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Kentucky Counties Sue MERS, Say that They Will Refuse to Record Some Docs
Slade Smith

County attorneys for 14 of Kentucky's 120 counties have jointly filed a class action suit against MERS and dozens of MERS shareholders, including title industry organizations such as ALTA, First American, and Stewart.  The lawsuit accuses MERS of negligent and/or willful violation of Kentucky recording laws, fraud, unjust enrichment, and civil conspiracy.

The complaint alleges that in 2006, the Kentucky Legislature changed state laws to require that mortgage assignments be recorded.  At the same time, they instituted a $6 surcharge on recordings to provide a permanent source of funding for Kentucky's Affordable Housing Trust Fund.  MERS has since continued to fail to record mortgage assignments and evading recording fees in violation of the law, the suit claims.

The lawsuit asserts that the public records serve as a dispute resolution system for holders of security interest on land.  MERS, as a private system, hides those records, depriving the public of a system to easily resolve such disputes.  Therefore, "[a]ny MERS error in documenting note transfers frustrates the ability of individuals to transfer property", the lawsuit alleges.  Meanwhile, MERS takes advantage of the local land records to protect their own interests in property, while at the same time failing to pay to support that system, the suit alleges.

The lawsuit seeks back fees with interest, punitive and exemplary damages, attorney's fees, and an injunction against MERS to immediately cease the practice of not recording mortgage assignments.

The lawsuit also states that MERS and its members "have participated in a scheme utilizing material misstatements of interests in mortgages filed in Kentucky and Plaintiffs no longer intend to receive such instruments for recording."  This refusal to record would extend to "instruments missing complete and accurate information regarding the person preparing the instrument and the address information of a person receiving in the property by way of the instrument."

MERS has maintained that it has no duty to record mortgage assignments under Kentucky's recording statutes.

A similar class action lawsuit against MERS, filed by county clerks from two Kentucky counties, was dismissed earlier this year because the court ruled that the county clerks did not have a private right of action under the relevant laws, and that only property owners or holders of other interests in property could sue.  [See First Round Goes to MERS in County Recorder Suits Over Unpaid Fees, Source of Title, 2/23/2012]  That ruling was appealed in March.  One of the two counties in that suit, Christian County, has also joined this suit.  The other counties joining this suit are Boyd, Breathitt, Carter, Clark, Floyd, Franklin, Greenup, Johnson, Letcher, Magoffin, Mason, Pike, and Warren.

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