Texas Showdown: Dallas DA Sues MERSCORP

Mortgage & Real Estate

Dallas County District Attorney Craig Watkins this week filed suit against MERSCORP, seeking a judicial determination of whether the industry’s use of the Mortgage Electronic Registration System is legal in the Lone Star State.

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Also named in the suit as defendants are Bank of America and Stewart Title, which the DA describes as MERS shareholders. In addition, Aspire Financial, which operates in the state as TexasLending.com, is also a defendant.

Like many recent legal claims against MERS, the lawsuit argues that because the company is a nominee for promissory note holders and has no claim to the debt, it cannot serve as beneficiary of the corresponding mortgage securing the note with a subject property.

The filing says B of A and Aspire Financial originated loans and Stewart Title prepared deeds of trust filings in Dallas County, naming MERS on public land records when they “knew or should have known” that it would result in the Dallas County Clerk’s Office improperly listing MERS as “grantee” in the deed records trust.

“As demonstrated by the criminal and civil penalties for filing false or deceptive real estate liens, Texas public policy favors a reliable functioning public recordation system to avoid destructive breaks in title, confusion as to true identity of the holder of a note, fraudulent foreclosures, and uncertainty as to title when a home is sold,” the lawsuit reads. “The MERS System has all but collapsed this system throughout the U.S., including Dallas County, Texas.”

In a press release on the MERS website, the company said the claims in the lawsuit are without legal or factual merit.

“The MERS business model and practices are legal and comply with the recording statutes and regulations of Texas. This position has been upheld in numerous cases in Texas courts and countless cases across the country on the state and Federal level,” the statement reads. “We are confident that this court will agree that MERS’ business practices are perfectly legal.”

Representatives from B of A and Stewart Title declined to comment. Aspire Financial could not immediately be reached for comment Thursday morning.

MERS and its members have successfully defended themselves against similar cases in some states, while other claims are still pending in certain  jurisdictions.

Watkins’ crusade against MERS began in August, when his office announced it was investigating how to get the company to pay tens of millions of dollars in recording fees it claims Dallas County is owed.

The suit claims that as of mid-September, MERS was the grantee or grantor of more than 285,000 records in the Dallas County clerk’s public records. It also notes that Dallas County is not claiming any deeds of trust are ineffective security interests of properties by the true owner of the related promissory note.

(For more information about MERS, download the latest free e-edition of Mortgage Technology magazine, which includes an exclusive interview with Bill Beckmann, the new president and CEO of MERS.)

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