The New York Attorney General, Eric T. Schneiderman today sued three of the country’s biggest banks, over their use of a national private electronic mortgage registry, accusing them of deceptive and unlawful practices, including false documents in foreclosure proceedings. Lawsuit was filed against JP Morgan Chase & Co (JPM.N), Bank of America Corp (BAC.N), and Wells Fargo & Co (WFC.N) in New York State Supreme Court in Brooklyn by the State’s Attorney General Eric Schneiderman.
The lawsuit is over the banks’ use of the Mortgage Electronic Registration System (MERS), which Schneiderman claims is plagued by inaccuracies. The banks created the MERS in the mid-1990s to track the ownership and servicing of residential mortgage loans.
According to Schneiderman, “The mortgage industry created MERS to allow financial institutions to evade county recording fees, avoid the need to publicly record mortgage transfers and facilitate the rapid sale and securitization of mortgages en masse.”
According to the lawsuit, over 70 million mortgage loans that include millions of subprime loans, have been registered in the MERS system. By using MERS, the lawsuit claims the banks saved $2 billion in recording fees. Schneiderman, who is also the co-chair of a working group formed last month by President Barack Obama, to investigate mortgage securities fraud, is trying to get-back the profits the banks fraudulently obtained through MERS, along with other damages. He is also seeking to stop the banks from filing New York foreclosure actions in MERS name, and executing false or defective mortgage assignments in state foreclosure proceedings.
In addition to the banks, the lawsuit names MERS Corp., which owns and operates the system as a defendant. The suit said the use of MERS resulted in the filing of improper NY foreclosures which created confusion over property ownership interests.
Two other state attorneys-general, Martha Coakley of Massachusetts and Beau Biden of Delaware, have also sued Merscorp over similar allegations.
JPMorgan spokesman Patrick Linehan and Bank of America spokesman Rick Simon refrained from commenting on the lawsuit. Ancel Martinez, spokesman at Wells Fargo said the company was analyzing the lawsuit, while Janis Smith, spokeswomen at Merscorp, said the company will comply with the law and mortgage regulations. “We refute the attorney general’s claims and will defend the case vigorously in court,” Smith