New York Attorney General Eric Schneiderman announced on Friday he filed a lawsuit against Bank of America, JPMorgan Chase and Wells Fargo accusing them of engaging in “deceptive and fraudulent foreclosure filings.”
The suit comes just a week after Schneiderman was given an elevated position of power by President Obama to help lead a joint federal and state mortgage fraud task force within the Department of Justice. The timing also comes just days before state attorneys general across the country are expected to announce a major mortgage servicing settlement with same group of lenders and two more to resolve robo-signing foreclosure documents and other shoddy mortgage servicing practices.
Sources close to the situation said they did not expect the suit would hurt the broader impeding settlement. Banks involved would not comment, saying they were reviewing the latest suit.
The Schneiderman suit focuses on the lenders’ involvement in creating and using a private national mortgage electronic registry system known as MERS, which he says has resulted in a wide range of improper foreclosure practices that have harmed homeowners and undermined the integrity of the judicial foreclosure process.
Specifically the suit alleges that “employees and agents of Bank of America, J.P. Morgan Chase, and Wells Fargo, acting as ‘MERS certifying officers,’ have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have,” according to a press release announcing the suit.
The suit includes the banks as well as Virginia-based MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc.
It alleges that the MERS System has made it impossible for homeowners and the public to track property transfers through public records system.
“The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages. Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law,” Schneiderman said in a press release.