This announcement from New York Attorney General Eric Schneiderman indicates that there's still some hope that foreclosure fraud prosecutions could occur.
Attorney General Eric T. Schneiderman today filed a lawsuit against several of the nation’s largest banks charging that the creation and use of a private national mortgage electronic registry system known as MERS has resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process. The lawsuit asserts 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. The lawsuit names JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., as well as Virginia-based MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc.
A couple of important things: This is an action in Schneiderman's capacity of AG for New York—it is completely separate from his task force work with the new commission created by President Obama. That group is limited to pre-housing bubble conduct, this is targeted at ongoing and current fraud. It's also another potential blow to the settlement negotiations between the states and the feds, and an indication that Schneiderman is no closer to an agreement there than he's ever been. That settlement would release the banks of liability in foreclosure fraud, and Schneiderman clearly doesn't want them off the hook.
But most importantly, it specifically targets MERS as a creation of the banks "to allow financial institutions to evade local county recording fees, avoid the hassle and paperwork of publicly recording mortgage transfers, and facilitate the rapid sale and securitization of mortgages." It goes on, "MERS’ indiscriminate use of non-employee ‘certifying officers’ to execute vital legal documents has confused, misled, and deceived homeowners and the courts and made it difficult to ascertain whether a party actually has the right to foreclose."
The suit seeks injunctive relief as well as damages for the thousands of New York homeowners harmed by MERS. It's as strong a shot across the bow of continuing fraudulent foreclosures by big banks as you could hope for.