DOVER, Del. (AP) — The Delaware attorney general’s office has agreed to drop a deceptive trade practices lawsuit against a company that runs a nationwide electronic mortgage registry.
Attorney General Beau Biden announced a settlement with Virginia-based Mortgage Electronic Registration Systems Inc. on Friday.
The settlement was reached after a judge expressed skepticism about the state’s claims at a May hearing on MERS’ motion to dismiss the lawsuit.
MERS was set up by the banking industry to rapidly package and sell mortgages as securities without recording each transaction in county recorder offices.
Biden’s office argued that the MERS registry is riddled with inaccuracies that raise questions about the rights of homeowners facing foreclosure, including trying to find out who owns the underlying loan.
MERS argued that state officials couldn’t point to any deception of consumers because the registry operates solely for the benefit of its member financial institutions and does not provide any goods or services to homeowners.
Under the settlement agreement, MERS pledged to ensure that homeowners have telephone and online access to a database allowing them to find out who services their mortgages and who owns the underlying loans. MERS also will take reasonable steps to ensure that mortgage assignments are recorded in local recorder of deeds offices before a foreclosure action is filed and has agreed not to file as a plaintiff in any foreclosure action in Delaware.
The company also agreed to work with its member institutions to implement quality control measures to ensure that the mortgage information in its registry is accurate. It must also submit semiannual reports to the attorney general’s office describing the aggregate results of its internal quality assurance audits and any material changes in its rules and procedures relating to quality assurance.
MERS officials said that, except for the reports to the attorney general’s office, other provisions in the settlement agreement involve existing practices, including those required by its own rules and an April 2011 consent order with federal regulators.
“These are things that we are already doing nationally and are in place today,” MERS spokeswoman Janis Smith said.
While stopping short of declaring victory, Biden said the settlement was a positive step in ongoing efforts to ensure accountability and transparency in the mortgage finance system.
Biden noted that, with the settlement, MERS is legally committed to certain practices it had undertaken on a voluntary basis.
“That’s the fundamental difference here,” he said.
State officials sued the registry last fall, saying it had sown confusion among consumers, investors and other stakeholders in the mortgage finance system and damaged the integrity of Delaware’s land records system.
The lawsuit also claimed the registry’s conduct led to unlawful foreclosure practices, but registry officials said state officials could not cite a single instance in which a Delaware consumer not in default on a mortgage lost a home in foreclosure because of its actions.
While suing MERS, Biden declined to sue any of its member banks. He instead agreed to accept $2.5 million from the banks in return for not seeking monetary penalties against them in any MERS-related litigation.
