MERS Mortgage Electronic Registration Systems Defeated! Appeals Court upholds state law that states it’s illegal to record a fraudulent document in the recorder’s office. Claim Revived Against Some Users of MERS
By TIM HULL
(CN) – Home-loan borrowers in five states who say Mortgage Electronic Registration Systems burned them can move forward with a claims against companies that use the private mortgage database, the 9th Circuit ruled Thursday. About half the nation’s residential mortgages are recorded with MERS, which becomes the beneficiary of any deed of trust in its system.
Because this “allows residential lenders to avoid the bother and expense of recording every change of ownership of promissory notes,” the system “facilitated the bundling of promissory notes into investment pools” prior to the mortgage loan crisis of 2008, according to the ruling.
The multidistrict litigation consolidated in Arizona includes plaintiffs from that state as well as California, Nevada, Oregon and South Carolina, who claim that MERS aided and abetted predatory lending and foreclosure, and violated Arizona’s fraudulent documents law.
U.S. District Judge James Teilborg in Phoenix had dismissed the case and refused to green-light a second amended complaint.The defendants argued that the claims were not specific enough to survive, but a three-judge appellate panel disagreed Thursday.
As alleged, the consolidated amended complaint identifies “numerous allegedly forged documents,” Judge William Fletcher wrote for the court.The borrowers claimed that the defendant lenders violated state law by robo-signing and notarizing-in-blank deeds of trust and trustee sale notices.Though it revived the borrowers’ claims under Arizona fraudulent documents statute, the court otherwise affirmed dismissal.
The panel sent the case back to Phoenix. Back in 2011, the 9th Circuit struck down a similar lawsuit that had also failed in Teilborg’s court. The three-judge panel found that, among other things, the plaintiffs had not shown that they were “misinformed about the MERS system, relied on any misinformation in entering into their home loans, or were injured as a result of the misinformation.”
You can read the case here
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