MERS sued for fraud, billions in penalties in Nevada, California

Frank X. Mullens, Jr., RGJ.com

A Reno law firm has filed two lawsuits alleging fraud against a nationwide mortgage registration firm, and if those legal actions prevail, the firm and dozens of mortgage lenders could be liable to Nevada’s counties for billions of dollars in compensation and penalties.

Law partners Robert R. Hager and Treva J. Hearne, with Reno attorney Mark Mausert, have filed a case in Nevada and one in California against Mortgage Electronic Registration Systems, which operates an electronic registry of mortgage loans in the United States. MERS serves as the mortgagee of record for lenders, investors and loan servicers in county land records, but doesn’t own any mortgages.

By using the firm’s names on deeds and other paperwork, the lenders are able to avoid county recording fees, according to the firm. MERS has no financial interest in the loans, but is listed as actual owner or surrogate for the owner on millions of deeds of trust, even as individual mortgages are repeatedly traded and packaged inside of mortgage pools.

The lawsuits argue that listing the firm as the owner of mortgages in which it has no interest in order to avoid filing fees and taxes that are legally required constitutes fraud.

“We look forward to holding these financial institutions and foreclosure mills responsible for their actions that have deprived the states and counties of much-needed revenue,” said Hager.

Karmela Lejarde, communications manager, for the Reston, Va.-based firm, noted that the attorneys general of two states declined to take on the cases as false claims suits pressed by the government, instead leaving the plaintiffs to pursue the civil suits in the court systems.

“The lawsuits are completely without merit,” Lejarde said. “…The suits were filed by the same lawyers who have brought countless lawsuits against MERS, and every single one of them has failed. The most recent (fraud case) actions are just the latest in a line of baseless claims.”

Christopher Peterson, a law professor and associate dean of the University of Utah Law School, has written articles and lectured about MERS’s activities. He said the firm being listed as proxy owner of more than half the nation’s mortgages is contrary to 200 years of American legal precedent.

“The idea was if the mortgage bankers stopped paying recording fees they’d save a lot of money and that’s what happened,” he said. But as a result the true owners of those mortgage notes have been hidden, he said, and it’s often impossible to discover who the owners are.

The result of the electronic system was the elimination of the transparency of real estate records and “depriving county governments of a significant source of revenue,” Peterson said. He said means fewer police officers, firefighters and teachers in many counties.

Meanwhile homeowners who have their life savings tied up in home loans have no way of knowing to whom they actually owe the loan payments. The system was developed not by changes in long-standing laws, but by the mortgage bankers who had the most to gain from the registration process, he said.

“What (MERS) has done in avoiding these legally-required payments looks an awful lot like fraud,” Peterson said. “It probably is fraud.”

Read more here: http://www.rgj.com/article/20100625/NEWS/100625038/1321/NEWS

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