The county sued U.S. Bank Corp. of Minneapolis in Washington County Court, claiming the bank failed to pay a $52 recording fee when it acquired residential properties bundled in investment securities and sold them through the Mortgage Electronic Registration System Inc. of Reston, Va., known as MERS.
MERS is a national database of mortgages created by the banking industry to automate recordings and aid creation of mortgage-backed securities. Some experts consider that process to be a contributing cause to the mortgage and credit crisis that plunged the country into a recession in 2008. The electronic system tracks more than 65 million mortgages.
In the lawsuit, Washington County estimated it lost $1.6 million in recording fees over seven years from U.S. Bank’s failure to record mortgages it acquired. Based on the estimated losses, about 30,470 mortgages were not recorded in the county.
Washington County Recorder of Deeds Deborah Bardella said that estimate may be low because the county does not know how many times the mortgages were assigned to different investors.
The lawsuit, filed Sept. 28, not only wants restitution from U.S. Bank but asks the court to require the bank to record prior mortgage assignments on all properties on which it foreclosed. The county also is seeking class-action status that would cover the lost recording fees in the state’s 67 counties.
U.S. Bank spokeswoman Nicole Garrison-Sprenger said, “We think this suit is without merit.”
It’s the first lawsuit filed in the state against a bank over the issue of failing to record mortgages bundled into mortgage-backed securities that were sold and assigned to other financial institutions through MERS, said Evie Rafalko McNulty, president of the Pennsylvania Recorder of Deeds Association and the recorder in Lackawanna County. She estimated that Lackawanna County, where Scranton is the county seat, lost $1.3 million in recording fees.
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