Dallas County, Texas, is seeking to represent all counties in the state in its lawsuit against Bank of America Corp. and Mortgage Electronic Registration Systems Inc. over unpaid filing fees.
Dallas filed the complaint in September, alleging that Merscorp Inc.’s MERS, which runs an electronic registry of mortgages, cheated the county out of uncollected filing fees. 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 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. Dallas claims MERS was established by banks including Bank of America to avoid paying filing fees, as well as to ease transfers of mortgages.
“The MERS system has created massive confusion as to the true owners of the beneficial interests in mortgage loans and mortgages throughout the United States, and the loss of revenues has harmed U.S. counties,” Dallas County lawyers said in court papers.
The Dallas complaint has no merit, said Janis Smith, a spokeswoman for Reston, Virginia-based Merscorp.
“The allegations were false for Dallas County and they’re false statewide,” Smith said in an e-mail. “The MERS system does not violate Texas law.”
All deeds of trust in Texas “registered on the MERS system are recorded in public land records to establish the lien interest, and the recording fees are paid,” she said. “The MERS system is not a legal system of record nor a replacement for public land records. No interests are transferred on the system -- they are only tracked.”
MERS practices follow Texas Property Code, Smith said.
MERS has been sued by counties in Kentucky, Michigan, Ohio and Oklahoma, which also claim the MERS system cheated them out of filing fees.
Delaware’s attorney general last week filed an unrelated suit, alleging MERS used deceptive practices that hide information from borrowers.
The clerks of Kentucky’s Christian and Washington counties sued MERS, JPMorgan Chase & Co.’s Chase Home Mortgage Corp., Citigroup Inc.’s CitiMortgage, Wells Fargo & Co., Bank of America and others in federal court in Louisville in April over unpaid mortgage filing fees, seeking to represent all 120 counties in Kentucky. They said the banks used MERS to avoid paying the fees.
Geauga County, Ohio, filed a similar suit Oct. 13 against MERS and banks on behalf of all counties in that state. Cleveland County, Oklahoma, filed a MERS class action Oct. 25. Branch County, Michigan, sued MERS, Chase and others in state court in August, alleging they improperly failed to pay real estate transfer taxes.
Officials of Bexar County, Texas, which includes San Antonio, yesterday approved hiring an outside law firm to file a suit to recover unpaid recording fees, said Edward Schweninger, assistant county attorney for Bexar County. Harris County, Texas, which includes Houston, is also considering filing a claim, according to officials.
The Dallas class action lawsuit would cover every county where MERS is identified as beneficiary or where “any record has been filed” that would cause MERS to be identified in deed files as a grantor of interest in a property, unless “MERS itself actually holds in the property the interest that MERS purports to be granting,” according to the amended complaint.
Cases against MERS include Dallas County v. Merscorp Inc., 11-cv-02733, U.S. District Court, Northern District of Texas (Dallas); and Christian County Clerk v. Mortgage Electronic Registration Systems Inc., 5:11-cv-00072, U.S. District Court, Western District of Kentucky (Louisville).