The big meeting on the dead-on-arrival foreclosure fraud settlement is today. Banks may have actually shown up to this meeting, whereas they blew off the last one, so I guess that’s progress. But the fact that six Democratic AGs have said they wouldn’t sign a deal that releases the banks from liability without a vigorous investigation – and there are only 23 – spells doom for any effort at reviving these talks. Maybe a face-saving measure will come out of them, but that’s it.
The more interesting foreclosure fraud action at the state level are things like this:
Bank of America Corp. (BAC) is among a group of lenders that may face a wave of new lawsuits claiming cash-strapped counties were cheated out of millions of dollars by a system used for more than a decade to register mortgages.
Dallas County District Attorney Craig Watkins said state attorneys general and county officials across the U.S. have expressed interest in his lawsuit against Mortgage Electronic Registration Systems Inc. and Bank of America, filed in Texas state court on Sept. 21. Dallas County could be owed as much as $100 million in filing fees, he said.
“This is a big new front,” said Christopher L. Peterson, associate dean and professor at the University of Utah S.J. Quinney College of Law. “This case is scary because if Dallas wins then there are a lot of other counties around the country that are going to follow.”
This is something I’ve been watching for a long time. The entire reason for MERS is to avoid filing fees with county recorder offices. If Dallas County alone is suing for $100 million (in fact, with penalties and late fees Peterson says that could be much bigger, closer to $1 billion), then the liability here nationwide is well into the tens of billions. And every county needs the money. You’re talking about avoided fees on multiple transfers of 60 million mortgages. And yes, this was MERS’ entire business model:
“According to MERS’s own website, its system saves money for its members and is specifically designed to avoid paying the fees” to county clerks, according to the April 25 filing. “MERS president, R.K. Arnold, testified in 2009 that assuming each mortgage has been resold and recorded just once, it would have saved the industry $2.4 billion in recording expenses.”
There are other cases of this type in Kentucky. It’s just going to take one victory for the dam to burst.
Some would say this is a small potatoes version of the liability that the banks face for their fraudulent activities in the mortgage market. Well, consider how much trouble they face, then, if the small potatoes version can net tens of billions of dollars.