Delaware v. MERS

On October 27, Delaware Attorney General Beau Biden filed suit against MERS, alleging that the registry had repeatedly violated the state’s Deceptive Trade Practices Act.  In a press release, AG Biden said:

Since at least the 1600s, real property rights have been a cornerstone of our society. MERS has raised serious questions about who owns what in America. A man or woman’s home is not just his or her largest investment, it’s their castle. Rules matter. A homeowner has the obligation to pay the mortgage on time, and lenders must follow the rules if they are seeking to take away someone’s house through foreclosure. The honor system won’t work.

The broad allegations against MERS are:

  • MERS knowingly obscures information, making it difficult for homeowners to effectively challenge inaccuracies in the registry or identify and raise applicable defenses in foreclosure cases;
  • Because the registry is often inaccurate, MERS often acts without authority from the proper principal; and
  • MERS fails to oversee its own registry and to enforce its own rules.

None of that comes as a surprise, of course–anyone who has been litigating with MERS and the banks that use the registry (or even just paying attention to foreclosure-related news) understands the level at which MERS has made a mess of mortgage recording and transfers and that the possible fallout is overwhelming.   So overwhelming, in fact, that even among consumer attorneys who clearly recognize the willful harm that MERS has done, there’s dissent about the extent of appropriate remedies.  Perhaps for that reason, or perhaps for the same reasons that government officials at various levels have generally failed to respond adequately to the mortgage foreclosure crisis, fraud perpetrated by banks and mortgage servicers, bait and switch trial modification schemes that leave borrowers worse off than they were and generally every aspect of the crisis, MERS has thus far operated largely unscathed.

However, that situation started to shift earlier this year, when county Registers of Deeds in Massachusetts and North Carolina began investigating MERS and instituting a variety of actions, including refusing to accept robo-signed documents for recording and calculating revenues lost by MERS’s circumvention of state recording requirements.  Then, earlier this fall, the District Attorney for Dallas County, Texas filed suit against MERS claiming the company had cheated the county out of tens of millions of dollars in uncollected filing fees.  A month later, another Texas county asked the state’s Attorney General to consider a similar suit on behalf of all Texas counties.

Now, Delaware is moving forward with a suit of much broader scope, attacking some of the core flaws in the MERS system that have been largely ignored by officials.  The complaint is available here: Delaware v. MERS Complaint

For further information on the lawsuit, see the MERS Factsheet and press release issued by the Delaware Attorney General.