Merscorp Inc., the operator of an electronic mortgage registry known as MERS, must face a trial to determine how much it owes Pennsylvania counties for shortchanging them on mortgage recording fees, a judge ruled.
Merscorp and its Mortgage Electronic Registration Systems Inc. unit violated state law by failing to properly record home loans that were sold or transferred, U.S. District Judge J. Curtis Joyner ruled today in Philadelphia. The conduct misled homeowners facing foreclosure and created uncertainty about property ownership in the state, he said.
As a result, the company must face trial on damages and on claims that it was unjustly enriched, the judge ruled.
The ruling comes as Merscorp battles scores of lawsuits and state probes challenging its business model and the legality of its filings in county courthouses throughout the U.S. MERS documents the ownership and resale of about half of U.S. home loans. Its biggest customers are also owners: Fannie Mae, Freddie Mac and Bank of America.
The company last year persuaded judges in Texas and Minnesota to dismiss counties' lawsuits over filing fees, a reliable revenue source in the past.
The Pennsylvania case was brought by the recorder of deeds in Montgomery County on behalf of other recorders in the state. From 2000 to 2012, documents recorded by MERS steadily increased in the state with a corresponding decrease in recording fees collected by the counties, Joyner said in his ruling, citing a survey by the Philadelphia Department of Records. Montgomery County lost more than $15 million in recording fees, according to court documents.
Merscorp's conduct violated Pennsylvania's recording statutes making it mandatory to create and record documents memorializing the transfers of promissory notes secured by mortgages on real estate, Joyner wrote.
Bill Beckmann, Merscorp's president and chief executive officer, didn't immediately return a phone call seeking comment on the ruling.