• 04
  • February
    2012

New York Attorney General Eric Schneiderman filed suit against some of the nation's largest banks this past Friday, contending that they misled homeowners and court officials by filing flawed and fraudulent foreclosure documents through the popular electronic mortgage registry called Mortgage Electronic Registration Systems or MERS.

The suit named as defendants Bank of America, JPMorgan Chase, Wells Fargo and Mortgage Electronic Registration Systems. MERS is a privately run electronic database that the mortgage industry created in the 1990s. The system was created to help these banks save millions of dollars in filing fees by shortcutting the reassignment of loans without the time and expense of filing mortgage documents and paying local recording fees each time the loan changes hands.

During the housing boom, all major banks used MERS to track and transfer the assignment of mortgages and more easily put them into packages of securities that were traded in our financial markets. When foreclosures exploded because of the housing bust, the banks used MERS to try to shorten the foreclosure process. "The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages," Schneiderman said in his statement Friday after the suit was filed. "Once the mortgages went sour, these same banks brought foreclosure proceedings in masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirement or the rule of law."

MERS Has Created a Mess of Foreclosure Process 

The lawsuit sets forth an unequivocal truth that the MERS database is riddled with inaccuracies, misrepresentations and numerous "robosigned" documents. The system has made it impossible to determine which banks own the mortgage notes and whether each bank in a foreclosure has the right to foreclose. The mortgage securities were place into these trusts, but it was never done properly, bringing into question a majority of the foreclosures out there today. In our practice, we have also experienced great difficulty dealing with banks in trying to work out loan modifications and help our clients save their home, because you cannot get the right people to deal with. For lack of a better description, the MERS system has created an absolute mess and has resulted in an injustice to homeowners across our nation.