RALEIGH, N.C. — North Carolina's Guilford County is suing some of the country's biggest banks and a private mortgage registration system to force them to correct shortcuts that could create legal trouble for thousands of homeowners.
The lawsuit said it aims to force more than two dozen mortgage and financial companies to "clean up the mess they created in Guilford County's public property records" and "hold the defendants accountable for their unfair and deceptive trade practices."
The problem involves several shortcuts known collectively as "robo-signing" of mortgage documents used to prove banks have the right to foreclose if the homeowner isn't making mortgage payments. Local officials in North Carolina, Massachusetts, Illinois and Michigan said last year they found suspect mortgage documents dating back more than a decade effecting thousands of properties.
More than 4,500 documents filed in Guilford County bore known robo-signing aliases, often using the same name with different handwriting styles in an effort to authenticate mortgage documents, Guilford County registrar of deeds Jeff Thigpen said Wednesday.
Without available and accurate records, landowners can lose their property to illegal foreclosures, see their ability to buy and sell property restricted, and interests of mortgage lenders and borrowers are jeopardized, the lawsuit said.
"That paperwork needs to be done right. It doesn't matter if a person's going through foreclosure or they're still in their home now. If their paperwork has been signed off by someone where their names have been forged, or things like that, it just throws a very big question over the document. And that's not good for buyers, sellers, it's not good for the lenders. It's not good for banks. We believe they need to fix it," Thigpen said. "We're just asking them just to fix the documents so there can be certainty in the public record."
The lawsuit asks for a court-ordered supervisor to audit Guilford County's mortgage documents and make necessary corrections.
Named in the lawsuit are units of Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co., Citigroup Inc., and MERSCorp., which owns the Mortgage Electronic Registration Systems. MERS is a private tracking service that records ownership interests in mortgages to allow banks to buy and sell loans without recording transfers with counties.
It would cost the companies a few hundred thousand dollars to file new property records clearly tracing ownership rights, Thigpen said. He estimated Guilford County has lost about $1.3 million in mortgage fees since MERS was created 15 years ago.
Spokesmen for Bank of America and Wells Fargo didn't respond Wednesday to requests for comment on the lawsuit. A Citigroup spokesman said the company is reviewing the lawsuit. J.P. Morgan declined comment.
MERSCorp. said in a statement posted on its website that Guilford County's complaint "contains a lot of political rhetoric" about MERS, which "does not eliminate or replace county land records." Mortgages "are recorded in the local land records and the fees are paid," spokeswoman Janis Smith said.
The lawsuit comes a month after the big banks and attorneys general in 49 states reached a $25 billion settlement over widespread mortgage abuses. The banks did not admit or deny guilt in that settlement, which does not protect them from other litigation.
A decision is pending by North Carolina's Supreme Court in a case that could decide whether mortgage lenders can foreclose on a home without producing original documents that prove they're owed the money.
A class-action lawsuit filed by an Ohio county last fall accuses the same banks and MERS of failing "to record, or by recording patently false and/or misleading mortgage assignments" that have effectively "eviscerated the accuracy of Ohio counties' public land records, rendering them unreliable and unverifiable." The case asks a court to require restitution for the counties.
Several counties in Texas alleged in a lawsuit that using MERS was designed to deprive the counties of recording fee revenue.