New York Sues 3 Major Banks over Mortgage Fraud

Monday, February 06, 2012
The business practices of America’s banks and other mortgage holders are under fresh legal attack, as New York Attorney General Eric Schneiderman has filed a suit against Bank of America, Wells Fargo and JPMorgan Chase in New York State Supreme Court in Brooklyn. The suit alleges that the banks engaged in fraudulent and deceptive practices in the electronic registration of mortgages and the filing of foreclosures against homeowners.
Historically, every time a mortgage was sold from one holder to another, it had to be recorded at the local courthouse. In 1995, the banks created the Mortgage Electronic Registration System (MERS), a privately owned electronic system for registering mortgage sales that was supposed to replace local county recording. According to the New York Attorney General’s Office, they did so “to allow financial institutions to evade local county recording fees, avoid the hassle and paperwork of publicly recording mortgage transfers, and facilitate the rapid sale and securitization of mortgages.”
The New York lawsuit contends that MERS has resulted in many deceptive and fraudulent foreclosure filings, has eliminated homeowners’ and the public’s ability to track property transfers through public records, and is riddled with errors. The banks deny the allegations and promise to litigate vigorously.
Last year, Delaware’s attorney general, Beau Biden, sued Merscorp, which operates the MERS system, over similar issues.
As AllGov reported in August 2011, Schneiderman also filed suit against Mellon Bank for fraud related to pension funds. He has been critical of the Obama administration’s efforts to negotiate a global settlement with the banks over their illegal and unethical foreclosure practices, contending that the proposed deal is too generous to the banks and would make it difficult to bring future actions against them.
-Matt Bewig
To Learn More:

Obama Administration Fights to Halt Bank Investigations by States (by Noel Brinkerhoff, AllGov) 


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