Wow!  Montgomery County could be in line to receive nearly $16 million, or more, from a recent federal ruling against the banking industry's mortgage registry.

        Montco attorneys are now looking for other counties throughout the United States to join them in the legal action against the Mortgage Electronic Registration Systems and its parent company, Merscorp, Inc. (MERS).

        U.S. District Judge J. Curtis Joyner ruled last week that MERS violated PA law by using its members-only database to circumvent county recorder of deeds offices.  As such, the counties lost millions of dollars.  According to Joyner's ruling, the county's public records were compromised and home loans were sold time and time again without the knowledge of homeowners or county recorders.

        MERS was created by the banking industry back in the 1990s to simplify the sales and tracking of mortgages.  During the foreclosure crisis, MERS was central to issues such as subprime mortgages and mortgage-backed securities during much of the foreclosure crises. 

        They provided a marketplace to facilitate transactions and sometimes served as the named owner on loans that were being traded by its member institutions.  They did not buy or sell mortgages.  The data was kept in a database only accessible to MERS members that included banks, loan servicers, mortgage insurers and Fannie Mae and Freddie Mac.

        MERS handles more than half of all home loans in the United States and was created for the purpose of avoiding the time and expense of county records.  But it is the law in Pennsylvania that the conveyance of properties shall be recorded and Judge Joyner agreed. 

        The suit was originally brought by Montgomery County Recorder of Deeds Nancy J. Becker in 2011.  Earlier this year she was granted class-action status to sue on behalf of all 67 recorders in the Commonwealth.  Becker claims that Montgomery County lost $15.7 million in recording fees from 2004 to 2011 – an estimate she reports is very conservative.

        According to a report, one expert testifying for Becker examined some MERS properties and found recorded transactions with the Securities and Exchange Commission and MERS' database were "contradictory, incomplete or redundant."

        What sparked Becker to file the suit was a couple who came to her office with a foreclosure letter in hand.  They had proof of all of the mortgage payments and they were up-to-date.  What they didn't know was that their mortgage loan had been sold and their payments were sitting in a "lockbox" and not being forwarded to the new mortgage holder.

        The bottom line is that county property records are public and available to anyone.  Failing to report property transactions properly with the county could (and does) cause harm to homeowners.  The fees are paid to preserve those records and maintain the accuracy and availability of them.

        It could take a year for all of the appeals to play through the court system.  For the sake of accuracy, accountability and responsibility, let's hope that other jurists see it the same way Judge Joyner does.