Hennepin and Ramsey counties are suing a national registry of mortgages to recover unpaid fees.
The counties accuse Virginia-based Mortgage Electronic Registration Service, or MERS, of allowing large lenders to transfer mortgages among each other without paying county registration fees of $46 for each transfer.
Ramsey County Attorney John Choi said state law requires that each one of those transactions be recorded in the county where the property is located.
"What MERS has done is that they've created kind of like a recording system, privately, and that avoids having to pay a county recording fee," Choi said.
He said it also has made it hard for cities to find out who to fine when foreclosed properties are left vacant and unkempt.
"The city needs to have somebody to be responsible for that, but it's a real nightmare to figure out who is responsible and who should pay that fee," Choi said. "Because all that information is contained in a private database."
Choi said he doesn't know how much fee revenue has gone unpaid. MERS released a statement saying the company has not violated state law and that the suit has no merit. The company says it has already prevailed in similar cases in other states.
"All MERS mortgages are recorded in the county land records and all required fees are paid," said Janis Smith, Vice President, Corporate Communications for MERSCORP Holdings, Inc. in the statement. "We will defend against this complaint, as we have with others."