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MERS Wins Dismissal of Minnesota Counties’ Filings Suit

Aug. 27 (Bloomberg) -- Mortgage Electronic Registration Systems Inc. persuaded a judge to throw out a lawsuit by two Minnesota counties claiming the use of MERS to avoid paying mortgage-assignment filing fees violates state law.

U.S. District Judge David S. Doty in Minneapolis dismissed Ramsey and Hennepin counties’ complaint yesterday, ruling that state law doesn’t require that all transactions be recorded and only mandates what happens if they aren’t.

The applicable law says, in part, that “every conveyance of real estate shall be recorded in the office of the county recorder of the county where such real estate is situated; and every such conveyance not so recorded shall be void as against any subsequent purchaser in good faith and for a valuable consideration of the same real estate, or any part thereof, whose conveyance is first duly recorded.”

“Nothing in the statute suggests -- either through text or punctuation -- that the phrase shall be recorded is to be divorced from the surrounding text,” the judge said.

MERS, a unit of co-defendant Merscorp Holdings Inc., files mortgages as the lenders’ assignees or nominees to eliminate the need to record assignments of the notes securing those loans when they’re sold.

Loan Servicers

A closely held company based in Reston, Virginia, MERS describes itself on its website as a member-based organization comprising thousands of lenders, loan servicers, investors and government institutions.

Ramsey County, home of Minnesota’s capital city of St. Paul, and Hennepin County, site of the state’s most populous city, Minneapolis, filed the lawsuit in February on behalf of all the state’s counties.

They alleged the failure to make those assignments public created a public nuisance by concealing the identity of those who hold a financial stake in a property and deprived the counties of filing fees of about $46 for each transaction.

Christian Siebott, an attorney for the counties, didn’t reply after regular business hours yesterday to voice-mail and e-mail messages seeking comment on the decision.

“The Minnesota court has made it clear that there is no statutory duty to record all conveyances, but rather the statute outlines where to record and explains the consequences of failing to record,” Janis Smith, a spokeswoman for Merscorp, said today in a press statement.

The company perfects its lien priority by recording the mortgage in the appropriate county in MERS’s name and then tracking assignments between MERS system members internally, she said.

The case is County of Ramsey v. Merscorp Holdings Inc., 13-cv-00474, U.S. District Court, District of Minnesota (Minneapolis).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at aharris16@bloomberg.net

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

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