Andrew Keshner, New York Law Journal
MERS and several banks who were sued by New York’s attorney general for allegedly initiating faulty foreclosure actions have struck back in the high-profile litigation by strongly defending their practices and discounting the office’s assertions as factually and legally deficient.
In February, Attorney General Eric Schneiderman sued MERS—Mortgage Electronic Registration Systems—and several major banks and mortgage servicers, including JPMorgan Chase, Bank of America and Wells Fargo. The action contended the defendants’ use of the MERS system resulted “in the filing of improper New York foreclosure proceedings, undermined the integrity of the judicial process, created confusion and uncertainty concerning property ownership interests, and potentially created clouds of title on properties” across the state (NYLJ, Feb. 6).
Defendants fired back on April 20, seeking dismissal of the suit and claiming that their practices—such as having MERS commence a foreclosure or using a private registry to track loan ownership rights—were not deceptive and stressed that the attorney general never pointed to a single case where an action was initiated against a homeowner who was not in default.
Defendants argued the attorney general’s claims fell outside the scope of General Business Law §349(b), the statute outlawing deceptive business practices, and Executive Law §63(12), the law empowering the office to take action against “repeated fraudulent or illegal acts” in business.
Furthermore, the defendants said, the office’s claims were barred by the separation of powers and res judicata doctrines, along with the absolute privilege for statements made in litigation.
“In disregard of settled law, the Attorney General seeks to recast lawful, privileged conduct of a party to litigation, in the course of litigation, as fraudulent and deceptive trade practices,” MERS wrote in People v. JPMorgan Chase, 2768-2012.
MERS and the servicer defendants made many of the same arguments in their respective court papers but joined each other on any arguments not made in their own briefs.
The case has been assigned to Brooklyn Supreme Court Justice David Schmidt (See Profile) and the attorney general’s response is due June 22.
Last month, JPMorgan Chase, Bank of America and Wells Fargo, along with other entities who are not defendants in the state’s suit, reached a settlement with the attorney general’s office in which they agreed to pay a combined $25 million in relation to foreclosure practices. But the agreement preserved the attorney general’s claims for injunctive relief and his effort to recover for damages sustained by New York homeowners in allegedly faulty foreclosures. The banks neither admitted nor denied deceptive practices through their use of MERS. (NYLJ, March 15)
