N.Y. AG says mortgage registry damaged homeowners

Bryan Cohen Feb. 6, 2012, 1:34pm


NEW YORK (Legal Newsline) - New York Attorney General Eric Schneiderman filed a lawsuit on Friday against several of the country's biggest banks.

Schneiderman is alleging that steps taken by the financiers have resulted in multiple fraudulent foreclosure filings in the state.

The lawsuit names Wells Fargo Bank N.A., Bank of America N.A., JPMorgan Chase Bank N.A. and the Virginia-based MERSCORP Inc. and its subsidiary, Mortgage Electronic Registration Systems Inc.

The lawsuit alleges that the creation and use of a private national mortgage electronic registry system called MERS led to the filings in federal courts, injured homeowners and undermined the judicial foreclosure process' integrity.

The lawsuit alleges that agents and employees of Wells Fargo, JP Morgan Chase and Bank of America, acting as MERS certifying officers, have submitted court documents that have repeatedly contained misleading and false information that made it seem that the foreclosing party had the authority to bring a case when it may not have.

The lawsuit also names Wells Fargo Home Mortgage Inc., EMC Mortgage Corporation, Chase Home Finance LLC and BAC Home Loans Servicing LP.

The lawsuit alleges that the MERS System has effectively eliminated the capability of homeowners and the public to track property transfers through the standard system of public records. This information is stored solely in a private database that is riddled with errors and inaccuracies over which MERS and its financial institution members exercise complete control, Schneiderman says.

"The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages," Schneiderman said.

"Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law.

"Our action demonstrates that there is one set of rules for all - no matter how big or powerful the institution may be - and that those rules will be enforced vigorously. Only through real accountability for the illegal and deceptive conduct in the foreclosure crisis will there be justice for New York's homeowners."

The financial industry created MERS in 1995 to let financial institutions avoid local county recording fees and the hassle and paperwork of publicly recording mortgage transfers, and to smooth the progress of the rapid securitization and sale of mortgages.

The system operates as a membership organization and most of the large companies that participate in the mortgage industry - by servicing loans, buying or investing in loans or originating loans - are members, including Freddie Mac, Fannie Mae, Wells Fargo, Bank of America and JP Morgan Chase. More than 70 million loans nationwide have been registered in MERS System, including approximately 30 million loans that are currently active.

Schneiderman's lawsuit is seeking a declaration that the alleged practices violate the law, in addition to injunctive relief, damages for harmed homeowners and civil penalties. The lawsuit is also seeking a court order that would require the defendants to take all actions necessary to cure any title defects and clear any improper liens resulting from their allegedly deceptive and fraudulent acts and practices.

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Organizations in this Story

New York Attorney General
99 Washington Square
Albany, NY 12205

Wells Fargo
402 Montgomery Street
San Francisco, CA 94104

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