With more borrowers filing legal challenges to foreclosure, many mortgage lenders have turned their back on using MERSCORP Inc., which operates an electronic loan registry, to bring foreclosure actions. Some lenders are even returning to the old-fashioned, paper-based system of physically recording mortgage assignments at county recorder offices to ensure an unbroken chain of title.
The reversal by lenders stems from the need to avoid yet another round of expensive legal challenges to foreclosures.
Lawsuits against MERS are not new. But the legality of the private loan registry was called into question again Wednesday when Washington Attorney General Peter Nickles said foreclosures cannot proceed in the District of Columbia unless a mortgage deed is recorded in public land records.
Nickles said he may consider bringing enforcement actions to stop foreclosure proceedings brought in the name of MERS, and seek restitution for consumers.
Since its creation in 1996, the MERSCORP subsidiary has been used to foreclose on behalf of its 3,500 lender-members, including Fannie Mae and Freddie Mac, which pay annual dues and a fee for every transaction recorded.
Tom Deutsch, the executive director of the American Securitization Forum, a trade group, said Nickles' interpretation of the district's law was "overly broad." Most states do not have a mandatory requirement to publicly file a mortgage assignment, he said.
"They believe there is a notice requirement, which is quite distinct from challenging the actual ownership of the mortgage," he said.
MERS officials did not return telephone calls.
