Clerks of court in 30 of Louisiana's 64 parishes have combined to file a lawsuit this week against 17 MERS member banks and financial institutions, alleging violations of federal racketeering statutes through the use of MERS to avoid recording fees.

The parish clerks allege that the MERS member institutions had a duty to record mortgage assignments in order to maintain perfection of securitized mortgages, and that they misled investors into believing that this was not the case. 

The lawsuit seeks back recording fees from the MERS member institutions.  According to the lawsuit, recording fees on mortgage assignments are $25 plus $10 per page after the first page, or $8 a page after the first page if the document exceeds ten pages.  The county clerks "conservatively estimate" that the unrecorded documents would average ten pages, and that there are "ten to twelve" unrecorded transfers per MERS mortgage-- implying $1150 to $1380 in avoided fees per MERS mortgage. 

The lawsuit seeks treble damages, which implies that the county clerks are seeking $3450 to $4140 per MERS mortgage-- with interest.  In addition, the county clerks are seeking a permanent injunction requiring the recordation of all MERS mortgage assignments.

The portion of the lawsuit containing the primary allegations states:

"[We] do not allege that security instruments are unenforceable or foreclosures are inappropriate where MERS is a party, nor do [we] suggest that the MERS system of serving as nominee and electronically tracking mortgage transfers is inherently invalid.

"[We] instead allege that, in order to maintain perfection of a mortgage securing a loan transferred to anyone, whether members of the MERS system or not, a valid mortgage assignment must be recorded for that mortgage in the parish records.  Failure to do so results in the mortgage no longer being protected under the Louisiana Public Records Doctrine.  Defendants have a duty to maintain the perfection of the mortgages securing each mortgage loan backing a mortgage-backed security by properly recording all mortgage assignments in the public records.

"[We] are entitled to receive a fee when the mortgage assignment is properly recorded in the parish records.

"In order to avoid paying this fee, the Defendants: operated and directed the affairs of MERS to enable them to transfer mortgages in a manner designed to unlawfully avoid payment of required recording fees; directed misleading publications to investors and the general public regarding the need for properly recording mortgage conveyances; actively concealed the lack of valid assignments from investors; and mailed and/or electronically transmitted false information and/or notices included, but not limited to, foreclosure documents, to [county clerks], homeowners and others.

"The Defendant Trustees conspired with the Defendant Shareholders to create the MERS scheme and assisted in implementing the scheme by disregarding their duty as trustees to ensure proper perfection of the mortgages, all in order to facilitate the creation and profitability of mortgage-backed securities.  Trustees were not members of MERS and transfers to Trustees must be recorded in the proper offices of the [parishes].