Posted on 11 November 2010.
Page 23359 -Is the approach to asset number identifier workable? Should we only require or permit one type of asset number for all asset classes? If so, which one would be most useful? It appears that our proposed naming convention of “[CIKnumber]-[Sequential asset number]” would be applicable to all asset classes. Does the use of an asset number alleviate potential privacy issues for the underlying obligor? Why or why not? What issues arise if the asset number is determined by the registrant? Would there be any issues with investors being able to specifically identify each asset and follow its performance through periodic reporting.
MISMO does not believe that a single asset numbering system should be required across all asset classes. The industry infrastructure behind each asset class is supported by different systems and business processes. Each ABS participant industry (e.g. residential real estate finance) should be able to utilize an asset numbering system as efficiency and convention dictate, absent a compelling regulatory purpose.
In the mortgage sphere, the MERS Mortgage Identification Number (MIN) has been in use since 1997 and has been assigned to over 65 million loans. The MIN is a combination of a unique loan identifier for the originating lender plus the loan’s internal file number. It is available for residential, multifamily and commercial loans. It can attach to a mortgage as early as the application for a loan. The MIN is then used to track a loan throughout its life cycle, from application through monthly servicing activities until final loan payoff. It is used also used within the loss mitigation and Real Estate Owned (REO) processes. The MIN is well integrated within all facets of the real estate finance industry.
The adoption of a new, different, and/or conflicting numbering system would result in greater confusion, unnecessary system development costs, longer lead times for compliance and decreased transparency by making it more difficult for industry participants to track assets across multiple data and reporting systems. The real estate finance industry would be required to add the new asset number to all of its applications, databases, and file transfers between applications. In certain situations, a new asset number may have unintended consequences in the primary residential mortgage market. If a lender has to decide at the time of application whether to employ the MIN or some other loan numbering system based on the lender’s estimation that the borrower may not qualify for a conforming loan (loans meeting the criteria of Fannie Mae or Freddie Mac) or governmental mortgage (loans meeting the criteria of FHA, VA, or the Rural Housing Service), then the Proposal could unintentionally steer applicants to particular loan types. Alternatively, if a lender starts down one path and then needs to re-key an application, the chances for error increase.
The MIN is the only universally accepted identifier for loans in the mortgage industry across the entire lifecycle of the loan. The major participants in the residential mortgage industry utilize the MIN. Fannie Mae, Freddie Mac and Ginnie Mae all utilize the MIN. MISMO encourages the SEC to adopt the MERS Mortgage Identification Number (MIN) as the primary loan identifier for real estate finance ABS.
As long as the proposed data elements cannot be associated with a specific individual, there should not be privacy concerns with this information being made publically available. In anticipation of this requirement, MERS has designed and will implement a public version of the MIN that issuers would use in their public disclosure file format that could not be used to identify an individual associated with the required data.
To address the possibility of duplicate loan identifiers across different ABS industries (e.g. real estate finance and credit cards), a unique identifier can be provided with file submissions to denote a particular asset class, avoiding the drastic impact of imposing a whole new numbering system on an industry.
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