Eleven Oregon counties are suing a mortgage-industry company that registers loan sales, circumventing public property records.
The counties — Clackamas, Coos, Crook, Jackson, Josephine, Klamath, Lane, Linn, Marion, Washington and Yamhill — announced Thursday they have filed a $50 million lawsuit over unpaid recording fees since the lending industry created Mortgage Electronic Registration Systems, or MERS, in the 1990s.
The counties are following the lead of Multnomah County. They’re represented by the same Lake Oswego attorney, Tom D’Amore.
“MERS was taking advantage of our public records system but not paying the fees,” D’Amore said.
In a statement, MERS said it would “vigorously defend this litigation” and that it “complies with Oregon law and all of its recording statutes.”
“At no point in time has the integrity of Oregon land records ever been compromised by the use of MERS,” the company said.
In its 2012 lawsuit, Multnomah County argued MERS’ model was illegal under Oregon law. The county and MERS, as well as several banking institutions, settled this year, and MERS agreed to pay the county $9 million.
MERS is no longer listed as the beneficiary of a mortgage in public records, the county said, but a MERS spokeswoman said there hadn’t been any changes to its practices.
Each time a mortgage is sold, state law requires the transfer be recorded in county records. But as the buying and selling of securitized mortgage debt grew more common, the banking industry created its own registry, MERS, to serve as the owner of record. The private registry was created in 1995 to supplant public property records, avoiding the cost and hassle of each recording.
Counties, as a result, have missed out on millions of dollars in recording fees, while homeowners have found it difficult to determine who actually owns their mortgage.
MERS’ involvement also upended the foreclosure process during a wave of foreclosures after the housing bubble burst.
Because MERS was listed as a beneficiary on the deeds filed in county records, foreclosures were often initiated in its name. But in 2013, the Oregon Supreme Court ruled that MERS did not qualify as the beneficiary, and therefore didn’t have the right to initiate a foreclosure. (That ruling provides the basis for the counties’ lawsuits, D’Amore said.)
As a result of the uncertainty over MERS’ legal standing, lenders in 2012 began to foreclose on homes through the court system, a less expedient route that sent a huge caseload to county courts during the crisis and dragged out the process for homeowners.
Foreclosures have slowed dramatically in Oregon and across the country as home prices and the economy rebounded.