MERSCORP Inc., the operator of an electronic mortgage registry called MERS (Mortgage Electronic Registration System), has long been a cause of problems in the housing industry and now the problems seem to be coming to a head. AGBeat reported that MERS has not only destroyed the chain of title, but also damaged the housing industry as a whole.
Although they’ve logged several major wins in court recently, MERS is facing legal trouble after a Pennsylvania court ruled they violated state law by failing to properly record home loans that were sold or transferred. The company will face another trial to determine how much it owes Pennsylvania counties for errors in recording fees.
Judge rules on recording methods
County Register of Deeds, Nancy Baker, first stood up to MERSCORP on behalf of other recorders in the state, for flouting the statue regarding the recording of mortgage information (it cannot be recorded solely digitally). After the lawsuit was filed, Judge Joyner ruled against MERS and MERSCORP.
Joyner states, “Every such deed, conveyance, contract, or other instrument of writing which shall not be acknowledged or proved and recorded, as aforesaid, shall be adjudged fraudulent and void as to any subsequent bona fide purchaser or mortgagee or holder of any judgment, duly entered in the prothonotary’s office of the county in which the lands, tenements, or hereditaments are situate, without actual or constructive notice unless such deed, conveyance, contract, or instrument of writing shall be recorded, as aforesaid, before the recording of the deed or conveyance or the entry of the judgment under which such subsequent purchaser, mortgagee, or judgment creditor shall claim.
Nothing contained in this act shall be construed to repeal or modify any law providing for the lien of purchase money mortgages.” In other words, under Pennsylvania law, MER and MERSCORP is breaking the law by failing to record their mortgages properly.
Judge Joyner rules MERS will be held liable
The rest of the information regarding the case can be found in the 45-page Memorandum which outlines details about MERS’ agency relationships Pages 28-34 of the Memorandum go into detail about MERS’ agency relationship with its members. Despite MERS’ attempt to dispute this in court, Judge Joyner said: “[the court] likewise rejects the proposition that MERS is not subject to liability because it is only an agent for its member-lenders.”
Indeed, as a general matter, an “agent” is a “person authorized by another (principal) to act for or in place of him; one intrusted with another’s business.” It also states, “an agent holds the power to alter the legal relations between the principal and third persons” and “MERS may alternatively be held responsible as an undisclosed agent of the lenders for whom it was acting as ‘nominee.’” As it stands, this ruling means MERS and MERSCORP will be held liable to violating the Pennsylvania Recording Statutes and perhaps others as lawsuits progress.
