Attorneys for the Texas county that includes Houston will seek permission Oct. 11 to hire outside lawyers to sue Mortgage Electronic Registration Systems Inc. over $100 million or more in unpaid mortgage-filing fees.
The proposal was posted Friday on the agenda for the Harris County Commissioners Court, the governing body for the county. County attorneys will hire the same law firm, Malouf & Nockels, that handled a similar lawsuit filed by Dallas last month, County Attorney Vince Ryan said in an interview Friday.
The Dallas County district attorney's lawsuit claimed Merscorp Inc.'s MERS, which runs an electronic registry of mortgages, cheated the county out of tens of millions of dollars in uncollected filing fees. MERS tracks servicing rights and ownership interests in mortgage loans on its registry, allowing banks to buy and sell loans without recording transfers with counties.
"Our preliminary estimate, based on very superficial knowledge, is we're looking at a minimum of $11 million and it could be much, much more depending on the number of times the real estate was used as collateral and should've generated a filing fee," Ryan said.
The county may be seeking more than $100 million in unpaid fees, he said. Janis Smith, a spokeswoman for Merscorp, in Reston, Va., did not comment on the county's plan.
"Our cause is mirrored by every other county in Texas that can tag onto this," Ryan said. "This thing is huge." Ryan did not name a bank that Harris County might sue or say whether the county will sue a bank for using MERS.
The Commissioners Court must approve hiring outside attorneys to pursue the suit before it can be filed, Ryan said.
The lawsuit could be filed next week or the following week, John Odam, assistant county attorney for special projects in Harris County, said Friday.
Dallas County District Attorney Craig Watkins, who also sued Bank of America Corp. last month, claimed that his county could be owed as much as $100 million in filing fees. The clerks of Kentucky's Christian and Washington counties sued MERS, Chase Home Mortgage Corp., CitiMortgage, Wells Fargo & Co., Bank of America and others in federal court in Louisville in April over unpaid fees, seeking to represent all 120 counties in the state.
Washington County, Pa., sued U.S. Bank N.A. in state court over fees last week, contending MERS was set up "for the express purpose of circumventing the payment of assignment of mortgage fees to county governments." In the suit, brought on behalf of all counties in the state, MERS is not a defendant.
"Because the matter is in litigation, we cannot comment," said Thomas Joyce, a spokesman for U.S. Bank, in Minneapolis.
Branch County, Mich., has sued MERS, Chase and others in state court, alleging they improperly failed to pay real estate transfer taxes.
"I don't think there's any question this is growing," said Christopher Peterson, associate dean and professor at the University of Utah S.J. Quinney College of Law. He said he has had discussions with officials in Utah considering a similar claim. He did not identify the county.
Odam said $11 million was a conservative estimate, reflecting one transfer per property. "The evidence will show that there were at least two transfers, with history showing there have been multiple transfers with foreclosures and all that's occurred in the real estate market in the last few years," Odam said.
