WILMINGTON, Del. (Legal Newsline) – Delaware Attorney General Beau Biden announced a lawsuit on Thursday against the mortgage registry MERS that he says is at the middle of the housing crisis.
The complaint, filed in the Delaware Chancery Court, alleges that MERSCORP and its subsidiary, Mortgage Electronic Registration Systems Inc., have repeatedly violated the state’s Deceptive Trade Practices Act.
“Since at least the 1600s, real property rights have been a cornerstone of our society,” Biden said. “MERS has raised serious questions about who owns what in America. A man or woman’s home is not just his or her largest investment, it’s their castle.
“Rules matter. A homeowner has the obligation to pay the mortgage on time, and lenders must follow the rules if they are seeking to take away someone’s house through foreclosure. The honor system won’t work.”
MERS allegedly engaged and continues to engage in deceptive trade practices that sow confusion among investors, homeowners and other stakeholders in the mortgage finance system, which damages the integrity of the land records that are central to Delaware’s real property system and leads to improper foreclosure practices. These practices fall into three broad categories.
MERS, through its private mortgage registry, allegedly knowingly obscures important information from borrowers and the information that MERS does provide to borrowers is often inaccurate. The opacity of the registry’s mortgage registration database allegedly makes it difficult for consumers to know of or challenge inaccuracies in the MERS system, which harms borrowers when MERS forecloses on borrowers in its own name.
It allegedly impairs a borrower’s ability to raise a defense and also hampers the ability of borrowers to seek out the owner of their loan to pursue loan modifications or other loss mitigation relief.
MERS allegedly often acts as an agent without authority from its proper principal. Because the MERS system was allegedly both unreliable and frequently inaccurate, the registry often does not know the identify of its proper principal and where the name of the owner of the mortgage loan recorded in the system does not reflect the true owner, any action MERS takes on behalf of the purported owner is without authority.
MERS is effectively a “front” organization that has created a systematically important mortgage registry but failws to properly oversee the registry or enforce its own rules on participating members in the registry, Biden says.
Rather than maintaining an adequate staff to provide its services, MERS operates through a network of more than 20,000 deputized, non-employee, corporate officers who cause the registry to act without any meaningful oversight from anyone who works at MERS, Biden says.
This has allegedly resulted in MERS recording so-called “robosigned” documents with country records of deeds and failing to follow its own rules designating proper institution of foreclosure proceedings.
MERS, incorporated in Delaware and based in Northern Virginia, was formed in 1995 to facilitate the growing mortgage finance market.
Biden alleges that the confusing path and inaccurate records in the mortgages are endemic to the entire MERS system.