In foreclosure-related news, officials with the Bexar County District Attorney's Office are on the verge on taking major legal action against a privately-run mortgage tracking system that they claim has deprived the county of millions of dollars in recording costs on mortgage assignments.

Specifically, the D.A.'s office will be seeking approval from the Commissioners Court to retain the services of a law firm to take legal action against Mortgage Electronic Registration Systems Inc. (MERS), a Virginia-based company created by the mortgage industry (i.e., Bank of America, CitiMortgage, Chase, Fannie Mae, Freddie Mac, Wells Fargo) in the mid 1990s to "streamline the mortgage process."

In general, after a bank/mortgage lender extends a mortgage to a homebuyer, it may turn around and sell (assign) the mortgage to a third party, freeing it to make additional mortgage loans. Typically, this mortgage assignment would then be recorded with the county clerk - for a fee - to protect the property interests of buyers/sellers.

According to experts, however, this practice became highly impractical once Wall Street began pooling mortgages and selling them to investors.

"If you're packaging up to 10,000 mortgages to issue mortgage-backed securities on, and you have to file 10,000 assignments in the [county] records, it's decidedly more cumbersome than if you don't have to file them," said Stephen Malouf, a Dallas-based attorney who is currently taking legal action against MERS.

Consequently, MERS was created and the service indicated that future mortgage assignments didn't need to be recorded because MERS would always remain the lender, serving as a type of mortgage clearinghouse.

However, multiple Texas counties - including Dallas County and Harris County - are now taking legal action against MERS, claiming that by going around the need to pay for recording costs on mortgage assignments, MERS is single handedly destroying the county recording systems through lack of funding.

"There has been a process developed specifically for the purpose of circumventing the recording procedures and statutes in reference to real property," said District Attorney Susan Reed. "The process we have is for the protection of purchasers and sellers of property. What supports that - all of the filings, all of the record maintenance - [is] the fees that are collected in relation to the transactions."

While Harris didn't offer an exact number, she did estimate that the damages could easily be millions of dollars.

This makes sense when you consider that over 257,000 documents involving MERS were recorded from 1998 through mid October 2011, and that the applicable filing fee for mortgage assignments in Bexar County is $16 for the first page and $4 for each additional page.

Stay tuned for more from our San Antonio bankruptcy blog ...

Regardless of your financial situation, contact an experienced legal professional to learn more about foreclosure, or your rights under Chapter 7 bankruptcy or Chapter 13 bankruptcy.

This post is for informational purposes only and is not to be construed as legal advice.

(Please note: The firm handles only bankruptcy matters and is not involved in any pending class action lawsuits against banks/mortgage lenders. We take pride in reporting matters that are important to our community.)

Source:

San Antonio Express-News, "Bexar to sue over lost fees" Oct. 24, 2011