aims to have it up and running by first quarter 1997. Leading the effort are the Mortgage Bankers Association of America, Fannie Mae, Freddie Mac, the Federal Home Loan Mortgage Corp., the Veterans Affairs and the Housing and Urban Development departments, and the Government National Mortgage Association. The Mers system will be an industry-owned utility for the electronic registration of mortgages. Officials said the system, also known as Mers, will let companies reduce or eliminate most paper-based processes when preparing, mailing, tracking, and correcting mortgages. Paul S. Reid, president of the Mortgage Bankers Association and of American Home Funding Inc., Richmond, Va., called Mers "an idea whose time has come." "All participants in the mortgage process, including borrowers, stand to benefit from the increased efficiencies Mers will bring to the industry," he said in a press statement. Details about Mers were announced last week during the MBA's annual conference in San Diego. The system will be modelled after others, most notably Depository Trust Co., a Wall Street-based electronic book entry system for securities transfers. Mers will be a central clearing house for tracking mortgage ownership after loans are closed. It is meant to reduce fraud by authorizing mortgage identification numbers - MINs - and speed release of liens, which can take upward of a year. The idea of an electronic registry was introduced two years ago and has been slowly gaining momentum across a wide spectrum of industry participants. Over $1 million in all has been invested by Allied Group Mortgage Co., West Des Moines; Norwest Mortgage Inc., Des Moines; American Home Funding; Crestar Mortgage Corp., Richmond, Va.; Source One Mortgage Services Corp., Farmington Hills, Mich.; and BancBoston Mortgage Corp., Jacksonville, Fla. Additional investments of $1 million each were made by Fannie Mae, formally the Federal National Mortgage Association, and Freddie Mac, the Federal Home Loan Mortgage Corp. Mers' chairman, Stephen Morrisson, said it will do for the mortgage industry what Depository Trust Co. and Participants Trust Co. have done for securities. Mr. Morrisson, a senior vice president of Norwest Mortgage, said that last year over $358 billion in government and conventional mortgage servicing rights were transferred between lenders. If Mers had been operational it would have saved the industry at least $90 million, he said. "We are enthusiastically anticipating economies ... from this, the biggest collaborative technology effort our industry has ever undertaken," said Marc C. Smith, president of Crestar Mortgage. The assignment to Mers "will generally be the only assignment that's needed for the life of the loan," Mr. Morrisson said. Subsequent transfers of mortgages and servicing rights will be tracked by the Mers data base. Electronic updates will be made through electronic data interchange, using standard industry formats. Individual borrowers will also have limited access to the system through a telephone voice-response system. The next phase in developing the Mers system is already under way. Officials are searching for "technology partners" to build the system to their specifications. That effort is being led by Leilani Allen, a director at Tenex Consulting of Burlington, Mass. "We will be working over the next few months with a dozen companies in building the Mers technology and running the Mers operation," said Ms. Allen, who also leads the mortgage trade group's technology committee. The Mers consortium will issue a request for proposals in December and plans to select a technology provider by early next year, she said. The vendor or vendors will not operate in a traditional outsourcing deal, she said, but will fund the development of the technology in exchange for a portion of the revenues. The aim is to give all involved incentives to make sure that Mers succeeds, she said. "A year is do-able with the right challenge, the right motivation, and the right oversight." Ms. Allen said preliminary discussions had begun with several vendors, but she declined to name them.

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