“Doug Welborn, state district court clerk of Baton Rouge, and Jeff L. Thigpen, register of deeds in Guilford County, North Carolina, are doing what millions of recession-weary Americans wish they could do: they are suing large banks and mortgage companies in court, alleging that their creation in 1995 of the Mortgage Electronic Registrations Systems, Inc., (MERS), to replace local county recording of property transfers, led to billions of dollars of fraud, victimizing not only millions of homeowners but state and local governments across the country. MERS, not coincidentally, was a key factor in the growth of the real estate bubble whose crash precipitated the Great Recession of 2007 to 2009.
Welborn’s action, filed in federal district court in Baton Rouge on behalf of court clerks across Louisiana, alleges that the 17 banks and mortgage companies violated the Racketeer Influenced and Corrupt Organizations (RICO) Act by controlling MERS in a scheme to cheat clerks of court of recording fees.
Historically, every time a mortgage was sold from one holder to another, it had to be recorded at the local courthouse. Welborn’s suit alleges that the banks used MERS to avoid recording fees on 10 to 12 mortgage transfers per property, each instance of non-paid fees costing local government. MERS was thus critical to the industry practice of bundling mortgages into securities that eventually were sold to investors. Although the complaint does not state a specific damage amount, attorneys for Welborn estimate statewide losses of $450 million; if proven, they could be trebled under RICO to $1.35 billion…”
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