According to Bloomberg, the two largest counties of Minn. - Ramsey and Hennepin sued Mortgage Electronic Registration Systems Inc. (:MERS) and a number of financial institutions. The lawsuit has been filed in the U.S. District Court of Minnesota on behalf of taxpayers and other counties in Minn.
The case alleges MERS of failing to keep records of consequent assignments of mortgage loans and recording payment of the filing fees. Co-defendants include Wall Street giants - JPMorgan Chase & Co. (JPM), Bank of America Corporation (BAC) and Citigroup Inc. (C).
Virginia-based MERS was formed by Fannie Mae (FNMA), Freddie Mac and the mortgage industry, as a commercial and easy means of trading mortgage debt. Previously, mortgages were registered at county clerks’ offices and a fee was charged against these. However, MERS replaced the system and introduced one-time online registration.
MERS used to record servicing rights and ownership interests in mortgage loans on registration, enabling banks to buy and sell loans without recording transfers with counties. Though MERS saved mortgage lenders’ money, yet it was a flaw for counties and homeowners. Counties were deprived of the revenue from transaction fees. Moreover, erroneous property records became an issue for homeowners.
The counties alleged MERS of deceiving millions of dollars in mortgage-related fees. Additionally, MERS, which provides database for mortgage servicers, has been accused of sloppy record keeping, concealing identities of the holders of mortgage debt from borrowers and evading fees.
Therefore, the counties received a court approval for suing MERS as a class. They demand recording of every mortgage and assignment in the state in the county where the core property is located along with reimbursement.
MERS defended with the argument that use of the MERS system is lawful in all 50 states and it abides by Minn. property recording state laws. However, spokesmen from various big financial institutions involved in the case refrained from any comments.
The primary motive behind the lawsuit is to get proper accountability of the mortgage-related documents in lawful and legal procedures. Additionally, the lawsuit aims to provide relief to the counties, which were deprived of their fees and homeowners, whose property had been wrongly foreclosed by the misconducts of the mortgage servicers.
More From Zacks.com