BofA, JPM Chase Sued by New York Over MERS

[Roland99]

http://www.bloomberg.com/news/2012-02-03/bank-of-america-jpmorgan-chase-wells-fargo-sued-by-new-york-over-mers.html

Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. were sued by New York Attorney General Eric Schneiderman over the creation and use of a mortgage database.

The banks’ use of the database, known as MERS, has led to deceptive and fraudulent foreclosure filings in New York state and federal courts, Schneiderman said in a statement today.

“The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages,” the attorney general said. “Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions.”

Delaware Attorney General Beau Biden last year sued Merscorp Inc., which operates the mortgage registry, accusing it of deceptive trade practices. Merscorp was also named as a defendant in Schneiderman’s lawsuit.

Guess that means bye-bye settlement!


More info:

http://www.zerohedge.com/news/kiss-foreclosure-settlement-goodbye-bank-america-wells-and-jp-morgan-are-sued-over-use-mers

Schneiderman: MERS And Servicers Engaged In Deceptive and Fraudulent Practices That Harmed Homeowners And Undermined Judicial Foreclosure Process

NEW YORK – Attorney General Eric T. Schneiderman today filed a lawsuit against several of the nation’s largest banks charging that the creation and use of a private national mortgage electronic registry system known as MERS has resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process. The lawsuit asserts that employees and agents of Bank of America, J.P. Morgan Chase, and Wells Fargo, acting as "MERS certifying officers," have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have. The lawsuit names JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., as well as Virginia-based MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc.

The lawsuit further asserts that the MERS System has 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. Additional defendants include BAC Home Loans Servicing, LP, Chase Home Finance LLC, EMC Mortgage Corporation, and Wells Fargo Home Mortgage, Inc.

“The banks created the MERS 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,” said Attorney General Schneiderman. “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. Only through real accountability for the illegal and deceptive conduct in the foreclosure crisis will there be justice for New York’s homeowners.”

The financial industry created MERS in 1995 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. MERS operates as a membership organization, and most large companies that participate in the mortgage industry – by originating loans, buying or investing in loans, or servicing loans – are members, including JPMorgan Chase, Bank of America, Wells Fargo, Fannie Mae, and Freddie Mac. Over 70 million loans nationally have been registered in MERS System, including about 30 million currently active loans.

[mike_c]

1. hopefully this will indicate to the other states that...

...the potential court awarded damages FAR exceed the paltry slap on the wrist the settlement represents.

[Fuddnik]

2. Can Holder take a clue?

I doubt it.

[sarcasmo]

3. Makes you wonder the total number of law suits against these two coproations.

[FarCenter]

4. Why isn't he suing Fannie and Freddie

Fannie and Freddie participated in the design and establishment of MERS and they are partners in MERS.

Fannie and Freddie required the banks and mortgage lenders to use MERS.

[Yo_Mama]

5. Yes!!!

The GSEs (Fannie and Freddie) set up the system and were the original two adoptees of it. Everyone else followed their lead.

MERS itself is not fraudulent at all. However creditors not filing the correct paperwork before foreclosure is, or not sending through the right assignments to the trustee originally - that is not how the system was designed to work. It's the sloppiness of some of the participants that caused the problem, and they can be legally held accountable for it. What's really bizarre is that the intermediaries in the system (those that bought up the mortgages and transferred them to the Trustees of the securitization pool - violated rules that require them to check the documentation and confirm that the correct paperwork was in the original file transmitted.

Direct from Fannie's website:
https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/mers/

I know people don't want to hear it, but some localities were having a rough time just recording mortgages and satisfactions. A lot of them couldn't have handled additional recording. Heck, just to get deeds/mortgages recorded in a few of these places was taking months in the mid-2000s, and I heard from a lawyer that one place in Michigan was backed up about a year.