Online Mortgage Registry System

The Law Center is representing and advising legal services and affordable housing services in a class action lawsuit brought by the Montgomery County recorder of deeds against Mortgage Electronic Recording Systems, Inc.

In 2011, the Montgomery County recorder of deeds filed a class action lawsuit on behalf of herself and all other Pennsylvania recorders of deeds against Mortgage Electronic Recording Systems, INC. and MERSCORP, Inc. The plaintiff alleges that the electronic registration system illegally bypasses the county recorder’s office and contends that when a bank sells its interest in a mortgage to another back, the transfer ought to be recorded in the official public system and not just in the private MERS database.

The Law Center supports the plaintiff position in this case and wrote an amicus brief for  that asserted avoiding the long standing practice of public recordation each time a mortgage is sold from one bank to another, the MERS member banks are were depriving several legal services and affordable housing organizations of millions of dollars.

However, the judge refused to allow the Law Center to filed the amicus brief for technical reasons. Therefore, while the Law is not counsel of record in the case, we still represent and advise such organizations, such as Community Legal Services, Pennsylvania Legal Aid Network, and the Housing of Alliance of Philadelphia, that are being harmed by the scheme at issue with the electronic mortgage system.


Case Updates

Law Center Submits Amicus Brief in Second Case Against MERSCORP, Inc.

The Public Interest Law Center prepared an amicus brief in a Commonwealth Court case brought by several counties and county recorders of deeds to challenge the MERS system. The brief is submitted in support of Pennsylvania counties and recording officials seeking to enforce Pennsylvania law in accordance with their legal duties and the public interest. Our amici include three legal services organizations and two consumer advocacy groups who have allegedly suffered as a result of MERSCORP, Inc.’s malpractice.

MERSCORP, Inc. provides access to registered home mortgages and investor information through a free and nationwide database. MERSCORP, Inc. has a legal responsibility to track the ownership of mortgage loans in the United States.

According to the amicus brief, MERSCORP, Inc. disregards the law and the public’s best interest by allowing investors to bypass the county recorder’s office and withholding information regarding the transfer of loans between lenders. MERSCORP, Inc. is then able to avoid the county recording fee, depriving numerous organizations of their legally-mandated funding.

The brief argues two overarching claims, “Under Pennsylvania Mortgage Law, a Mortgage and the Note It Secures Cannot Be Transferred Separately” and “There Is No Public-Interest Justification for Allowing MERS to Ignore the Pennsylvania Recording Statute.” Essentially, “…consumers and the public at large not only do not benefit from, but in fact are harmed by, incomplete public land records and the evasion of filing fees that fund essential civil legal services and affordable housing for low-income people.” The services rely heavily on these funds to provide for people in need.

The Law Center challenged MERSCORP, Inc.’s practices previously. In 2011, the Law Center supported the Montgomery County Recorder of Deeds in their lawsuit against MERSCORP, Inc. At the time the judge refused our amicus brief for technical reasons and unfortunately the past case, which highlighted the fraud for the first time, failed in the third circuit last year. However, we stand unwavering in support of the organizations affected by the actions of MERSCORP, Inc.

Oral Argument Heard in Mortgage Recording Case

Oral arguments in our Mortgage Electronic Registration System (MERS) case took place on June 25, 2015 in the Court of Appeals for the Third Circuit.

MERS allows banks and mortgage owners to transfer ownership of mortgages without paying the recording fees charged by county recorders. This class action lawsuit was initially brought by the Montgomery County Recorder of Deeds against MERS for lost recording fees that should have been paid to Montgomery County, claiming that every time a mortgage transferred ownership, it should have been recorded by the county, and not only in the private MERS database.

The Public Interest Law Center supports the Montgomery County Recorder of Deeds in their complaint against MERSCORP, Inc. by representing and advising legal and affordable housing services in the suit.

Staff attorney Ben Geffen authored and submitted an amicus brief in March, urging the court to rule against MERSCORP, Inc. In the amicus brief, the Law Center argued that it is beneficial for homeowners, as well as interested third parties, to be able to access accurate land records from the County. It was also argued that the failure of the mortgagers to record with the County strips millions of dollars in funding from legal services and affordable housing programs, which are legally mandated to receive funding from the recording fees.

The main discussion at the oral argument was whether a Pennsylvania statute creates a requirement for all mortgages to be recorded by its use of the phrase, “shall be recorded.” The attorneys for MERSCORP, Inc. argued that the purpose of the statute was not to create a public land record, but to make the mortgages public and valid, so they can be collected on.

The plaintiff argued that it is essential to the public well being that the mortgages and ownership of land be recorded in a public and accessible manner. The plaintiff’s claims echo the sentiments of the Public Interest Law Center’s amicus brief.

Court Rules on Cross Motions for Summary Judgment

On June 30, Judge Joyner denied the Defendants’ motion for summary judgment in its entirety and granted in part Plaintiff’s motion for partial summary judgment.

The Court ordered that Declaratory Judgment be entered in favor of the Plaintiff and against the Defendants. This order means that MERSCORP, INC. is obligated to create and record documents memorializing the transfers of promissory notes secured by mortgages in Pennsylvania for all such transfers past, present and future with the Recorder of Deeds office. The Court further declared that MERS Defendants’ failure to document and record these transfers is, was and will in the future be, in violation of the Pennsylvania Recording Statute.

In addition, the Judge Joyner’s ruling declared that Defendants’ failure to create and record documents memorializing such transfers is, was and will in the future be, in violation of the Pennsylvania Recording Law. The Court found that the issue of damages as a consequence of Defendants’ violations should be addressed at trial. The Court declined to enter summary judgment on Plaintiff’s unjust enrichment claim and left it to be decided at trial because it found that the record had not been sufficiently developed on that issue.

Click here to read the full decision.

Judge Denies Defendants’ Second Motion for Summary Judgment

On April 21, Judge Joyner denied Defendants’ second motion for summary judgment. In the motion, the Defendants contended that the recording statute was unconstitutionally vague as applied to them if it required them to record the transactions at issue in this lawsuit. Specifically, they argued that the statute “fails to give notice as to who must do the recording when a promissory note is transferred, when the recording must take place, or what must be created and recorded to reflect the transfer of a promissory note.”

However, Judge Joyner upheld the constitutionality of the statute requiring the registration of deeds.  In terms of where the recording of the mortgage must take place he wrote, “the answer . . . is easily discerned: recording should be effectuated in the office of the recorder of deeds for the county where the property is situate within ninety days of execution, notwithstanding that there is a grace period of an additional ninety days before a deed, mortgage or defensible deed may be deemed insufficient to convey good title.” As for who must do the recording, Judge Joyner has “little difficulty” concluding that both parties to a transfer should record, and that this is especially important for the mortgagee.

He concludes the decision by stating: “Hence the standard is very simple: if the holder of an interest in land wishes to protect and maintain that interest, it must record the document by which that interest is memorialized. We find nothing vague about it.”

The decision suggests that Judge Joyner is receptive to Plaintiff’s core legal theory. Nonetheless, he has not explicitly resolved whether “the mortgage follows the note” (Plaintiff’s core theory) or whether the transfer of a note does not automatically transfer the legal title to the corresponding mortgage (Defendants’ core theory). That is the key legal issue in this case, and its resolution will be crucial or even outcome-determinative. Judge Joyner will have to confront that issue directly when he decides the cross-motions for summary judgment.

Click here to read the full decision.

Click here to read an article about the decision.

District Judge Grants Class Certification to Plaintiff

U.S. District Court Judge J. Curtis Joyner granted class certification to the deed recorders in the 67 counties of Pennsylvania for their class action lawsuit against MERS, Inc. and MERSCORP.

Lead plaintiff, Nancy J. Becker, the Recorder of Deeds for Montgomery County, Pennsylvania, originally filed her complaint against the MERS “system,” on November 7, 2011 on behalf of herself and all other similarly situated Pennsylvania County Recorders of Deeds. The complaint alleges that the system illegally bypasses the Recorder of Deeds’ office. In addition, the plaintiff seeks for all mortgage transfers to be recorded in public record.

Judge Joyner’s decision to grant class certification allows the class action to proceed against MERS, Inc.

Click here to read the full decision.

Law Center Files Amicus Brief

The Law Center filed a motion for leave to file an amicus brief on behalf of fellow service organizations Community Legal Services, Pennsylvania Legal Aid Network and the Housing Alliance of Philadelphia in connection with a class action complaint against MERSCORP, Inc. and Mortgage Electronic Registration Systems, Inc. (MERS). The Law Center’s amicus brief supports the Plaintiff’s class action complaint against MERSCORP, Inc. and MERS, which alleges that MERS, an online mortgage registry system, operates to circumvent county recording fees for mortgage transfers. As explained in the brief, the MERS system results in the loss of millions of dollars in legally-mandated funding for legal service organizations and affordable housing programs.


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