Bloomberg News

Bank of America, MERS Ask Court to Dismiss Texas Counties’ Mortgage Suit

March 12, 2012

Mortgage Electronic Registration Systems Inc. and Bank of America Corp. asked a court to dismiss a lawsuit brought by Texas counties accusing MERS of filing false claims in property records.

The counties allege Merscorp Inc.’s MERS was established by lenders including Bank of America to avoid paying filing fees as well as to ease mortgage transfers. The Texas Legislature approved of MERS’s appearance as a mortgagee in filings in county land records, the defendants said in a filing March 9 in federal court in Dallas.

“No false, fraudulent or otherwise wrongful activity occurred by filing security instruments naming MERS as beneficiary or mortgagee,” MERS and the bank said in their motion to dismiss. “There is no duty to record assignments, or other documents, since Texas’s property recording system is permissive not mandatory.”

MERS tracks servicing rights and ownership interests in mortgage loans on its registry, allowing banks to buy and sell loans without recording transfers with counties. Dallas County claimed that this system has cost it as much as $100 million in unpaid fees. The county initially sued in September, alleging that MERS cheated it out of uncollected filing fees.

Revised Suit

Dallas County District Attorney Craig Watkins revised the lawsuit Oct. 31 as a class action, or group case, seeking to represent all other Texas counties in which a deed of trust has been filed identifying MERS as a beneficiary.

“Contrary to the defendants’ contentions, the legislature has not approved MERS’ appearance as the ‘mortgagee’ in the filings in the real property records of Texas counties,” Watkins said in an e-mail today. “Rather, the legislature simply approved MERS acting on behalf of lenders in conducting non-judicial foreclosures.”

Harris County, which includes Houston, and nearby Brazoria County won court approval last week to join the Dallas suit.

Harris County disagrees with the contention that MERS has statutory permission to operate as it has, John Odam, a county assistant district attorney, said in an interview today.

“We analyzed the legal basis for our claim and feel we have a good claim,” he said.

The case is Dallas County v. Merscorp Inc., 11-cv-02733, U.S. District Court, Northern District of Texas (Dallas)

To contact the reporters on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net; Tom Korosec in Dallas at tkorosec@sbcglobal.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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