Suffolk County Could Look to Recoup $100m in Recording Fees From MERS

We’ve spilled plenty of (virtual) ink in the past couple of months discussing the Mortgage Electronic Registration System  (MERS) and the controversy that envelops it.

MERS, in case you have not been following the situation, is a database that was created to transfer and securitize mortgages, and has been used to foreclose on homes over the past couple of years.  It also allegedly allowed lenders to transfer mortgages privately, effectively bypassing the traditional (public) system of transferring mortgages and deeds that existing in this country for hundreds of years.  The problem is that this may or may not be legal, and has spawned tons of litigation over the past two years or so.  Since property law varies from state to state, the legality of this system is still very much up for debate.  Federal bankruptcy judges in New York and Oregon, as well as state courts in Arkansas, Utah, and Massachusetts have ruled against MERS to one degree or another, while state courts in Alabama, Kansas, New Hampshire, and California have ruled for MERS.  The legal issues here run deep, and many with far more insight into the legalities than myself have commented at great length upon these matters.

What I find interesting is the spate of lawsuits that MERS may soon face from various county registers of deeds across the country.  Jeff Thigpen, the Register of Deeds for Guilford County, North Carolina, is looking into suing MERS for over $1 million in lost recording fees. John O’Brien, the Essex South (Massachusetts) Register of Deeds has announced his intentions to sue MERS for $22 million over los recording fees.

Now a report from NBC New York says that a former Suffolk County, Long Island clerk, Ed Romaine (now a county legislator) is asking Suffolk County to investigate suing MERS for lost recording fees.  According to the article it is possible they could pursue up to $100 million worth of fees.

Interestingly, Romaine attempted to stop MERS from operating in Suffolk County back in 2001.  He is quoted as saying:

“I saw a problem because we would not know who would be the owner of these mortgage notes because they would be sold in a private system and not recorded in a public system.”

These remarks turned out to be prescient, as this is much the situation we are in now.  If these counties are successful one would assume many other counties would follow suit, and liabilities would likely range into the billions. This raises an interesting question: does MERS have deep enough pocket to meet these liabilities? While it is aligned with a lot of deep-pocketed banks, MERS itself is a privately held corporation, and as such I can’t find much financial information on it (possibly some sleuths with better googling skills than I can weigh in on the matter).  One has to wonder what would happen if these lawsuits were to move forward.