NY AG Sues Banks For Deceptive Practices, False Documents

New York State Attorney General Eric Schneiderman on Friday sued three major U.S. banks, accusing them of fraud for using an electronic mortgage database that resulted in deceptive and illegal practices.

Schneiderman filed the lawsuit against Bank of America Corp (BAC.N), Wells Fargo & Co (WFC.N) and JPMorgan Chase & Co (JPM.N) in New York state court in Brooklyn.

The lawsuit is over the banks’ use of MERS, the Mortgage Electronic Registration System the industry created in the mid-1990s to track the ownership and servicing of residential mortgage loans.

Schneiderman claims the system is plagued by inaccuracies. The lawsuit also names MERS and its parent as defendants.

“The mortgage industry created MERS to allow financial institutions to evade county recording fees, avoid the need to publicly record mortgage transfers and facilitate the rapid sale and securitization of mortgages en masse,” Schneiderman said.

Schneiderman’s lawsuit claims that banks saved $2 billion in recording fees by using MERS.

The suit also said the use of MERS resulted in the filing of improper NY foreclosures and created “confusion and uncertainty” over property ownership interests.

New York sues banks over electronic mortgage system