Wednesday, March 14, 2012

FYI: NY AG Settles Penalties in MERS-Related Litigation for $25M

New York Attorney General Eric T. Schneiderman settled MERS-related allegations against several of the nation's largest banks for $25 Million, in addition to amounts to be paid by the same entities in connection with the national mortgage settlement.
The lawsuit was filed as People of the State of New York v. JPMorgan Chase & Co. 2768-2012, New York State Supreme Court (Brooklyn).  A copy of the complaint is available at:
The NY AG alleged that the use of MERS supposedly "resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process."  
More specifically, the NY AG alleged that:
-  The MERS system is a "bizarre and complex end-around of the traditional public recording system," allowing its members to avoid paying "more than $2 billion in recording fees."
-  Numerous New York foreclosure actions listed MERS as plaintiff, when MERS supposedly lacked the legal authority to foreclose and did not own or hold the promissory note, allegedly despite saying otherwise in court filings.
-  Assignments of New York mortgages signed by MERS certifying officers were often "automatically generated and 'robosigned' by individuals who did not review the underlying property ownership records, confirm the documents' accuracy, or even read the documents."   The NY AG claimed that the assignments were "false and defective," because they often "masked gaps in the chain of title and the foreclosing party's inability to establish its authority to foreclose, and as a result have misled homeowners and the courts."
-  The use of non-employee MERS "certifying officers" to execute legal documents "confused, misled, and deceived homeowners and the courts and made it difficult to ascertain whether a party actually has the right to foreclose," and "without disclosing that they are not MERS employees, but instead are employed by other entities, such as the mortgage servicer filing the case or its counsel."  In addition, the NY AG asserted that "individuals have executed legal documents on behalf of MERS, such as mortgage assignments and loan modifications, when they were either not designated as a MERS certifying officer at the time or were not authorized to execute documents on behalf of MERS with respect to the subject loan."
-  MERS and its members supposedly "deceived and misled borrowers" by failing to identify the real party in interest pursuing the foreclosures, and often indicating that MERS was acting as nominee for a lender that was no longer in existence at the time of filing.
-  The MERS System is "riddled with inaccuracies which make it difficult to verify the chain of title for a loan or the current note-holder, and creates confusion among stakeholders who rely on the information." In addition, the NY AG asserted that as a result of these inaccuracies, mortgage satisfactions were often supposedly recorded against the wrong property.
The lawsuit seeks a declaration that the alleged practices violate the law, as well as injunctive relief, damages for harmed homeowners, and civil penalties. The lawsuit also seeks a court order requiring defendants to take all actions necessary to cure any title defects and clear any improper liens resulting from their fraudulent and deceptive acts and practices.
This MERS-related settlement reportedly precludes New York from seeking penalties of $5,000 for each alleged violation. However, the state will continue to pursue damages allegedly incurred by New York homeowners as a result of the banks' use of the MERS system, and will seek court-ordered changes to the MERS system.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874

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