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.

Read the MERS filing.

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.

Read the banks’ filing.

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)

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In line with other states, Louisiana is suing the nation’s biggest banks for bypassing recording fees due in transfer of real estate title, but Louisiana stands out for taking a different route and suing under RICO laws, just like the government does to major crime syndicates.

Louisiana stands up to big banks

In the State of Louisiana, 30 judges representing 30 parishes are suing 17 banks, stating that the Mortgage Electronic Registration System (MERS) is a “scheme” set up to illegally defraud the government of transfer fees, and that mortgages transferred through MERS’ recording system are illegal as the promissory note of any mortgage is inseparable from the mortgage, which is what MERS does.

MERS was initially established by Fannie Mae and Freddie Mac nearly 20 years ago in conjunction with several major banks as a means to expedite the loan recording process as it used to be done through individual county clerk offices which was slow, and the founders went ahead even though most states did not have laws that authorized them to bypass the required filing with clerks.

Several states like Delaware and Ohio, along with the City of Dallas have already sued MERS and their bank partners, claiming millions were bypassed in filing fees due, and that the banks should have known that their filing system could lead to improper filing. These claims have been supported by numerous studies, one of which asserts that MERS destroyed the entire chain of title in America and is at the core of the housing crisis.

RICO laws took down the Gambinos, may penalize banks as well

What is different with Louisiana’s lawsuit is that they are pulling out the big guns and suing under RICO laws (Racketeer Influenced and Corrupt Organizations Act), alleging wire and mail fraud and a scheme intended to defraud the parishes out of their lawfully owed recording fees. RICO laws have taken down the Gambino crime family, the Genovese crime family, Hell’s Angels, and the Latin Kings and carry treble damages, which is triple the amount of actual damages.

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John W. Schoen, Senior Producer, MSNBC

In a quiet office in downtown Charlotte, N.C., dozens of Wells Fargo’s foreclosure foot soldiers sit in cubicles cranking out documents the bank relies on to seize its share of the thousands of homes lost to foreclosure every week.

They stare at computer screens and prepare sworn affidavits that are used by lenders in courts across the country to seize homes. Paid $30,700 to start, these legal process specialists, the title that goes with the job, swear an oath under penalty of perjury that they’re corporate vice presidents. They’re peppered with e-mails from managers to meet daily quotas of at least 10 or 11 files day.

If they fall short, they face a verbal warning. Then written. Two written warnings could cost them the paycheck that supports a family. As more than one source for this story told msnbc.com, “I can’t afford to lose this job.”

Pressured to meet daily production quotas, they are likely making mistakes that inadvertently could toss a family out of its home and onto the street, according to these workers.

State and federal prosecutors, in a recent settlement with five banks that included Wells Fargo, agreed. The joint state and federal settlement spelled out how the document procedures at the five banks resulted in “loss of homes due to improper, unlawful or undocumented foreclosures,” according to the complaint.

“These are mistakes that could cost someone their home,” a Wells Fargo document preparer told msnbc.com.

The Wells Fargo worker, who first contacted msnbc.com via email in late January, told of a wide range of concerns about the foreclosure documents she processes. Some families apparently were denied loan modifications after only cursory interviews, she said. Other borrowers applying for help sent comprehensive personal financial documents to a fax machine that she discovered had been unattended for weeks. Others landed in foreclosure after owing interest payments of as little as $1.18 a day, according to documents she said she reviewed.

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Leo King, Computerworld IDG

The US Federal Reserve has issued a punishing court order to Morgan Stanley, as it prepares to fine the bank over the use of automated ‘robo signing’ of documents relating to foreclosures for struggling US mortgage payers. It ordered the bank to make significant process, data and systems improvements.

The issue relates to a troubled electronic mortgage registry created by a range of the largest banks, which is allegedly plagued with errors. Those that have brought claims against the banks have said access to the database was deliberately restricted by the banks, and that mortgage foreclosures were often based on incorrect data entered by the banks as they rushed to offload the loans.

The court order issued this week concerns the Saxon business, which Morgan Stanley has sold to mortgage servicing group Ocwen Financial. The Fed said Morgan Stanley retained responsibility for the impact of Saxon’s actions. Saxon had issued over 225,000 residential mortgage loans.

Robo-signing typically involves employees of mortgage servicing companies automatically signing off foreclosure papers without checking them, in the interests of fast processing the papers.

The practice was allegedly supported by the Mortgage Electronic Registration Systems (MERS), which opponents claim may have resulted in unfair foreclosures for many home buyers. The database was created in 1995 to simplify the recording of mortgage sales and to allow banks to more easily sell on loans.

According to recent complaints by New York State against a number of banks, as well as being used fraudulently, the database was also “plagued with inaccuracies and errors”. New York State Attorney General Eric Schneidermann said that employees and agents of a number of banks had used the system to “repeatedly” submit court documents on mortgage holders, “containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have [had]“.

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Merscorp Inc., operator of the electronic-registration system for about half of all U.S. home mortgages, got a court to set aside a bankruptcy judge’s opinion criticizing its right to transfer the mortgages among members.

U.S. District Judge Joanna Seybert in Central Islip, New York, yesterday vacated part of U.S. Bankruptcy Judge Robert E. Grossman’s February 2011 decision in the bankruptcy of Ferrel L. Agard. Merscorp, based in Reston, Virginia, runs Mortgage Electronic Registrations Systems, or MERS.

“The issue of whether MERS had authority to assign the mortgage was no longer before thebankruptcy court,” Seybert wrote. “There was no longer a live case or controversy.”

Merscorp was created in 1995 to help county officials cope with the growing volume of mortgage transfers, the company has said. It tracks servicing rights and ownership interests inmortgage loans on its electronic registry, allowing participating banks to buy and sell the loans without having to record the transfer with the county. MERS helped Wall Street to quickly bundle mortgages together in securitized trusts.

“I thought it was a poor decision because it was decided only on procedural grounds,” George E. Bassias, a lawyer for Agard in Queens, New York, said of Seybert’s ruling in a phone interview today. “In my opinion she’s wrong on the procedure too.”

Foreclosure Sale

Agard filed for bankruptcy in September 2010, the day before her Westbury, New York, home was to be the subject of a foreclosure sale. The mortgage servicer, Credit Suisse Group AG (CSGN)’s Select Portfolio Servicing, asked Grossman to allow it to continue with the foreclosure. Grossman ruled that Select Portfolio should be allowed to do that.

Grossman then went on to say that Select Portfolio and U.S. Bancorp, which had been assigned the mortgage by MERS, wouldn’t have been given the relief had a state court not already granted a foreclosure judgment.

That was because MERS’s “nominee” status didn’t give it the authority to assign mortgages, Grossman said.

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Carolyn Thompson, Associated Press

A New York law firm that was harshly criticized after pictures surfaced from a company Halloween party where people dressed as homeless has agreed to pay $4 million in a settlement with the state over some of the tens of thousands of foreclosures it filed, attorneys said Thursday.

The agreement settles allegations that the Steven J. Baum Firm, one of the state’s largest-volume foreclosure companies, engaged in “robo-signing” and other paperwork shortcuts to process a huge number of foreclosure cases for clients including Wells Fargo,JPMorgan Chase, Bank of America, HSBC and Citibank, according to Attorney General Eric Schneiderman’s office.

Schneiderman said his office has been investigating the suburban Buffalo firm since April 2011, months before the company drew withering public criticism over pictures from its 2010 Halloween party that were published in TheNew York Times.

They showed part of the office decorated to resemble a row of foreclosed homes. In one picture, a person had a sign around her neck that read: “3rd party squatter. I lost my home and I was never served,” apparently mocking the explanation of some homeowners facing foreclosure. The Times said a former employee provided the pictures.

The firm’s president, Steven J. Baum, who was labeled as insensitive and held up by the Occupy movement as a symbol of corporate greed, later apologized. The firm announced in November that it would close.

Between 2007 and 2010, Baum attorneys filed more than 100,000 foreclosure actions, about 40% of all of those brought in New York courts. Examiners determined the firm prepared complaints in “assembly-line fashion,” enlisting the services of an affiliated document processing firm, Pillar Processing. Pillar, which Baum started, also is named in the settlement, along with Brian Kumiega, the Baum firm’s managing partner.

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Cora Currier, ProPublica

Buried in the sweeping mortgage settlement with banks, for which final documents were filed this week, are five whistleblower cases that shed light on the litany of foreclosure abuses by the banks.

According to one suit, Bank of America allegedly passed bad loans on to the Federal Housing Administration. According to another, the bank allegedly denied qualified homeowners access to HAMP, the government’s loan modification program.

The suits were all settled as part of the overall $25 billion mortgage deal. They were filed under the False Claims Act, which provides incentives for whistleblowers to come forward in cases in which someone has defrauded the government. Whistleblowers can net up to 25 percent of the total settlement from False Claims suits, and in some of these cases, the reward is in the millions.

Details are available for four of the cases; documents in a fifth, against JPMorgan Chase, have not yet been filed in Massachusetts. While the cases were settled as part of the overarching agreement, they still have to be accepted by the courts in which they were originally filed. In reaching the settlements, none of the banks admits or denies the lawsuits’ allegations.

We’ve laid out the details of each case.

Countrywide Defrauded the FHA

Kyle Lagow worked at LandSafe, a contractor of Countrywide, which Bank of America bought in 2008. He brought a suit in 2009 alleging that the company systematically undermined the appraisal process for home loans in order to approve as many as possible:

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