Klamath County has joined 11 plaintiffs in a $50 million lawsuit filed Thursday against major U.S. banking institutions for alleged mortgage record fraud committed prior to the Great Recession.
Filed in Multnomah County Circuit Court, plaintiffs claim lenders avoided paying fees to counties by exploiting the Mortgage Electronic Registration Systems (MERS), a private company established in 1995 to track mortgage transfer records.
The suit claims, by listing MERS as the owner of numerous real estate loans, lenders were able to package and transfer high-risk mortgages through the system multiple times without paying the appropriate county recording fees for doing so.
Plaintiffs claim this also caused confusion when they attempted to determine the actual owner of a mortgage when loan ownership was called into question.
The suit further claims these actions were part of the unregulated trading of mortgage-backed securities which led to the financial crisis in 2007.
The defendants are seeking damages for fraud, unjust enrichment and negligence including economic and non-economic damages as well as attorney’s fees and any other relief the court deems appropriate.
As of Thursday a judge had yet to be assigned to the case and the defendants were not yet served.
Defendants include MERS and its owner Merscorp Holdings Inc. as well as national lenders Bank of America, JP Morgan Chase Bank, Citimortgage Inc., Wells Fargo Bank, Everbank Financial Group, SunTrust Mortgage and Citizens Bank. Northwest lenders were also named, including Bank of Oswego, Umpqua Bank, Willamette Community Bank, Willamette Valley Bank and Bank of the Cascades.
In a news release in response to the suit Thursday, MERS said they plan to “vigorously defend” against the lawsuit and say claims that their system violated Oregon laws are false.
“After learning of the complaint filed today, we reiterate and emphasize that the use of Mortgage Electronic Registration Systems, Inc. and the MERS System complies with Oregon law and all of its recording statutes,” said the release.
“At no point in time has the integrity of Oregon land records ever been compromised by the use of MERS,” the release continued. “MERS has been challenged in similar lawsuits before and has consistently prevailed on the issues.”
Listed as plaintiffs were Clackamas, Coos, Crook, Jackson, Josephine, Klamath, Lane, Linn, Marion, Washington and Yamhill counties, who are all represented by attorney Thomas D’Amore of Portland-based D’Amore Law Group.