Schneiderman alleges mortgage fraud in suit against banks
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Attorney General Eric Schneiderman filed a lawsuit today against Bank of America, J.P. Morgan Chase Bank, Wells Fargo and Virginia-based MERSCORP Inc. and its subsidiary, Mortgage Electronic Registration Systems Inc., charging that a private electronic-mortgage registry system (MERS) they developed has led to “deceptive and fraudulent” foreclosure filings that have harmed homeowners. Additional defendants are BAC Home Loans Servicing, Chase Home Finance, EMC Mortgage Corp. and Wells Fargo Home Mortgage Inc.
The lawsuit alleges that employees and agents of the bank have acted as MERS certifying officers and “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,” Schneiderman’s news release said.
The lawsuit claims the MERS system has “effectively eliminated” homeowners’ and the public’s ability to track property transfers through the traditional public records system because it is stored in a private database, which is full of inaccuracies and errors.
“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,” Schneiderman said in a statement.
“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,” he said.
More than 70 million MERS loans have been registered in the MERS System, roughly 30 million of which are active, Schneiderman said. The system was created in 1995 to get around county fees for recording, “avoid the hassle and paperwork of publicly recording mortgage transfers” and speed up the sale and securitization of mortgages, he said.
The attorney general said the use of MERS has led to filing improper foreclosure proceedings in the state, compromised the the integrity of the judicial process, and caused confusion and uncertainty over property ownership interests, according to the lawsuit.
In New York, MERS has filed more than 13,000 foreclosure actions against homeowners in which it is listed as the plaintiff, the lawsuit said. In many cases, it has no legal authority to foreclose and did not own or hold the promissory note, although it said otherwise in court papers, it said. Mortgage assignments frequently were “robosigned” by people who did not review property-ownership records.
The attorney general is seeking injunctive relief, damages for harmed homeowners and civil penalties, and it is requesting a court order requiring the defendants to “cure any title defects and clear any improper liens resulting from their fraudulent and deceptive acts and practices.”
