On June 23, 2016 several national banks, including Bank of America, Wells
Fargo, Citibank and others, joined Mortgage Electronic Systems Inc. (“MERSCORP”
or “MERS”) in demanding a Third Circuit federal court to throw
out a class action case filed by Washington County, Pennsylvania, on behalf
of the state’s other counties, seeking to recover millions in unpaid
recording fees. The case is
County of Washington, Pennsylvania v. Mortgage Electronic Registration
Systems Inc. et al., case number 2:16-cv-00672, filed in the U.S. District Court for
the Western District of Pennsylvania.
Washington County’s Claims
In its complaint, Washington County (“County”) claims that
MERS and the member banks violated Pennsylvania record keeping law, known
as Section 351, by failing to record mortgage assignments for deeds of
trust with the appropriate Pennsylvania county recorder’s office.
The County claims that the failure of the defendants to file timely recordings
with each respective county has resulted in a loss of over $100 million
in recording filing fees. The County argues that under state law, the
banks, through buying and selling of mortgage notes, are required to file
a recording of each assignment with the corresponding county and pay a
General Overview of MERS
MERS’ sole purpose is to serve as mortgagee in the land records for
mortgages that are registered on the MERS system. In a typical mortgage
finance transaction, the member bank and the borrower name MERS as the
mortgagee (as nominee for the lender and its successors and assigns).
As such, once MERS is the mortgagee of record, all subsequent transfer
of ownership from one member to another would be tracked and recorded
electronically eliminating the need to record the assignment documents.
It was up to the members who own the beneficial interests in the promissory
notes and mortgages to take the appropriate steps to update the ownership
records. The lack of recording of assignments by MERS has been a point
of contention in numerous wrongful foreclosure class actions, in addition
to this case.
Defendants’ Arguments Supporting Dismissal
In arguing for a dismissal of the
Washington County case, the defendants argued that the County’s complaint should be
dismissed because the same claims were already rejected last year in a
case heard by the Third Circuit Court, in
Montgomery County v. MERSCORP. The defendants also argued that the Third Circuit inMontgomery County made clear that Section 351 “informs property owners of what steps
they must take to safeguard their interests, and does not imply that failure
to record constitutes a violation of the statute enforceable by a recorder
of deeds.” As such, the attorneys for the defendants asserted that
it is not for the Court to “second-guess” the Montgomery County
decision in reaching a different conclusion.
In addition, in demanding the dismissal, the defendants argued that several
other courts around the nation have reached the same conclusion as the
County case. The defendants argued, “Twenty-two courts have joined
Montgomery County and rejected these lawsuits, holding that there is no duty to record mortgage
assignments under the specific state recording statues; or that legislatures
did not grant counties or county officials a right of action to sue under
While MERS and the other defendants are waiting for the court’s ruling, the
Washington County case is just but one of many lawsuits that have been recently filed against
MERS across the country. As such, it is likely that MERS will continue
face legal challenges stemming from the continued fallout from the subprime
mortgage crisis as homeowners and counties like Washington County and
Montgomery County continue to file lawsuits against MERS and its member banks.
Contact Geraci Law Firm at (949) 298-8050 today, or contact
Jenny Park for more information.