Conway Alleges Mortgage Swapping Company Violated State Law
Claiming they committed fraud, Kentucky Attorney General Jack Conway has filed a suit against a mortgage company. Mortgage Electronic Registration Systems, or MERS, provides a marketplace for banks to trade mortgages and mortgage-backed securities. Conway says it was set up by banks to avoid the fees that must be paid when mortgages are sold and to hide the true owners of those mortgages.
Conway's suit alleges MERS did not pay the proper fees in Kentucky. He's also suing under the Consumer Protection Act, because MERS foreclosed on many homes.
“About 300,000 mortgages in Kentucky are MERS mortgages right now," Conway said. "We are able to fine up to $2,000 per violation of the Kentucky Consumer Protection Act. We have that avenue of damages. And we also have the avenue to go after the recording fees that have been dodged as a result of this mortgage transfer scheme.”
New York, Delaware and Massachusetts have also filed suit against MERS.
In a statement, MERS denies they broke any laws in Kentucky.
"There is no merit to the allegations leveled at MERS by Kentucky Attorney General Jack Conway in today's news conference. All MERS mortgages are registered in the local land records and all recording fees are properly paid. The MERS® System's role in the mortgage industry has reduced chain of title issues, provided efficiencies through e-commerce, and resulted in lower mortgage borrowing costs. Our business model is straightforward and transparent, and MERS role is clearly spelled out in the contract between borrower and lender. MERS® System data is not used by servicers to make loan modification, refinance or foreclosure decisions."
Their spokesman, Jason Lobo, says the Massachusetts case was dismissed.