Nice Work, NY AG Schneiderman

Attorney General of the State of New York, Eric Schneiderman is the one to watch, along with AG Masto of Nevada.  Now these two have the cojones that others are sorely lacking.  From the man himself:

 A.G. SCHNEIDERMAN ANNOUNCES MAJOR LAWSUIT AGAINST NATION’S LARGEST BANKS FOR DECEPTIVE & FRAUDULENT USE OF ELECTRONIC MORTGAGE REGISTRY

Complaint Charges Use Of MERS By Bank Of America, J.P. Morgan Chase, And Wells Fargo Resulted In Fraudulent Foreclosure Filings 

Servicers And MERS Filed Improper Foreclosure Actions Where Authority To Sue Was Questionable

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.

Through their  membership in MERS, these companies avoided publicly recording the purchase and  sale of mortgages by designating MERS Inc. – a shell company with no economic  interest in any mortgage loan – as the “nominal” mortgagee of the  loan in the public records. Instead, MERS members were supposed to log mortgage  transfers in the MERS private electronic registry. The basic theory behind MERS  is that, because MERS Inc. serves as a “nominee” (or agent) for most  major lenders, it remains the “mortgagee” in the public records  regardless of how often the loan is sold or transferred among MERS members.  Thus, although MERSCORP has only about 70 employees, MERS Inc. serves as the  mortgagee of record for tens of millions of loans registered in the MERS  System.

MERS has granted over  20,000 “certifying officers” the authority to act on its behalf, including the  authority to assign mortgages, to execute paperwork necessary to foreclose, and  to submit filings on behalf of MERS in bankruptcy proceedings. These certifying  officers are not MERS employees, but instead are employed by MERS members,  including JPMorgan Chase, Bank of America, and Wells Fargo.

MERS’ conduct, as well  as the servicers’ use of the MERS System, has resulted in the filing of  improper New York foreclosure proceedings,  undermined the integrity of the judicial process, created confusion and  uncertainty concerning property ownership interests, and potentially clouded  titles on properties throughout the State of New York. In fact, several New York judges have questioned the standing  of the foreclosing party in cases involving MERS loans and the validity of  mortgage assignments executed by MERS certifying officers.

The lawsuit  specifically charges that the defendants have engaged in the following  fraudulent and deceptive practices:

  • MERS has filed over  13,000 foreclosure actions against New    York homeowners listing itself as the plaintiff, but  in many instances, MERS lacked the legal authority to foreclose and did not own  or hold the promissory note, despite saying otherwise in court submissions.
  • MERS certifying  officers, including employees and agents of JPMorgan Chase, Bank of America,  and Wells Fargo, have repeatedly executed and submitted in court legal  documents purporting to assign the mortgage and/or note to the foreclosing  party. These documents contain numerous defects, including affirmative  misrepresentations of fact, which render them false, deceptive, and/or invalid.  These assignments were often automatically generated and “robosigned”  by individuals who did not review the underlying property ownership records,  confirm the documents’ accuracy, or even read the documents. These false and  defective assignments often masked gaps in the chain of title and the  foreclosing party’s inability to establish its authority to foreclose, and as a  result have misled homeowners and the courts.
  • MERS’ indiscriminate  use of non-employee “certifying officers” to execute vital legal  documents has confused, misled, and deceived homeowners and the courts and made  it difficult to ascertain whether a party actually has the right to foreclose.  MERS certifying officers have regularly executed and submitted in court  mortgage assignments and other legal documents on behalf of MERS without  disclosing that they are not MERS employees, but instead are employed by other  entities, such as the mortgage servicer filing the case or its counsel. The  signature line just indicates that the individual is an “Assistant  Secretary,” “Vice President,” or other officer of MERS. Indeed,  these documents often purport to assign the mortgage to the certifying  officer’s own employer. Moreover, as a result of the defendants’ failure to  track the designation of certifying officers and the scope of their authority  to act, individuals have executed legal documents on behalf of MERS, such as  mortgage assignments and loan modifications, when they were either not  designated as a MERS certifying officer at the time or were not authorized to  execute documents on behalf of MERS with respect to the subject loan.
  • MERS and its members  have deceived and misled borrowers about the importance and ramifications of  MERS’ role with respect to their loan by providing inadequate disclosures.
  • The MERS System is  riddled with inaccuracies which make it difficult to verify the chain of title  for a loan or the current note-holder, and creates confusion among stakeholders  who rely on the information. In addition, as a result of these inaccuracies,  MERS has filed mortgage satisfactions against the wrong property.

The lawsuit seeks a  declaration that the alleged practices violate the law, as well as injunctive  relief, damages for harmed homeowners, and civil penalties. The lawsuit also  seeks a court order requiring defendants to take all actions necessary to cure  any title defects and clear any improper liens resulting from their fraudulent  and deceptive acts and practices.

The matter is being  handled by Deputy Bureau Chief of the Bureau of Consumer Frauds &  Protection Jeffrey K. Powell, Assistant Attorney General Clare Norins, and  Assistant Solicitor General Steven C. Wu, under the supervision of First Deputy  Attorney General Harlan Levy.

Attachment:

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