Del. AG settles with national mortgage registry

By Jessica M. Karmasek | Jul 16, 2012


WILMINGTON, Del. (Legal Newsline) - The national mortgage registry known as MERS has agreed to implement certain reforms as part of a settlement with Delaware Attorney General Beau Biden's office last week.

Biden announced Friday that MERS, incorporated in Delaware and based in Northern Virginia, has agreed to:

- Maintaining a database -- accessible online and via a toll-free telephone number -- that allows homeowners with mortgages held by MERS members to clearly see who owns the mortgage and who services the loan;

- Requiring members to record assignments of mortgages with the county Recorder of Deeds Office before a foreclosure can proceed;

- Agreeing to not foreclose in its name for the next five years;

- Improving the accuracy of its records; and

- Increasing oversight and training.

According to Biden's office, MERS will audit its records for accuracy, reporting the results to the Attorney General's Office, and will require its members to fix the errors revealed by the audit.

MERS is also required to annually examine documents signed by employees of its 25 largest members to check the identity and authority of the person who signed the documents. These signing officers also will be required to undergo training, the attorney general explained.

"Every homeowner should be able to find out who owns their mortgage, not just the company hired to collect payments," Biden said in a statement.

"The MERS system functioned to obscure this important information."

In October, the attorney general, who contends MERS is at the middle of the nationwide housing crisis, sued the company in Delaware Chancery Court for repeatedly violating the state's Deceptive Trade Practices Act.

MERSCORP and its subsidiary, Mortgage Electronic Registration Systems Inc., was formed in 1995 to facilitate the growing mortgage finance market.

Biden's suit argued that MERS is effectively a "front" organization that has created a registry but fails to properly oversee it or enforce its own rules on participating members.

The attorney general alleged that 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.

As a result, the company has recorded so-called "robosigned" documents, and has failed to follow its own rules designating proper institution of foreclosure proceedings, Biden alleged.

In May, MERS asked a Delaware judge to dismiss Biden's lawsuit.

The company's attorneys argued that the registry operates solely for the benefit of financial institutions, and does not provide any services to homeowners.

After hearing more than five hours of oral arguments, Chancellor Leo Strine Jr. -- who reportedly was skeptical of the State's arguments -- asked to speak with attorneys behind closed doors to figure out "a path forward."

"MERS' inaccurate and unreliable records raised serious questions about who owns what in America. The steps MERS will now take will help answer those questions," Biden said of the settlement last week.

Delaware is the first state to secure such concessions.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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