New York sues big banks over mortgage database

New York Attorney General Eric Schneiderman is suing Bank of America, Wells Fargo and JPMorgan Chase for using a mortgage database that allegedly led to deceptive and fraudulent foreclosure filings.

In a statement, Schneiderman said the banks created the Mortgage Electronic Registration System “as an end-run around the property recording system, to facilitate the rapid securitization and sale 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, he said.

The suit, which was brought in the New York State Supreme Court in Brooklyn, charges that agents of the banks, operating as “MERS certifying officers,” repeatedly brought foreclosure actions against New York homeowners even though they lacked the authority to do so and did not hold the notes on the properties. The system also “effectively eliminated homeowners' and the public's ability to track property transfers through the traditional public records system. Instead, this information is now stored only in a private database — which is plagued with inaccuracies and errors — over which MERS and its financial institution members exercise sole control,” Schneiderman said.

He said MERS was created “to allow financial institutions to evade local county recording fees, avoid the hassle and paperwork of publicly recording mortgage transfers, and facilitate the rapid sale and securitization of mortgages.” The suit alleges that the banks avoided $2 billion in recording fees by using MERS.

Merscorp, which runs MERS, said in a response that the company’s activities are in compliance with state and federal laws. Spokeswoman Janis Smith said in a separate e-mail statement that the company will fight the allegations, the New York Times reported.

Yet even as Scheiderman announced the suit, he continued pursuing joining a multistate mortgage settlement, according to the Times. The deadline for the $25 billion deal is Feb. 13, although that will likely be pushed back, reported Reuters.

According to CNN, 40 states have signed on to the agreement, with California, Delaware, New York and Nevada still undecided. All are still in negotiations and may yet sign the deal. The states’ attorneys general have been leery of signing because of worry that the deal might cripple their own investigations, the article noted.

About the Author

Kathleen Hickey is a freelance writer for GCN.

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Reader Comments

Mon, Mar 5, 2012 Greg Ga.

It seems to me that the problem is that government fees are too high to maintain their database(s)! Otherwise why would private industry invest in a system that effectively duplicates the governments? Maybe the government should seek to put MERS on contact to save taxpayers a bunch of money and speed up transactions.

Wed, Feb 8, 2012

Is it any wonder there are Occupy Wallstreet protesters when it is clear that big banks, when thrown a life preserver to keep them afloat, threw their customers an anchor.

Wed, Feb 8, 2012

I'm trying to remember back to something I heard on MERS - and what I remember is that it was set up as a central clearing house for these transactions, but 5 people actually worked for MERS, so the actual work was done by agents for the banks - which were not vetted in any way shape or form - basically acting as temp employees for MERS for the duration of each transaction. I remember something about a lack of audit trails; but that may have been a layperson not asking the right questions. Someone wanted congress to pass something that absolved MERS of liability, but someone else didn't want the bill because it would provoke folks to ask why they might want absolution and start asking some questions they didn't want to answer.

Wed, Feb 8, 2012 fritz

The collection of flawed information is deeper then the average person know. The TRW company had private data bases available to the Police force offices all over the country. Our police station had just purchased a subscription from TRW and one of the Narcotics officers asked me for a name to search. I gave them my dead grandfathers name who had died in 1970 and TRW had 15 pages of data on my grandfather including a list of auto licenses issued to his last address going back to 1958. My grandfather was a policeman and retired after 35 years. Why TRW keeps data like that is a mystery to me. Looking over the data there were some errors which only I would know. So much for 100% accuracy The datatbase said he moved in with my parents in 1965 and I knew that he didn't.

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