Delaware Attorney General Beau Biden Sues MERS

Delaware Attorney General Beau Biden has sued MERS.  Heres Naked Capitalism’s Yves on the topic–full post here:

Because changes in ownership are recorded only in MERS’ private database, there is “no public trail by which anyone can identify the principals or verify the propriety of the transfer,” the suit charges. The opaque nature of the database also makes it difficult for consumers “to know of or challenge inaccuracies in the MERS System.”

And when MERS foreclosed in its own name, the borrower’s ability to raise defenses was impaired, the suit charges.

So interestingly, Biden considered the filing fee issue but decided the deceptive practices angle was more germane. The dollar amounts that could be obtained under a recording-fee action are a fraction of the ones at issue here. Recording fees saved were typically in the range of $35, and the use of MERS would have saved typically 2 or 3 recording fees, or $70 to $105 per mortgage, versus the $10,000 civil penalty for each consumer violation here. It is still mind-boggling that the securitization industry saw it fit to run roughshod over the property records of this country to save such small amounts over money (over an entire 5000 mortgage securitization, the savings would be $350,000 which in all likelihood was ripped out in more fees rather than passed on to consumers).

Bloomberg adds some details:

Biden asked the court to bar MERS from initiating any foreclosure actions in the company’s name, from acting as a nominal mortgage lender when it didn’t have a “beneficial interest” in the property and from recording such mortgages in the company’s name.

Biden also asked the court to stop MERS from assigning or taking any other actions on Delaware mortgages until the company’s system has been “audited and corrected,” according to the complaint. The court should order MERS to correct the chain of title on Delaware mortgages that were recorded in county offices, Biden said.

Unless MERS gets injunctive relief, these two provisions effectively stop foreclosures in MERS’s name in Delware. MERS has repeatedly said it does not hold any interest in the property or note in depositions. And the mortgage registry system had also quietly put out a notice to members months ago telling members to stop foreclosing in the name of MERS. Not allowing MERS members (servicers, banks, and their foreclosure attorneys) to assign mortgages out of MERS will stop the foreclosure apparatus cold. This is a legitimate legal strategy to get a foreclosure freeze and force the servicing industry to the table to negotiate a much bigger fix.

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