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MERS Wins Dismissal of Minnesota Counties’ Suit Over Filing Fees

AUG 27, 2013 10:40am ET
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Mortgage Electronic Registration Systems Inc. persuaded a judge to throw out a lawsuit by Minnesota’s Ramsey and Hennepin counties claiming the use of MERS to avoid paying mortgage-assignment filing fees violates state law.

U.S. District Judge David S. Doty in Minneapolis threw out the counties’ complaint yesterday, ruling that state law doesn’t require all transactions be recorded and only mandates what happens if they aren’t.

The applicable law says in part, “every conveyance of real estate shall be recorded in the office of the county recorder of the county where such real estate is situated; and every such conveyance not so recorded shall be void as against any subsequent purchaser in good faith and for a valuable consideration of the same real estate, or any part thereof, whose conveyance is first duly recorded.”

“Nothing in the statute suggests—either through text or punctuation—that the phrase shall be recorded is to be divorced from the surrounding text,” the judge said.

MERS, a unit of co-defendant Merscorp Holdings Inc., files mortgages as the lenders’ assignees or nominees to eliminate the need to record assignments of the notes securing those loans when they’re sold.

A closely held company based in Reston, Va., MERS describes itself on its website as a member-based organization comprising thousands of lenders, loan servicers, investors and government institutions.

Ramsey County, home of Minnesota’s capital city of St. Paul, and Hennepin County, site of the state’s most populous city, Minneapolis, filed the lawsuit in February on behalf of all the state’s counties.

They alleged the failure to make those assignments public created a public nuisance by concealing the identity of those who holding a financial stake in a property and deprived the counties of filing fees for each transaction of about $46.

Christian Siebott, an attorney for the counties, didn’t immediately reply after regular business hours yesterday to voice-mail and email messages seeking comment on the court’s decision.

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