MERS Mortgage Registry Sued by Delaware for Allegedly Deceiving Borrowers
By David McLaughlin, Margaret Cronin Fisk and Phil Milford – Oct 27, 2011 10:47 AM ET
The Delaware attorney general’s office sued Merscorp Inc., which runs a national mortgage registry used by banks, saying its practices are deceptive and hide information from borrowers.
The MERS database, which tracks ownership interests in mortgages, obscures information from borrowers and impeded their ability to fight foreclosures, Delaware Attorney General Beau Biden said in a complaint filed today.
“MERS engaged and continues to engage in a range of deceptive trade practices that sow confusion among consumers, investors and other stakeholders in the mortgage finance system, damage the integrity of Delaware’s land records, and lead to unlawful foreclosure practices,” Biden said.
MERS tracks servicing rights and ownership interests in mortgage loans on its electronic registry, allowing banks to buy and sell loans without recording transfers with individual counties. MERS acts as the lender’s nominee and remains the mortgagee of record as long as the note promising repayment is owned by a MERS member.
Banks and investors have the true economic interests in the loans, and the ownership of the mortgage notes is purportedly recorded in the MERS registry, to which the public has limited access, according to Biden. Biden said the system is “frequently inaccurate.”
“The unreliability of the MERS System, when compounded with MERS’s reliance on the records in the MERS System, is deceptive and harms consumers by permitting and encouraging foreclosures for which the authority has not been fully determined and may not be legitimate,” the attorney general said.
Janis Smith, a spokeswoman for Merscorp, said the allegations in the suit have no merit.
“MERS’s business practices are transparent,” she said in a phone interview. “There is no confusion.”
Smith said that while the company hasn’t seen the complaint, MERS is already under subpoena by the Delaware attorney general and has been cooperating with his investigation.
MERS faces multiple unrelated lawsuits by counties over allegations that the company cheated them out of mortgage filing fees.
Dallas County, Texas, which sued last month, claims the system allows banks that own stakes in MERS to buy and sell loans without properly recording transfers with counties and paying the fee. Dallas County District Attorney Craig Watkins, who also sued Bank of America Corp., said his county may be owed as much as $100 million.
The case is State of Delaware v. MERSCORP Inc., CA6987, Delaware Chancery Court (Wilmington).
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