Banks seeking to avoid local governments' recording requirements are now beginning to find that the self-published MERS claim to have saved at least 2.4 billion dollars in recording costs is coming back to haunt them in court.
Local governments are using Qui Tam lawsuits which allow a private party to bring suit on behalf of the government entity for a past or present fraud. One such suit, State of California ex rel. Barrett R. Bates, was filed in May of this year. In this action, the plaintiff qui tam, standing in for numerous local California governments, sued MERS, BofA, Chase, and Wells Fargo, and others. The suit alleges that the defendants wrongfully bypassed the counties' recording requirements. It also alleges that the borrowers were divested of the right to know who actually owned the promissory note. The 2.4 billion worth of avoided recording costs is named in the suit.
The suit asks for treble damages for all recording fees which were not paid to the counties during the last 10 years and also asks for civil penalties of up to $10,000 for every unpaid fee. Both Nevada and Tennessee have had similar suits filed.
The damages in the case of California might add up to 60 to 120 billion dollars. If this holds true for other states, the banks may find that they are in danger of becoming insolvent.
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