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County Ponders Suing Mortgage Tracker

A lawsuit against a private mortgage tracking system which may have cheated Harris County out of millions of dollars in fees is being considered. Other counties in Texas are suing over the company's practices.



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The controversy involves Virginia-based Mortgage Electronic Registration Systems, or MERS, which claims to hold title to some 60 million loans around the country.

Harris County is ready to challenge the practice used by MERS. County Judge Ed Emmett says a lawsuit could be filed in a couple of weeks.

“My concern was there were just a lot of unanswered questions. Specifically, if this is something that affects county governments all over the state, then why isn’t the attorney general of Texas involved in it, representing the arms of the state, namely the county governments. And I think there are just a lot of facts that need to be gathered before we enter into this type of a lawsuit.”

A bank that makes a mortgage loan to a homebuyer may opt to sell the loan, allowing it to make new loans. Typically, that process is recorded with the county clerk.

MERS says that process doesn’t have to be recorded, because it is the lender, no matter how many times that loan is sold. Harris County — along with other counties across the state — alleges the way MERS tracks mortgages violates state law.

County Judge Emmett says he’s been told by County Attorney Vince Ryan that it is owed at least $10 million in unpaid fees, and possibly as much as $100 million with penalties.

“That raised some of the concern. If they, as was said in court two weeks ago, it could be ten to a hundred million dollars. Well, I had concern that we were going to be paying outside attorneys. And $2.5 to 25 millions, that money would otherwise come back to the taxpayer. So, we’ll wait and see what they bring back to us in two weeks.”

A research economist at Texas A&M expects a lot of legal wrangling and discussion about the function of MERS, and whether the sale of loans was legally required to be recorded at the county courthouse.

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