WASHINGTON – The electronic mortgage registration company at the center of the robo signing scandal has ordered a halt to foreclosures in an effort to protect itself from legal problems in the growing foreclosure crisis.
Mortgage Electronic Registration Systems, better known as MERS, last week issued a new policy advising lenders not to foreclose or start legal proceedings in bankruptcy courts in the name of the company. It also required mortgage servicers to obtain mortgage assignments and record them with county clerks before beginning foreclosures.
Since the collapse of the housing boom, many foreclosure cases were filed in MERS's name, even though the computer-based registry does not really own either the mortgage or the promissory note, the document which states the terms of the mortgage loan.
The company, which is owned by big banks and mortgage groups, provides digital recordation services for millions of mortgages to facilitate trading, selling and securitization and has been the focus of a growing number of lawsuits.
The new policy comes after at least three states, including Massachusetts, New York and Delaware, voiced concerns about a possible agreement with the nation’s five largest banks over errors made in the robo signing scandal. Employees admitted to signing thousands of signatures in mass to legal documents that led to the foreclosure of homes in dozens of U.S. states without first confirming the information as being true.
The change represents a major turn of direction for the company, which has recorded about 32 million mortgages, or 60% of all residential mortgages in the U.S. Among the owners of the Reston, Va., company are: Bank of America, JP Morgan Chase, Citicorp, Wells Fargo, HSBC, Fannie Mae, Freddie Mac and the Mortgage Bankers Association.
MERS is the target of thousands, and perhaps eventually millions of lawsuits over its foreclosure processes related to the electronic recording of documents in counties all over the U.S. to finalize foreclosures. Dozens of credit unions, as well as banks and other lenders currently are facing costly litigation over the practices. Attorneys are challenging the legality of MERS standing in some foreclosure cases, which lack the original Deed of Trust paperwork needed to obtain the legal compliance to foreclose.
In a July 26 statement, MERS said, “No foreclosure proceeding may be initiated in the name of Mortgage Electronic Registration Systems, Inc. (MERS). No Legal Proceedings in a bankruptcy may be filed in the name of MERS.”
