According to
Bloomberg
, the federal judge in Texas (Dallas) has rescinded the bid filed
by
Bank of America Corporation
(
BAC
) and Mortgage Electronic Registration Systems Inc. (MERS). The bid
was related to the dismissal of claims under a lawsuit against both
of these companies. The lawsuit, filed by Texas counties accused
MERS of misrepresenting the documents of property records.
U.S. District Judge Reed O'Connor ordered the counties to pursue
further proceedings over their claims. Moreover, he has restricted
MERS from filing bids in future. The allegation which states that
MERS had filed false liens was dismissed. Otherwise, it would have
made the company pay $10,000 as the statutory penalty for each
filing.
Virginia-based MERS was formed by major financial institutions,
like
JPMorgan Chase & Co.
(
JPM
) and BofA, as a commercial and easy means to trade mortgage debt.
Previously, mortgages were registered at county clerks' offices and
a fee was charged against these. However, MERS replaced the system
and introduced one-time online registration.
MERS used to record servicing rights and ownership interests in
mortgage loans on registration, enabling banks to buy and sell
loans without recording transfers with counties. Though MERS saved
mortgage lenders' money, but it was a flaw for counties and
homeowners. Counties were deprived of the revenue from transaction
fees. Moreover, erroneous property records became an issue for
homeowners.
Background
Last year, Dallas County alleged MERS for deceiving millions of
its wealth in mortgage-related fees. Moreover, along with MERS, the
county sued BofA to get back the unpaid recording fees. The case
filed sued the defendants for failing to keep records of consequent
assignments of mortgage loans and recording payment of the filing
fees.
Additionally, MERS, which provides database for mortgage
servicers, has been accused of sloppy record keeping, hiding
identities of the holders of mortgage debt from borrowers and
evading fees.
Further, the lawsuit was revised by Dallas County in October
2011. The modified lawsuit represented all other Texas counties in
which a deed of trust has been filed recognizing MERS as a
beneficiary. In March 2012, Harris and Brazoria counties also
joined the lawsuit in U.S. District Court in Dallas and demanded up
to $10 billion in support of all the counties in Texas.
Responses from the Defendants
The officials of BofA and MERS opposed the allegations. They
commented that under the Texas law, recording of assignments or
maintaining other related documents is not mandatory. The
Texas Property Code, containing a range of statutes, does not
demand such recording of documents related to the mortgage filing
fees.
The primary motive behind the lawsuit is to get proper
accountability of the mortgage-related documents in lawful and
legal procedures. Additionally, the lawsuit aims to provide relief
to the counties, which were deprived of their fees and homeowners,
whose property had been wrongly foreclosed by the misconducts of
the mortgage servicers.
Shares of BofA currently retain a Zacks #3 Rank, which
translates into a short-term Hold rating. Considering the
fundamentals, we also maintain a long-term 'Neutral' recommendation
on the stock.
BANK OF AMER CP (BAC): Free Stock Analysis
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JPMORGAN CHASE (JPM): Free Stock Analysis
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