ALBANY, N.Y. - New York’s attorney general accused some of the nation’s largest banks yesterday of deceit and fraud in using an electronic mortgage registry that he said puts homeowners at a disadvantage in foreclosures while saving banks over $2 billion.
Eric Schneiderman sued Bank of America, JPMorgan Chase, and Wells Fargo over their use of the Mortgage Electronic Registration Systems Inc., or MERS, asserting the banks submitted court documents containing false and misleading information that appeared to provide the authority for foreclosures when there was none.
The lawsuit also names the registry operator, MERSCORP Inc. of Virginia.
Schneiderman said the MERS system has eliminated homeowners’ ability to track property transfers through traditional public records. He said the electronic system now stores that data and is plagued by inaccuracies and what the lawsuit calls “faulty and sloppy document preparation and execution practices.’’
In December, Massachusetts Attorney Martha Coakley sued MERS as part of a multipronged suit against five major US lenders for their role in the state foreclosure crisis. She said the system allowed lenders to avoid state requirements that they record mortgage transfers, concealing the identity of mortgage holders and avoiding registration fees.
Coakley’s office issued a statement saying the suit seeks to hold banks “accountable for violations of Massachusetts law arising out of their use of the MERS system, as well as foreclosing against homeowners without holding the actual mortgages.’’
Schneiderman said, “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.’’
Janis L. Smith, a MERS spokeswoman, said the company would fight the lawsuit. “Federal and state courts around the country have repeatedly upheld the MERS business model, and the validity of MERS as legal mortgagee and nominee for lenders,’’ she said.
JPMorgan Chase and Bank of America declined to comment. There was no immediate comment from Wells Fargo.
MERS was set up by banks to rapidly package and sell mortgages as securities without recording each transaction in county records offices.