Massachusetts Sues Banks Over Mortgage Issues

Dec. 20, 2011: There is an interesting CPA component to a lawsuit filed this week by Massachusetts Attorney General Martha Coakley.

The AG is claiming that the nation's largest banks engaged in deceptive practices in the foreclosure of many Massachusetts homes, and also avoided state requirements that all mortgage transfers be recorded at the local registry of deeds.  Also named in the suit was Mortgage Electronic Registry Systems (MERS), a company set up by banks in the 1990's to track the paperwork involved in the bundling and selling of mortgages.

The connection with CPA comes not with the foreclosures, but with MERS.  With most real estate transactions, a copy of each mortgage, and any subsequent transfer, is recorded at the local registry of deeds.  Each filing at the registry is assessed a surcharge of $20, which is deposited in the statewide CPA Trust Fund.  Since the creation of MERS however, when investments in mortgages are bought and sold among the large banks that are members of MERS, the paperwork is not filed at the local registries of deeds.  Instead it is MERS that keeps track of the transaction.  No registry filing means no revenue is generated for the CPA Trust Fund.

It will be interesting to see how this case develops, and the Coalition will report on any future activity in this lawsuit.


“State sues five big US lenders,” by Jenifer B. McKim. The Boston Globe. December 2, 2011

“Firm may skirt millions in property fees,” by Jenifer B. McKim. The Boston Globe. December 15, 2010

Community Preservation Coalition Letter to Attorney General Coakley January 13, 2011