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Cecil Stack
Communications Manager
(703) 761-1274

McLEAN, VA—The California Housing Finance Agency (CHFA) recently announced its agreement to purchase Mortgage Electronic Registration Systems-registered loans as of Feb 1, along with several mandates that include MERS.

The decision affects all single-family owner-occupied home loans originated on FHA, VA or CHFA approved MERS Deeds of Trust. CHFA’s goal is to have all new loans originated on the MERS® System. CHFA’s current portfolio consists of 64,000 loans ($5.5 billion), according Clint Ingle, CHFA Portfolio Manager.

CHFA is a state agency that finances below-market rate housing loans and assists first-time California home buyers. MERS is an electronic registry that tracks ownership of loans and servicing rights with more than 3 million loans registered.

“Our conversion to MERS does two things that strengthens CHFA’s portfolio,” Ingle said. “It allows us to absolutely verify we have deeds of trust in the CHFA name. That’s something we can’t do now, although we have checks and balances in place.

“The conversion also protects our bondholders. We can now verify the loan is recorded in MERS prior to purchase, and we can stop the purchase if need be and require the deed of trust to reflect MERS,” Ingle said

The agency program bulletin mandated the following changes.

• Once a lender begins originating CHFA loans with MERS as the nominee, all loans thereafter will be registered with MERS.
• Lenders that have delivered MERS-registered loans to CHFA have 90 days from Feb. 1, to transfer beneficial rights on the MERS® System to CHFA.
• On or after Jan. 1, 2002, CHFA will purchase only loans registered on the MERS® System.
• For loans originated on or after January 1, 2002, servicers that receive loans not recorded and registered with MERS, will enter a MERS Mortgage Identification Number and record the CHFA approved MERS Assignment of Deed of Trust form and register the loans with MERS.
• Effective Feb. 1, 2001, prior to the transfer and servicing of any MERS loans, the receiving servicer will be and remain a MERS member.

Ingle estimates 85 percent of the lenders that sell to the state agency are MERS members or planning to join MERS. “CHFA offers several options for lenders and servicers to get their loans on the MERS® System and provide for loan servicing,” he said.

The announcement follows almost two and a half years of talks between MERS and CHFA. “CHFA proceeded with caution to protect the public’s money,” Ingle said. “MERS met our requirements and answered our ‘what ifs;’ I see MERS registration as the system of the future.”

“There was a lot of hard work,” said R.K. Arnold, MERS President and CEO. “But the methodical approach CHFA took reinforces what the real estate finance industry has learned in the past two years—MERS is well-grounded and sound.”

Although the California agency is the first state-housing agency to be a MERS member, other state-housing agencies are interested in joining MERS. The Utah Housing Finance Agency has applied for membership, and the State of New York Mortgage Agency now purchases loans that designate MERS as nominee for the SONYMA lender. SONYMA is considering MERS membership, according to Arnold.

MERS Western Region Director Bob Pathman agreed. “This as a positive step other state agencies will consider and take when they understand how MERS can protect portfolios,” Pathman said. “Working with Clint Ingle and CHFA officials has given me an appreciation of state housing agency checks a