NEW YORK — New York Attorney General Eric T. Schneiderman sued three of the nation's largest banks over a private national mortgage electronic registry system, claiming it has resulted in a wide range of deceptive and fraudulent foreclosure filings.
The lawsuit, filed in New York State Supreme Court in Brooklyn, names units of Bank of America Corp., JPMorgan Chase and Wells Fargo Corp. as defendants, as well as MERSCorp. Inc., which owns and operates the electronic registry, known as MERS.
In his complaint, Schneiderman alleges that the MERS system has effectively eliminated the public's ability to track property transfers because those transfers are maintained in the private registry, rather than in the local county clerk's office. He claims the system is riddled with inaccuracies and, as a result, it is difficult to verify the chain of title for a loan or a current noteholder for many properties.
The attorney general claims the system was designed to allow financial institutions to evade county recording fees, eliminate the need to publicly record mortgage transfers and to facilitate the rapid sale and securitization of mortgages.
"Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law," Schneiderman said.
"Our action demonstrates that there is one set of rules for all — no matter how big or powerful the institution may be — and that those rules will be enforced vigorously."
The lawsuit is seeking that a declaration that the alleged practices by MERS violate the law as well as damages for harmed homeowners and civil penalties.
Schneiderman alleged that MERS was created in 1995 by the financial industry and operates as a membership organization with most of the large companies that participate in the mortgage industry as members.
More than 70 million loans nationally have been registered in MERS system, including about 30 million currently active loans, he said.
MERS has granted more than 20,000 "certifying officers" the authority to act on its behalf, including the authority to assign mortgages, to execute paperwork necessary to foreclose, and to submit filings on behalf of MERS in bankruptcy proceedings, Schneiderman said.
Those certifying officers are not MERS employees, but instead are employed by MERS members, including JPMorgan Chase, Bank of America and Wells Fargo, he said.
Spokespersons at a Bank of America didn't immediately have a comment when reached Friday. J.P. Morgan said it had no comment. Spokespersons at Wells Fargo and MERSCorp couldn't immediately be reached for comment.
