Large city files suit
Mortgage Electronic Registration Systems Inc. (MERS) bowed out of facilitating foreclosures this July after various investigations including a federal investigation and judges ruling that MERS never owned the loans they were facilitating foreclosures for, therefore their authority to facilitate has been denied in several courts.
MERS and Bank of America Corporation are being sued by Dallas County District Attorney Craig Watkins who alleges the mortgage-tracking system violates Texas laws and shorted the county anywhere from $58 million to over $100 million in uncollected filing fees due to the MERS system, dating back to 1997.
Suit alleges MERS was set up to forego banks paying filing fees
MERS was initially established by Fannie Mae and Freddie Mac just over 15 years ago in conjunction with several major banks as a means to expedite the loan recording process as it used to be done through individual county clerk offices which was slow. “The founders went ahead even though no state laws authorized them to bypass the required filing with clerks,” according to Reuters.
Watkins claims the establishment of MERS by banks including Bank of America was simply to avoid paying filing fees and the lawsuit notes that Bank of America “knew or should have known” that their filing system could lead to improper filing.
“Texas public policy favors a reliable functioning public recordation system to avoid destructive breaks in title, confusion as to true identity of the holder of a note, fraudulent foreclosures and uncertainty as to title when a home is sold,” Watkins said, claiming that MERS “has all but collapsed this system throughout the U.S.” Other banks may be added to the lawsuit, according to Bloomberg.
Legality of 15 year old company now in question
Economist Barry Ritholtz said, “The politics of this are quite fascinating: The bankers may own the corrupt US Congress, and they may have intimidated or bought off many of the more cowardly State Attorneys General, but there simply are too many counties and District Attorneys representing local interests throughout the country to all be bought off. Buying/intimidating/controlling all of the local country District Attorneys may be like herding cats — nearly impossible. I am going to stand by my original prediction: The early litigants may get something, but the latter lawsuits will likely result in bankrupting MERS.”
“This is a big new front. This case is scary because if Dallas wins then there are a lot of other counties around the country that are going to follow,” said Christopher L. Peterson, associate dean and professor at the University of Utah S.J. Quinney College of Law.
