St. Clair County, Illinois, has settled a lawsuit for $800,000 against banks accused of fraud by evading requirements to file documents with the county’s recorder when mortgages are bought and sold by lenders.
The suit against Mortgage Electronic Registration System, or MERS, was one of the first of its kind filed in Illinois.
The settlement is one of only two in the country — one in St. Clair County and one in New York.
The settlement was made in August, but became public in late November after the release of county board executive session minutes approving it.
The recorder’s office will receive $36,000 of the settlement for costs associated with the lawsuit. The county’s Juvenile Justice Council, which coordinates a teen court, will receive $500,000 of the settlement. Paul Slocomb, the county’s lawyer, received the remaining $264,000 for handing the case.
St. Clair County State’s Attorney Brendan Kelly, who filed the suit, declined to comment, citing a confidentiality agreement in the settlement.
The suit alleged mortgage companies and banks created a holding company called Mortgage Electronic Register that created an electronic mortgage database system. This system tracked the transfers of loans between lending institutions and Wall Street securities. The system allowed banks and mortgage holders to avoid property transfers and fees when the mortgages were bundled.
But homeowners and the county also had a harder time discerning who held and serviced individual mortgages.
As part of the settlement, MERS mortgages filed in St. Clair County must list an identifier and a toll-free telephone number to allow borrowers to contact their mortgage company.
Kelly told county board members during the executive session that banks were wary about settling the lawsuit because they opened themselves up to other lawsuits from other Illinois counties under the same legal theory, the minutes stated.
Some other Illinois counties joined in a federal class action lawsuit, but that case was dismissed. The county opted to pursue its case alone against the banks in state court.
Defendants listed in the lawsuit included Bank of America Corp., CitiMortgage Inc., HSBC Finance Corp., Suntrust Mortgage, Wells Fargo Bank, Bank of O’Fallon, First Collinsville Bank, First National Bank, Mid America Mortgage, Midland States Bank, Commerce Bank, Regions Bank and UMB Bank.
