NY AG Sues Banks over Foreclosure Mishaps
Since its inception in the 1990's, the Mortgage Electronic Registry System, a database designed to track mortgage ownership, has taken shots from critics who debate the system's legality.
Add New York Attorney General Eric Schneiderman to the list of critics. On Friday, February 3rd, Schneiderman took his swing, filing a lawsuit in a Brooklyn Supreme Court claiming that Bank of America, J.P. Morgan, Wells Fargo, and MERS knowingly filed incorrect foreclosure paperwork in order to deceive struggling homeowners.
Schneiderman levied harsh allegations, claiming that the companies purposely mucked up documents in order to confuse homeowners and facilitate the foreclosure of their homes. He also opined that MERS was created by banks in order to side-step some of the legal channels for transferring the ownership of mortgage loans. According to Schneiderman, over 70 million home loans were registered in the MERS, instead of with their counties, allowing banks to save over $2 billion in fees.
The suit aims to have all damages and improper paperwork reversed, with an added monetary penalty for each individual violation.
While all three banks declined to comment on the charges, MERS released a statement defending the legality of their system and pointing out their favorable record in federal and state courts.
This could be a rough couple weeks for the big banks, as they are also expected to reach a settlement with the Obama Administration and a group of state attorneys over charges related to the housing collapse and subsequent bailouts. The settlement could cost the banks as much as $25 billion that would be reinvested into foreclosure assistance efforts. In his recent State of the Union address, Obama also vowed to continue investigating mortgage lending mishaps.
Schneiderman has previously stated that he feels settlement should be postponed until all investigations are concluded.
By: Javi Calderon
