Monday, November 14, 2011

Suit targets mortgage registry firm

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Suit targets mortgage registry firm
DUVAL COUNTY, Fla. – Nov. 11, 2011 – A Florida court official is taking on the nationwide mortgage registry company created to save banks money when buying and selling homes.

Duval County Clerk of Court Jim Fuller is seeking class-action status in a lawsuit filed Oct. 31 against Mortgage Electronic Registration Systems, or MERS, which he said operates an “unlawful scheme.”

The Virginia-based company was created by the banking industry as a way to streamline and track the transfer and sale of mortgages – a critical element in real estate’s heyday when loans traded hands at a frenetic pace.

But Fuller said MERS sidesteps public recording land rules and bypasses fees to the detriment of the public and the state’s 67 clerks of court.

When a lender originates a mortgage it can go into MERS, which becomes the “mortgagee.” This allows the company to internally track the transfer, sale or securitization of the loan instead of each move being recorded in the public record.

“The MERS system avoids the recordation requirement, and the accompanying fees, and in doing so deprives the Florida Clerks of Court fees to which they are entitled and the public of its ability to identify the true mortgagee of mortgaged property,” the lawsuit says. “The effort to disconnect the debt from the collateral to save on recording costs is at the heart of the unlawful scheme that is MERS.”

Palm Beach County Clerk of Court Sharon Bock said she didn’t know about the lawsuit until Wednesday and is reserving judgment.

The Florida Association of Court Clerks and Comptrollers felt similarly, saying its executive committee is ready to “review the issue and take action” if and when Fuller’s suit progresses.

MERS has been the target of ire nationwide as problems with identifying the true owners of mortgages became clearer in the wake of last fall’s “robo-signing” scandal.

The company has faced several challenges to its business practices, including a lawsuit filed last month by the Delaware attorney general’s office that claims MERS makes it difficult for borrowers to identify their mortgage holder, which hurts their ability to fight foreclosures.

Janis Smith, a spokesman for MERS, said Fuller’s allegations are without merit and that the company will move to dismiss the complaint because it “fails to state any plausible legal or factual claims.”

“Any suggestion that MERS acting as the mortgagee on the public records somehow ‘allows the owner of a loan to remain anonymous’ is completely wrong,” Smith said.

Copyright © 2011 The Palm Beach Post, West Palm Beach, Fla., Kimberly Miller. Distributed by MCT Information Services.

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