Real Estate & Property Law

Del. AG Alleges Deceptive Practices in Latest MERS Suit, Seeks Temporary Court-Ordered Shutdown

In an apparent new wrinkle among a growing wave of government litigation over a national electronic registry that circumvented the traditional system of recording mortgage assignments in county offices, the Delaware attorney general has filed suit against Merscorp Inc. alleging deceptive practices by its Mortgage Electronic Registration Systems, according to Bloomberg.

“MERS engaged and continues to engage in a range of deceptive trade practices that sow confusion among consumers, investors and other stakeholders in the mortgage finance system, damage the integrity of Delaware’s land records, and lead to unlawful foreclosure practices,” said AG Beau Biden in a complaint filed today in the state’s chancery court.

It seeks damages of $10,000 per violation, Reuters reports.

The AG also seeks a court order barring MERS from acting as a nominal mortgage lender, bringing foreclosure actions, making mortgage assignments or recording a mortgage in a lender’s name until its system is “audited and corrected,” reports Bloomberg.

As detailed in earlier posts, counties in at least three other states (Ohio, Pennsylvania and Texas) are pursuing litigation against MERS and/or Merscorp in an effort to recoup millions of dollars in allegedly unpaid mortgage recording fees as banks instead looked to MERS to keep track of assignments between lenders.

Reuters says New York’s attorney general has subpoenaed Merscorp seeking information about how banks use MERS.

MERS denies any wrongdoing and says the litigation has no merit.

“MERS’s business practices are transparent,” spokeswoman Janis Smith told Bloomberg. “There is no confusion.”

In a subsequent email, she also said Merscorp had cooperated in good faith with the AG’s office in its investigation and disagreed with the allegations made in Delaware’s “unexpected” lawsuit.

Lenders’ reliance on MERS came to public attention in recent years due to a national tidal wave of foreclosures, apparently resulting from the recession and dubious lending practices prior to the global economic meltdown that began in late 2008.

Amidst the court chaos, original documents proving the chain of title and showing who currently held the mortgage assignment and note couldn’t always be found. Additionally, there have been allegations that individuals “robo-signed” documents attesting to title and mortgage assignment information of which they had no personal knowledge.

The Wilmington News Journal also has a detailed article about the suit.

Related coverage: “How a BigLaw Refugee Spurred a Foreclosure Uproar” “Thousands View YouTube Depos of Title Co. Workers Whose Output Supports Foreclosures” “Lawmakers Call for Robo-Signing Probe After AP Reports Practice Is Still Widespread re Mortgage Docs/” “After Robo-Signing Scandal, Fannie and Freddie Will No Longer Use Attorney Networks”

Updated on Oct. 28 to link to News Journal article.

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