Delaware Attorney General Beau Biden has settled his lawsuit with Mortgage Electronic Registration Systems, or MERS. This is one of the lawsuits that was preserved in the aftermath of the foreclosure fraud settlement. To date, none of those lawsuits which were preserved have produced very much in the way of tangible success.
Biden announced today that MERS agreed to implement “important reforms” as part of the settlement, which would reduce the likelihood of illegal foreclosures. “MERS’ inaccurate and unreliable records raised serious questions about who owns what in America. The steps MERS will now take will help answer those questions,” Biden said in a press release.
So here’s what Biden got out of MERS:
• A new online database, which can also be accessed via phone, which homeowners with mortgages on MERS can easily access to find out who owns their mortgage.
• A new assignment system. “MERS members now must record assignments of mortgages with the county Recorder of Deeds Office before a foreclosure can proceed,” according to the release. This has the effect of bringing the mortgage registry back to the local level, though it’s possible that MERS could withhold the recording of those assignments on performing loans, and then just dump a bunch of assignments on the county recorder if the servicer chooses to foreclose.
• MERS will not foreclose in its name as the “mortgagee” for the next five years. Biden says that he will work to draft state legislation that would ban MERS permanently from foreclosing in its name in the state of Delaware.
• Internal audits by MERS will have to be reported to the Delaware AGs office, and member banks would have to fix any errors resulting from that audit.
• MERS will have to examine all documents from its largest 25 members and check the identity and authority of those signing officers. The signing officers wold have to undergo some form of training, though it’s not clear what. Currently, MERS signing officers simply get a piece of paper authorizing them to sign for MERS.
There don’t appear to be any cash penalties associated with this settlement, and many of these kinds of reforms were already either MERS policy (the company hasn’t foreclosed in its name for a while) or covered in consent orders with the OCC. Furthermore, by forcing MERS to record assignments before foreclosure, Biden implicitly acknowledges that MERS wasn’t doing this previously, costing municipalities hundreds of millions if not billions of dollars in lost recording fees. But there’s no restitution in this settlement.
There’s just not a lot to take from this settlement. It’s another case of banks playing by their own rules, and then not suffering virtually any consequences as a result. Of course, this was the inevitable result of the lost leverage from closing out the foreclosure fraud settlement broadly. Delaware is a tiny state and there’s not all that much liability there. There was power in numbers, but that’s all gone.