This whole settlement is suspect as it is occurring without any substantial investigation by the AGs. As Eliot Spitzer and other prosecutorial types have pointed out, the AGs haven’t subpoenaed any of the discovery they would need to ascertain the strength of their claims before giving them up. Chief among the elephants in the room is the effect of leaving MERS out of the equation, and the extent of the waiver that the banks seek.
From Gretchen Morgenson at the NY Times is today’s article:
¶Lawyers who have examined this issue say it would be unprecedented to grant a broad release from liability to the banks that own MERS from claims that have not been investigated.
WHILE some states are scrutinizing MERS, most have declined to investigate its operations. That might seem surprising, given the apparent conflicts of interest in its business. Employees of law firms representing banks in foreclosures, for instance, are also officers of MERS. They can assign mortgages even though they represent a party with an interest in the outcome.
A broad release would vastly diminish the possibility of an in-depth investigation. Such a release might also make it harder for borrowers to argue that MERS has no right, or standing, to foreclose on them. The United States Trustee has supported this view in a number of recent cases, but exempting banks from future lawsuits on this issue would send a message that questioning MERS’s standing is of no interest to top state officials.
And if the banks are insulated from future state lawsuits, responsibility for any abusive acts by MERS would be pushed onto law firms that did the system’s work. With few assets, these law firms are virtually judgment-proof. The unit of MERS that held title to the mortgages also has few assets and was set up in such a way that lawsuits against it would probably reap little for plaintiffs.
MERS has begun to clean up its practices and paperwork. Officials are furiously assigning mortgages out of MERS’s name and into the banks’ names. One borrower in Pierce County, Wash., combed through records from April 1, 2011, to July 18, and found 1,956 assignments of deeds of trust executed from MERS to banks that service the loans or trustees that oversee mortgage pools.