More on the Massachusetts AG’s Suit Against Lenders

Posted By Cliff Tuttle | December 5, 2011

No. 765

As noted last week, the Attorney General of Massachusetts, Martha Coakley, filed suit against the five largest home mortgage lenders in the United States and certain of their affiliate corporations, and Mortgage Electronic Registration System, Inc. and its parent, Merscorp, Inc. Massachusetts is the first to break ranks with the Attorney Generals of the 49 other states who were attempting to negotiate a joint settlement over mortgage foreclosure irregularities. The other Defendants are Bank of America, N.A., BAC Home Loan Servicing, BAC GP, LLC, JPMorgan Chase Bank, N. A., Citibank, N.A., Citimortgage, Inc., GMAC Mortgage, LLC and Wells Fargo Bank, N.A..

Coakley announced that she was unwilling to accept the bargaining position taken by the lenders and decided to air her grievances in Court.

The fifty-nine page Complaint asserted that the Defendants engaged in unfair and deceptive foreclosure practices.  It states that Massachusetts is a non-judicial foreclosure state, which means that the mortgagee can sell the property without enlisting the aid of a court, provided it follows the statutory requirements exactly.

The Complaint alleges that all of the Defendants frequently foreclosed upon residential properties without strictly following the statutory requirements.  In particular, the complaints and other documents were often filed before the mortgages were assigned to the plaintiffs.

NOTE:  In Pennsylvania we have a judicial foreclosure system.  Our Superior Court has held that a complaint may be filed before an assignment is filed so long as the plaintiff includes a sufficient explanation in the complaint that the defendant is informed that an assignment will be filed.

The Complaint alleges that a large number of the notarized affidavits filed of record contained false information given under oath.

The Complaint also alleges that there was widespread deception of borrowers concerning the terms of proposed mortgage modifications.

In addition, the Complaint alleges that the Banks and MERS failed to comply with the Massachusetts land registry system.  MERS is a private electronic registration database established by its members ( including the defendants and others) which is intended to avoid the necessity of recording assignments of mortgages. MERS is named as mortgagee of record, but is not the owner of the loan, only the owner’s nominee.

The Complaint states that, while not all properties are entered into the Massachusetts land registration system, the defendants are required to comply with the registration system with regard to the properties in the system.  By transferring mortgages on the MERS system, while not filing the proper documents in Massachusetts, the defendants violated the law.

NOTE: Although Allegheny County has a Deed Registry office, it only keeps track of the transfer of title to land, not mortgages.Thus, there is no equivalent violation of the law in Pennsylvania for failing to register mortgage transfers.

The Complaint also alleges deceptive mortgage servicing practices, such as giving wrong information to borrowers concerning eligibility for mortgage modification.

The Massachusetts litigation may open the door to similar litigation elsewhere.  Discovery may turn up evidence of fraudulent practices that have not been alleged because the evidence is hidden in files that have never been reviewed. However, it will have little direct impact on legal developments in Pennsylvania.

CLT

Welcome

CLIFF TUTTLE has been a Pennsylvania lawyer for over 45 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

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