Massachusetts Sues Five Largest Servicers and MERS

Disenchanted with the lack of progress made after a year of negotiations between state attorneys general and the nation's five largest mortgage servicers, ""Massachusetts Attorney General"":http://www.mass.gov/ago Martha Coakley has split from the pack and filed her own individual lawsuit.
[IMAGE] Coakley is suing Bank of America, Wells Fargo, JP Morgan Chase, Citi, and GMAC for what she says were ""illegal foreclosures."" The suit also names Mortgage Electronic Registration System, Inc. (MERS) and its parent company, Merscorp Inc., as defendants.

""In the complaint"":http://www.mass.gov/ago/docs/press/ag-complaint-national-banks.pdf, the attorney general alleges that the five servicers engaged in unfair and deceptive trade practices in violation of Massachusetts’ law.

Specifically, the suit faults the companies for “pervasive use” of fraudulent documentation to foreclose, including the practice of so-called robo-signing; foreclosing without holding the actual mortgage; using MERS to avoid land registration and recording requirements; and failing to uphold loan modification promises to Massachusetts homeowners.

In response to the attorney general’s claims involving MERS, Janis Smith, a spokesperson for Merscorp, issued a

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statement saying, “We are confident that the MERS System complies with Massachusetts laws.”

Smith continued, “The complaint filed today on the limited allegations that relate to MERS hangs on broad and ambiguous language from a statute that’s over 100 years old. We believe it has no applicability to MERS’ business model or its conduct of business in Massachusetts, which has been repeatedly validated by courts in the state.”

Coakley’s lawsuit follows a long and drawn-out investigation and negotiation period spearheaded by Iowa Attorney General Tom Miller, stemming from the foreclosure robo-signing issues that surfaced last September.

The effort began as a 50-state settlement to reconcile charges that false affidavits and improper notary procedures were used by servicers to initiate and complete foreclosures, but individual states â€" including New York, California, and Delaware â€" have begun dropping out of the settlement talks.

Coakley herself had previously made it clear that she would not sign on to a blanket agreement with the banks if it included broad liability release regarding MERS, or if she did not believe the banks had come to the table with an offer in the best interest of Massachusetts borrowers.

“Attorney General Coakley informed me of her decision to file lawsuits against the banks,” Miller said in a statement Thursday. “She also indicated that she’ll evaluate the joint state-federal settlement we’re negotiating, which we hope to reach soon.”

Miller says Coakley has indicated that she is open to joining the multi-state settlement effort if the terms adequately address the needs of the people of Massachusetts.