New York Attorney General Eric Schneiderman intends to hold some of the nation’s biggest banks, including Bank of America, Wells Fargo and JPMorgan Chase accountable for what he calls “deceptive conduct” in the foreclosure crisis.
The lawsuit was filed Friday against several big lenders, charging the creation and use of a private national mortgage electronic registry (MERS) resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, hurting both homeowners and the integrity of the judicial foreclosure process.
MERS is a membership organization created by the financial industry in 1995. It was created to allow financial institutions to evade local county recording fees, avoid the hassle and paperwork of publicly recording mortgage transfers and facilitate the rapid sale and securitization of mortgages.
MERS has granted over 20,000 “certifying officers” the authority to act on its behalf, including the authority to assign mortgages, to execute paperwork necessary for foreclosure and to submit filings on behalf of MERS in bankruptcy proceedings. These certifying officers are not employed by MERS, but by member lenders.
The lawsuit accuses employees and agents of Bank of America, JPMorgan Chase and Wells Fargo acting as “mortgage electronic registry system (MERS) certifying officers” of repeatedly submitting court documents containing false and misleading information that made it appear the party initiating foreclosure had the authority to bring the case when in fact it may not have.
The attorney general released this statement on his website Friday:
“The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages. Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law.
“Our action demonstrates that there is one set of rules for all – no matter how big or powerful the institution may be – and that those rules will be enforced vigorously. Only through real accountability for the illegal and deceptive conduct in the foreclosure crisis will there be justice for New York’s homeowners.”
Most large companies that participate in the mortgage industry are MERS members, and over 70 million loans nationally have been registered in MERS System, including about 30 million currently active loans, according to Friday’s report.
JPMorgan Chase, Bank of America, Wells Fargo and the Virginia-based MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc. are all named in the lawsuit.