MERS Mortgage Company Hit with Lawsuit
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MERS Mortgage Company Hit with Lawsuit

November 4, 2011

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With two million American homes currently in some stage of the foreclosure process , it’s not surprising that Delaware’s Attorney General, Beau Biden, has taken aim at MERS mortgage company, one of the companies that might be responsible for some of the havoc in the housing market.

According to Credit.com, Biden has charged MERS with deceptive practices that prevented mortgage borrowers from accessing information about their mortgage loans and thus from effectively mitigating their losses when home values declined. To compensate his state’s residents, Biden has reportedly requested $10,000 in civil penalties and restitution to homeowners for each individual violation of Delaware’s deceptive practices act.

A MERS spokeswoman quickly refuted the claim that her company had done anything illegal in its handling of mortgage loans. Past cases against MERS have had mixed results: judges have found in favor of both the company and its opponents, though the number (and legal actions) of the latter seems to be growing.

MERS acts as a sort of clearinghouse of mortgage ownership notes. It played an integral role in facilitating the pooling and securitizing of mortgage loans that prompted the bubble and led to the eventual real estate market implosion that triggered the Great Recession.

Biden’s case against MERS alleges that the company provided false or misleading information to customers, and often has inaccurate data stored in its records.

It further charges that every time the company took action (including to initiate or complete foreclosure proceedings) when it had the incorrect owner listed on a mortgage loan, such actions were illegal. In other words, Biden and his office are asserting that MERS may have illegally caused the foreclosure of many Delaware residents.

This is not the first time MERS has faced such charges, and Delaware is not the only state affected; in fact, MERS handles mortgages from around the country. If it is required to pay the fines and penalties suggested by Biden’s office, it may face serious financial difficulties.

Many Americans who are faced with foreclosure proceedings turn to Chapter 13 bankruptcy, which may prevent or delay the foreclosure process thanks to the legal protection known as the automatic stay.


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