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New York AG Sues Major Lenders for Allegedly False and Misleading MERS Foreclosures

February 6, 2012

Vincent Howard and our team of Ontario foreclosure defense attorneys were interested to read about an ambitious lawsuit by the state of New York. The Los Angeles Times reported Feb. 3 that New York's attorney general, Eric Schneiderman, has sued three major lenders for alleged fraud with their use of the Mortgage Electronic Registration System. MERS, as it is better known, is an electronic system and a private company set up by major lenders in the 1990s to facilitate the buying and selling of mortgages among financial institutions. MERS has survived most, though not all, of the challenges filed since to its right to foreclose, making Schneiderman's lawsuit somewhat unusual. Localities have also challenged MERS on the grounds that it allows banks to avoid local land registration fees.

The lawsuit from the mortgage unit of Schneiderman's office alleges that Bank of America, Wells Fargo, JP Morgan Chase and MERSCorp, the MERS parent company, of filing false and misleading foreclosures in New York. In particular, it alleges that the paperwork they submitted in support of the foreclosures misled courts into thinking MERS had authority to foreclose when it did not. It says MERS is full of inaccuracies that MERSCorp and the major banks do not address before filing. It also notes that because MERS is private, homeowners now cannot use public records to track ownership of their loans, which is vital to "show me the note" lawsuits by homeowners seeking to stop foreclosures. And because MERS bypasses land records, the case says, it has saved the major banks $2 billion in land recording fees.

The lawsuit follows similar lawsuits by the states of Massachusetts and Delaware. It also follows an unfavorable court ruling from a New York appellate court last summer, in which a MERS foreclosure was thrown out. In that case, Bank of New York v. Silverberg, the court found that New York law does not allow MERS to own debts through the language used in the Silverbergs' loan documents. Thus, any assignee standing in its shoes, such is a loan servicer, would be unqualified to foreclose under the law. That ruling may provide one road map for Schneiderman's office, but on a grander scale, since he represents all New Yorkers and is alleging systematic fraud rather than contesting an individual set of loan documents. Vincent Howard and our entire team of Fullerton foreclosure defense lawyers look forward to hearing more about the case.

At Howard Law, P.C., we have represented distressed homeowners from the very beginning of the housing crisis. As a result, we understand that "show me the note" issues like this are more than just technicalities -- they go to the heart of individuals' property rights and the problems with major lenders. Observers of the housing market will remember the "robo-signing" scandal, which is still not settled as of early February of 2012. The scandal exposed deep, systematic fraud against courts, motivated by pressure to get foreclosure documents out the door quickly, even if that meant getting them wrong. At least a handful of wrongful foreclosures have been identified as a result; many more were rubber-stamped before courts began to think twice. Vincent Howard and our entire team of Oceanside foreclosure defense attorneys look at each new case to determine whether flaws in the paperwork could delay or stop a foreclosure.

If your home is threatened by a foreclosure you believe can be prevented, but your lender declines to provide meaningful assistance, call Howard Law today to discuss how we can help. You can reach us at 1-800-872-5925 or send us an email.

Similar articles:

New York Appeals Court Rejects MERS Foreclosure - Bank of New York v. Silverberg

State of Massachusetts Sues Five Major Lenders With Allegations of Fraudulent Foreclosures

Ninth Circuit Throws Out Challenge to MERS for Failure to State Injury or Misinformation - Cervantes v. Countrywide