St. Clair County State's attorney, Recorder sue banks over mortgage transfers
St. Clair County State's Attorney Brendan Kelly's office filed a lawsuit Monday against 22 banks, accusing them of engaging in fraud and deception by evading requirements to file documents with the county's recorder of deeds when home loans were bought and sold by lending institutions.
Banks and lending institutions created a holding company called MERS in the mid-1990s. MERS created an electronic mortgage database system that tracked the transfers of loans between lending institutions and Wall Street securities institutions.
The database is called the Mortgage Electronic Registration System or MERS. Most home loans in the U.S. are on the MERS database. According to the lawsuit, this system resulted in a shadow recording system.
The lawsuit asserts, "The MERS System effectively eliminated the homeowners' and the public's ability to track the purchase and sale of properties through the traditional public records system. Instead this information is stored in a private database maintained by MERS. However, the MERS database is unreliable and inaccurate."
"The system set up by MERS allows financial institutions to avoid transparency in transfer of property and to evade county recording fees which every other citizen has to pay," Kelly said.
The Recorder's office estimates through this system tens of thousands of transfers of title occurred without proper documentation. Similar actions were filed across the country, but this is the first filed under Illinois' strong recording laws.
"We simply want these institutions to follow the law," Kelly stated.
The lawsuit was filed on behalf of St. Clair County against: Bank of America, CCO Mortgage Corp., CITI Mortgage, Corinthian Mortgage Corp., Everhome Mortgage Co., GMAC Residential Funding Corp., Guaranty Bank, HSBC Finance Corp., Suntrust Mortgage, Wells Fargo Bank, WMC Mortgage Corp., Bank of O'Fallon, Compass Mortgage, First Collinsville Bank, FirstCo Mortgage Corp., First County Bank, Mid America Mortgage Services of Illinois, Mortgage Services III, Midland States Bank, Peoples National Bank, Commerce Bank, Regions Bank and UMB Bank.