An electronic mortgage registry system and the banks that created and use it have come under fire from New York State Attorney General Eric Schneiderman, who is suing the banks, charging that the system has resulted in deceptive and fraudulent foreclosure filings in state and federal courts.
The system, known as MERS for Mortgage Electronic Registration Systems, was created in 1995 by the financial industry to speed up the securitization and sale of mortgages by allowing banks to avoid county recording fees as well as the paperwork involved in publicly recording mortgage transfers. More than 70 million loans nationwide have been registered in MERS, 30 million of them currently active.
The suit claims that employees and agents of Bank of America, J.P. Morgan Chase and Wells Fargo submitted court documents that made it look like the foreclosing party had the authority to bring a case when it actually may not have. It asserts that because of MERS, homeowners and the public can no longer trace property transfers through public records, and that this information now exists only in a private database that it claims is filled with errors and over which only MERS has control.
MERSCORP and its subsidiary, Mortgage Electronic Registration Systems Inc., are also named in the suit, as are BAC Home Loans Servicing, Chase Home Finance, EMC Mortgage, and Wells Fargo Home Mortgage.
In New York state, MERS filed more than 13,000 foreclosure actions against homeowners when it did not have the authority to foreclose and did not own or hold the promissory note, even though it claimed to in court papers, according to Schneiderman.
The suit claims that MERS officers, who are employed by its member banks, have filed court papers that contained mistakes and were “robosigned” by workers who did not check them for accuracy or even read them. The suit also charges that MERS has filed mortgage satisfactions against the wrong property.
“Our action demonstrates that there is one set of rules for all, no matter how big or powerful the institution,” Schneiderman said in a press release. “Only through real accountability for the illegal and deceptive conduct in the foreclosure crisis will there be justice for New York”™s homeowners.”
The suit seeks damages for affected homeowners as well as civil penalties.
