Editor’s note: This story was originally published in Finance and Commerce
By Mark Anderson
Hennepin and Ramsey counties filed suit on Friday against the Mortgage Electronic Registration Service, Inc. (MERS), claiming the national servicing business failed for years to properly record mortgage assignments in Minnesota.
The action, filed in Ramsey County District Court on behalf of all Minnesota counties, also seeks to recover recording fees that MERS and its member groups avoided by not recording those assignments, according to the complaint.
MERS was established in 1995 by many of the nation’s large lending institutions to streamline the securitization of home mortgages through a system that enabled lenders to easily assign mortgages to one another.
“The public never consented to a system in which some pay recording fees while others do not,” said Hennepin County Attorney Mike Freeman.
In the last 15 years, MERS and its members have played a dominant role in the U.S. mortgage industry, registering almost 60 percent of all home mortgages, according to the complaint. The counties claim that MERS has deprived states and counties nationwide of approximately $7.2 billion in unpaid recording fees.
The counties said that by failing to follow Minnesota recording laws MERS and its members also made it difficult to identify the lender who is legally responsible for maintenance of a foreclosed property. That practice left many homes vacant and unattended, harming the value of surrounding homes.
Janis Smith, a spokeswoman for Reston, Va.-based MERSCORP said in a statement that her organization will contest the claim, and that all MERS mortgages are properly recorded in county land records.
Smith said that her organization has worked closely with Hennepin and Ramsey county registrars on legislation that clarified MERS legal role, and she said MERS has won recording fee challenges in four other states.