MBA's Legal Issues in Mortgage Technology Conference November 30 – December 2, 2005 MERS Overview Enabling eCommerce for the Mortgage Industry December 2, 2005 William C. Hultman, Senior Vice President

What is MERS? MERS is an industry utility created by the mortgage industry to promote electronic commerce and eliminate paper-based processes. »MERS eliminates the need to prepare and record paper assignments when selling loans between MERS® Ready members. »MERS operates the MERS® eRegistry to provide liquidity for electronic notes.

What is MERS? Mortgage Electronic Registration Systems, Inc. (MERS) is the legal entity that is recorded in the county land records as mortgagee for loans registered on the MERS® System. MERS is a bankruptcy remote subsidiary of MERSCORP, Inc. which operates the MERS systems and processes, including the MERS ® eRegistry.

Who Owns MERS? The mortgage industry represented by: Fannie MaeFreddie MacWMC MBAABN AMROWells Fargo EverHomeCCO MortgageALTA ChaseCitiMortgageUnited Guaranty CorinthianCountrywideCMSA GE CapitalGuaranty BankFirst American HSBCMerrill LynchMGIC Nationwide GMAC-RFCPMI SunTrustWaMuStewart Title

How Does It Work? The security instrument names MERS as mortgagee and nominee for the lender. MERS serves as mortgagee in the county land records for MERS members. »When servicing transfers from one MERS member to another, no assignment is needed because MERS remains the constant mortgage lien holder over the life of the loan. »Chain of title is simplified because it begins and ends with MERS.

How Does It Work? Members register loans on the MERS® System and then report transfers of beneficial and servicing interests as they occur. MERS receives service of process and electronically forwards documents to the current servicer on the MERS® System. Members foreclose and release liens in the name of MERS through our corporate resolution naming their officers as MERS officers.

MERS ® Residential Over 36 million loans registered since 1997 Average 34,000 loans registered daily Over 2,400 companies registering loans Over 53% market share on all newly originated loans in the U.S. Over 22 million active loans on the system Accepted by all major secondary market investors and routinely included in rated securities.

MERS ® Commercial Same legal foundation as MERS for residential loans System adapted for cross collateralized loan products Over $27 billion (1,600 loans) registered since July 2003 Live on MERS® Commercial: »Bear StearnsBanc of America Securities »Wells FargoGinnie Mae »Pinnacle Fin.RESMAE »LaSalleCBA Commercial » Morgan Stanley Midland Loan Services Other lenders in the pipeline: »Lehman »GE Capital

What is the MERS® eRegistry? The industry’s response to the requirements imposed by UETA and E-SIGN The central location to identify the current Controller (holder) and Location (custodian) of the Authoritative Copy of an eNote

Definitions Paper WorldElectronic World Negotiable InstrumentTransferable Record (“eNote”) Original Note Authoritative Copy of eNote PossessionControl Lender/Investor/HolderController CustodianLocation (eVault) Endorsement/DeliveryTransfer of Control Holder in due courseTransferable Record Audit trail ServicerController’s Delegatee

Why MERS? Strategic imperative for MERS Logical extension of the MERS mission and expertise Potential additional revenue for MERS Endorsed by MBA Fannie and Freddie solution for uniform eNote Supported by Covington & Burling legal opinion Develop and promote industry standards

Assumptions Industry investors will require eNote registration eNote must refer specifically to the MERS ® eRegistry Participants must be members of MERS MERS ® eRegistry does not store eNotes Multiple eVaults will be created to store eNotes Funding of loans occurs outside the MERS ® eRegistry

Registration & Sale Process

eNote Progress Two lenders active and registering eNotes on the MERS ® eRegistry: First Advantage and Ohio Savings Bank – over 150 registered to date; GMAC also ready Fannie Mae is an active Investor and has purchased registered eNotes Other lenders/investors in process: Freddie Mac, Countrywide and Wells Vendors »Ready: DPS, Fiserv »In process: Encomia, Stewart, Digital Docs

Industry Standards Mortgage Identification Number (MIN) Organizational ID Number Registry operator in Uniform eNote MISMO XML data and SMARTdoc format SISAC-accredited issuing authority for digital certificates Policy reinforces standards for eClosing process »Signing methodologies (SPeRS) »Registration timeframes (Investors) Solutions for modifications, addendums, riders, etc. Enforceability and transferability of eNotes (SPeRS)

Potential Future Initiatives Working with Countrywide and Stewart Title to facilitate timely delivery of lien releases to counties for our members Working with Fannie Mae, Freddie Mac, Countrywide and other members to provide standardized delivery of electronic documents from one member to another.

Questions? More information is available from the MERS Web Site ( under the “MERS ® eRegistry” Tab. ( under the “MERS ® eRegistry” Tab.