed out troubling weakness in MERS’s operational controls and systems in past posts. Our Richard Smith, a capital markets IT specialist who has worked in high transaction volume environments, provided comments on statements made by MERS officers in various depositions about how various procedures worked. He found serious shortcomings in their “electronic handshake” process and authentication, as well as troubling open questions about access control and an audit trail. From his discussion of the electronic handshake:
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