MERS has been sued again, and it's probably not going to be the last time. The state of Kentucky (actually, it's a commonwealth) has followed the lead of states like New York, Texas, Alabama, and Delaware, and is going after Mortgage Electronic Registration Systems, Inc. (MERS) for lots of money in a lawsuit based on county record filing fees.
In this latest suit, filed around a week ago in Kentucky state courts, Kentucky is alleging that MERS and its parent company, MERSCORP Holdings, Inc. violated Kentucky law - allegations that have come about after a lengthy Kentucky Attorney General investigation. There's an intent prong to the claims being brought by Kentucky, too: the lawsuit alleges MERS acted intentionally to avoid paying these fees so as to unjustly enrich MERS at the expense of consumers' pocketbooks and Kentucky's coffers.
In essence, the Kentucky argument is that MERS did not record mortgage assignments with Kentucky County Clerks as mortgages were sold (transferred) between banks. Kentucky charges a twelve dollar ($12) fee for each of these recordings in the county real estate records. The fees are owned by the Commonwealth of Kentucky.
Those $12 fees for each of these assignments adds up to lots of damages being alleged by Kentucky Attorney General Jack Conway.
"Kentucky's statute is clear. It requires assignments be recorded with County Clerks, and MERS directly violated that law by creating this system that provides no public record of sales or transactions and deliberately circumvents paying recording fees to states," General Conway said. "The process makes it difficult for consumers to access data to find out who owns their loans, and the Commonwealth is ripped off when it comes to recording fees."
You can read the entire complaint filed by Kentucky against MERS and MERSCORP here.
MERS Comes Back Swinging
MERS isn't new to the ballgame here, and the company was quick to issue a news release slamming the Kentucky claims.
Here is the MERS' released response to the Kentucky lawsuit:
“There is no merit to the allegations leveled at MERS by Kentucky Attorney General Jack Conway in today's news conference. All MERS mortgages are registered in the local land records and all recording fees are properly paid. The MERS® System's role in the mortgage industry has reduced chain of title issues, provided efficiencies through e-commerce, and resulted in lower mortgage borrowing costs. Our business model is straightforward and transparent, and MERS role is clearly spelled out in the contract between borrower and lender. MERS® System data is not used by servicers to make loan modification, refinance or foreclosure decisions.
In Kentucky, all foreclosures are judicial foreclosures and as such are processed by the court system. MERS’ standing as mortgagee has been upheld in –In re Jessup, No. 09-5229 (Bankr. E.D. KY 2010). MERS and CitiMortgage’s Motion for Summary Judgment was granted and the court held that “the language in the Lender’s own instrument is sufficient to identify MERS as [the mortgagee].”