New York Attorney General Eric Schneiderman has filed a suit against Bank of America, JP Morgan Chase and Wells Fargo over their abuse of a private database, MERS, in handling mortgages. The suit claims that this led to several wrongful foreclosures.
By filing this lawsuit, Schneiderman has made it pretty clear where he stands on the deal that the Obama administration has proposed for the banks in their role in the foreclosure crisis. The deal is seen by some as being excessively soft towards the banks.
Schneiderman even went on record to pretty much call the proposed settlement the equivalent of giving a blanket plea deal to a criminal. States have till February 6 to decide if they want to join the settlement.
The fact that Schneiderman has filed this lawsuit is made even more interesting by the fact that he is one of the five co-chairs of a task force that President Obama announced to investigate fraud related to bonds backed by mortgage loans.
At the heart of the suit is the fact that these three banks used MERS – Mortgage Electronic Registration Systems. This system is used to register ownership of mortgage loans. Before the system was put in place, that work was done at the local courthouses, which many felt slowed down the entire mortgage process. But after its introduction in 1995, over 70 million mortgages have been handled by it.
But the system has problems. Schneiderman’s suit says its use resulted in many fraudulent foreclosures and also undermined New York’s process of reviewing each and every foreclosure case. Homeowners also faced difficulties in accessing mortgage-related documents while they were facing foreclosure.
Schneiderman believes that the banks used the system to give out mortgages more quickly and then when they began foreclosure proceedings, abused it to throw out homeowners from their properties without following proper procedures.
The New York Attorney General’s office issued a statement where it explained the charges against the banks. The major charges against the banks and MERS are:
- MERS has filed over 13,000 foreclosure actions against New York homeowners listing itself as the plaintiff, but in many instances, MERS lacked the legal authority to foreclose and did not own or hold the promissory note, despite saying otherwise in court submissions.
- MERS certifying officers, including employees and agents of JPMorgan Chase, Bank of America, and Wells Fargo, have repeatedly executed and submitted in court legal documents purporting to assign the mortgage and/or note to the foreclosing party. These documents contain numerous defects, including affirmative misrepresentations of fact, which render them false, deceptive, and/or invalid. These assignments were often automatically generated and “robosigned” by individuals who did not review the underlying property ownership records, confirm the documents’ accuracy, or even read the documents. These false and defective assignments often masked gaps in the chain of title and the foreclosing party’s inability to establish its authority to foreclose, and as a result have misled homeowners and the courts.
- MERS’ indiscriminate use of non-employee “certifying officers” to execute vital legal documents has confused, misled, and deceived homeowners and the courts and made it difficult to ascertain whether a party actually has the right to foreclose. MERS certifying officers have regularly executed and submitted in court mortgage assignments and other legal documents on behalf of MERS without disclosing that they are not MERS employees, but instead are employed by other entities, such as the mortgage servicer filing the case or its counsel. The signature line just indicates that the individual is an “Assistant Secretary,” “Vice President,” or other officer of MERS. Indeed, these documents often purport to assign the mortgage to the certifying officer’s own employer. Moreover, as a result of the defendants’ failure to track the designation of certifying officers and the scope of their authority to act, individuals have executed legal documents on behalf of MERS, such as mortgage assignments and loan modifications, when they were either not designated as a MERS certifying officer at the time or were not authorized to execute documents on behalf of MERS with respect to the subject loan.
- MERS and its members have deceived and misled borrowers about the importance and ramifications of MERS’ role with respect to their loan by providing inadequate disclosures.
- The MERS System is riddled with inaccuracies which make it difficult to verify the chain of title for a loan or the current note-holder, and creates confusion among stakeholders who rely on the information. In addition, as a result of these inaccuracies, MERS has filed mortgage satisfactions against the wrong property.