Alleging that MERSCORP and its Mortgage Electronic Registration Systems Inc. subsidiary have repeatedly violated his state's Deceptive Trade Practices Act, Delaware Attorney General Beau Biden filed suit against the Reston, Va.-based mortgage registry Thursday.
According to Biden, MERS' deceptive trade practices fall into three broad categories: obscuring information from borrowers and providing information that is "frequently inaccurate," acting as an agent without authority from its proper principal and acting as a front organization that does not enforce its own rules.
"Where the name of the owner of the mortgage loan recorded in the MERS System does not reflect the true owner, any action MERS takes on behalf of the purported owner is without authority," according to a statement released by Biden's office
"Since at least the 1600s, real property rights have been a cornerstone of our society," Biden said. "MERS has raised serious questions about who owns what in America. A man or woman's home is not just his or her largest investment, it's their castle. Rules matter. A homeowner has the obligation to pay the mortgage on time, and lenders must follow the rules if they are seeking to take away someone's house through foreclosure. The honor system won't work."
Biden's complaint against MERS cites a recent foreclosure in New Castle County in which MERS foreclosed on a loan in which it had no interest and without naming the real party in interest. The entity upon whose behalf MERS sought to foreclose had been dissolved months earlier.
According to a fact sheet released by Biden's office, MERS is attached to more than 30% of the state's mortgages. Since January 2008, more than 1,600 Delaware foreclosure actions have included MERS' name.
In a statement, MERS spokesperson Janis Smith refuted the claims, saying Biden's allegations are without merit.
"The borrower's customer relationship is with the servicer, and not with MERS, and federal laws require the servicer to disclose all changes in ownership to borrowers," Smith said.
She also said that the lawsuit came as a surprise, as MERS has cooperated with Biden's office since it subpoenaed the firm, a Delaware-incorporated entity, earlier this year.