Delaware files suit against bank-run mortgage registry

Attorney General Beau Biden says the private national mortgage registry, called MERS, violates Delaware’s Deceptive Trade Practices Act.

MERS, an acronym for the Mortgage Electronic Registration System, was esstablishd in 1995 to track the ownership and servicing rights for residential mortgages.  Biden says the registry is a “front” for mortgage lenders and banks that is unreliable and inaccurate.  MERS has more than 5,500 members including Bank of America, CitiMortgage, GMAC, and Wells Fargo.  Biden claims MERS blocks homeowners from learning which entity truly owns their mortgage.

“Our system changed drastically when a consortium of banks, government service entities like Fannie Mae and Freddie Mac, and other players in the mortgage industry decided to essentially privatize the public recordation system for their own benefit,” said Biden.  “They did so with little regard for the rest of us.”

Biden filed suit against MERS this morning in Delaware Chancery Court.  He says since 2008, MERS has filed more than 1,600 foreclosure actions against Delaware homeowners.  The registry system holds more than 30% of Delaware mortgages and 60% of mortgages nationwide.  Biden’s office says thousands of Delaware homeowners hold mortgages with MERS listed as the owner, but there is no way to actually determine the true owner.  That’s because, the suit claims, there was no outside oversight of MERS “murky” registry.  Biden says MERS did not meaningfully audit its records or enforce its own rules.  “This has resulted in MERS recording so-called robo-signed documents with county Recorder of Deeds.”

Biden says MERS fueled the mortgage-backed securities market which resulted in the housing bust of 2008. “By facilitating the slicing and dicing of mortgages, a practice that helped bring our economy and quite frankly the world economy to the brink of collapse.”  Biden says MERS has left the public land recording system in shambles.  “The privatization of property records has potentially clouded the titles of homes all over our nation.”  

The suit seeks a number of reforms of MERS including requiring the registry to audit its records, preventing MERS from foreclosing on homes without divulging the true owner of the mortgage, and imposing a $10,000 civil penalty for every willful violation of the Deceptive Trade Practices Act.