A system that promises to make mortgage servicing easier and cheaper has gotten key federal endorsements on its way to a March launching.
Executives from the Department of Housing and Urban Development, the Government National Mortgage Association, and the Department of Veterans Affairs gave thumbs up Thursday to a new electronic clearing house known as Mers.
"The system is a giant ... critical step" toward making the mortgage industry more efficient, said Nicolas Retsinas, assistant secretary at HUD. He was speaking in New York at the senior executives conference of the Mortgage Bankers Association.
Mers, formally the Mortgage Electronic Registration System, would simplify some of the time-consuming, paper-intensive procedures that still hobble what is otherwise a highly automated activity. Among the processes to be streamlined are transfers and tax payments.
The system will ultimately help the industry save at least $200 million a year, sponsors said.
The MBA, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corp., and about a dozen lenders have collectively put up $4 million for ownership rights in Mers. Electronic Data Systems Corp., Plano, Tex., is underwriting the project's multimillion-dollar development in exchange for fees from users.
Lenders will pay $500 to $7,500 a year, depending on their size, to use the system. They will also pay several thousand dollars for start-up costs. Mers executives said the outlays would be recovered through cost savings.
The agency endorsements do not amount to mandates that FHA and VA lenders use the system, but Mers executives hope the backing will bolster the fledgling project's credibility and raise its profile.
Though backed by powerful players, the operation needs widespread support to achieve its goal of becoming a central repository for mortgage information, observers said.
"The downside risk is that the broad industry would not adopt and use the data base," said Paul E. Mullings, Mers' chief executive.
Mr. Mullings said the chance that Mers would stumble is "minimal." Three-quarters of the top 25 lenders will join the system by spring, and many others are interested, he said.