MERS Sued By Delaware Amid Claims Of Mortgage Deception

MERS Sued By Delaware Amid Claims Of Mortgage Deception

11/11/2011

 

Delaware has joined today what is becoming a mounting legal battle against the mortgage industry, alleging in a Chancery Court suit that consumers who are facing foreclosure were intentionally misled and deceived by the firm that should have kept track of the ownership of their loans.

According to the suit filed by the Attorney General’s Office, by using a shadowy and oftentimes erroneous private database that masked the true owners of the mortgages, Merscorp made it very hard for hundreds of homeowners in Delaware to challenge foreclosure actions in court or to negotiate for new terms on their loans.

The Mortgage Electronic Registration Systems, or more popularly known as MERS, is the national registry established by banks, investors and industry players during the 1990s to simplify the process of buying, selling or re-selling of mortgages, a practice that have grown more turbulent as the now-burst housing bubble expanded.

Yet the firm, which was incorporated in Delaware and based in Virginia, was found to be actually an industry “front” which oftentimes fails to precisely track the ownership transfers or even impose its own rules on its members. This led to a lot of cases where vital legal documents were inappropriately “robo-signed” by employees at various member banks.

The suit charged, “MERS engaged and continues to engage in a range of deceptive trade practices that sow confusion among consumers, investors, and other stakeholders in the mortgage finance system, damage the integrity of Delaware’s land records, and lead to unlawful foreclosure practices.”

The state of Delaware is asking that MERS be directed to stop filing foreclosure suits under its name and also pay a civil penalty of $10,000 for each occasion where consumers were deceived.

WRITTEN BY:

blakeh@wellsdrew.com