The state of Delaware has filed a lawsuit against the Mortgage Electronic Registration Systems Inc. The state claims that the company is not authorized to file foreclosures, doesn’t adequately maintain its database and wrongly uses the employees of its members to operate.
The lawsuit was filed on Thursday by Delaware Attorney General Beau Biden in Delaware Chancery Court, according to an announcement from the state.
Biden claims that MERS and parent MERSCORP have repeatedly violated Delaware’s Deceptive Trade Practices Act by hiding the name of the true owners of the mortgages. It also violated the statute when it didn’t properly transfer notes, filed foreclosures and used employees of its members to operate the company.
“MERS engaged and continues to engage in deceptive trade practices that sow confusion among homeowners, investors, and other stakeholders in the mortgage finance system, seriously damaging the integrity of the land records that are central to Delaware’s real property system, and leading to improper foreclosure practices,” the state said.
In its own statement, MERS called the lawsuit unexpected and said it has no merit.
The lawsuit alleges that MERS obscures information and frequently provides inaccurate information. This leaves borrowers unable to identify their servicer and impedes their ability to defend themselves in court against foreclosure.
But MERS claims that borrowers have open access to their servicer information on the MERS system. The company’s Web site reportedly also provides counseling and foreclosure prevention organizations.
MERS also noted that the borrower’s relationship is with the mortgage servicer and not with MERS, and federal laws require the servicer to disclose when the loan changes hands.
MERS, itself, is often unaware of who the true servicer is, according to state, and is therefore not authorized to take action.
“MERS is effectively a ‘front’ organization that has created a systemically important mortgage registry but fails to properly oversee that registry or enforce its own rules on its members that participate in the registry,” Delaware’s news release stated. “Rather than maintaining an adequate staff to provide MERS‘ services, MERS operates through a network of over 20,000 deputized non-employee corporate officers who cause MERS to act without any meaningful oversight from anyone who works at MERS.
“This has resulted in MERS recording so-called ‘robosigned’ documents with country recorders of deeds and failing to follow its own rules regarding proper institution of foreclosure proceedings.”
The state cited a case where a foreclosure was commenced on a loan in which MERS had no interest and the actual lender had been dissolved. MERS’ system was missing transfer records and reflected a “confusing path and inaccurate records.”
For its part, MERSCORP said that it has cooperated in good faith with the Delaware attorney general’s office and complied with requests for information under a subpoena issued earlier this year.
