Mortgage Electronic Registration Systems Inc. has lost an appeal in a Connecticut case challenging higher recording fees that it has to pay compared to other filers.
Back in 2013, the state’s legislature created a two-tiered system that required MERS to pay recording fees that are around three times more than
for other mortgagees.
Before the legislation was enacted, all filers were required to pay $10 for the first page of each document recorded plus another $5 for each subsequent page filed.
The 2013 legislation added fees of $3 and $40 per filing and $2 per assignment after the first two assignments.
But on just transactions where MERS is named as mortgagee, the recording fee soared to $116 for the first page filed in addition to the $43 per-filing fees, the $10 for the first page fee and the $5 fee for each additional page.
“The net effect of the amendments to § 7-34a (a) is to collect from a nominee of a mortgagee, namely, MERS, substantially more for the filing of deeds, assignments and other documents in the land records than from any other filer,” the appeals court wrote in its decision.
The intention of the higher MERS fees was to help balance the state’s budget.
So the electronic registry filed a complaint naming the the state’s governor, attorney general, librarian and state public records administration as defendants.
The lawsuit seeks injunctive relief and a judgment declaring that the two-tiered fee structure violates provisions of the federal and state constitutions.
“Specifically, the plaintiffs alleged that General Statutes §§ 7-34a (a) (2) and 49-10 (h), as amended, violate the equal protection, due process, and takings provisions of the federal and state constitutions, the federal dormant commerce clause, and the federal prohibition against bills of attainder,” a Feb. 23 decision from the Supreme Court of Connecticut states. “The plaintiffs further alleged that enforcement of the statutes violates 42 U.S.C. § 1983.”
MERS acknowledged that the higher fees are passed on to borrowers in most cases, and it provided no evidence that any of its members in the state halted or reduced utilization of the system.
The defendants filed motions for summary judgment, and the motion was granted by the trial court.
MERS then appealed the decision. The case was argued on
Oct. 14, 2015.
But, citing citing guidance from the U.S. Supreme Court decision in Dept. of Revenue v. Davis, the appeals court only affirmed the lower court’s decision.
“Given the parties’ stipulation that the legislation at issue has not redounded to the tangible detriment of the MERS business model, we are compelled to defer to the legislature’s judgment that the fees at issue represent a reasonable approximation of the savings in recording costs generated by use of the MERS system,” the decision stated. “Accordingly, §§ 7-34a (a) (2) and 49-10 (h) do not offend the dormant commerce clause, and we reject the plaintiffs’ claim to the contrary.”
The decision called the development of the secondary mortgage market “the
most significant factor in the decline of the traditional residential mortgage model.”
MERSCORP Holdings issued a statement indicating that it “continues to believe that the challenged statute violates the U.S. Constitution and intends to explore its legal options.”
