Lenders sued for rushing through foreclosure process

Boarded houses
Hundreds of abandoned and boarded houses in north Minneapolis are vacant because of foreclosure.
MPR Photo/Dan Olson

Minneapolis Legal Aid attorney Amber Hawkins said in nearly half the cases the entity identified as the agent in the foreclosure was a Virginia-based company called MERS, Mortgage Electronic Registration System, Incorporated.

MERS, Hawkins said, did not hold the mortgages on the foreclosed homes.

MERS was created by the country's largest mortgage lenders including Chase, Citigroup, Countrywide, Wells Fargo and others to streamline the foreclosure process.

In Minnesota Hawkins said MERS is violating state law by not disclosing which lenders actually hold a homeowner's mortgage. "They have a right to know who has bought and sold the mortgage that is secured by their property, who is calling the shots, who is deciding whether they get some kind of a loan modification or not," he said.

Legal Aid filed suit in Hennepin County today seeking a temporary injunction to halt, and even roll back, the foreclosures where MERS represents the lenders.

Hawthorne Community Council Housing Director Jeff Skrenes said neighborhood groups also want to know who owns properties, so they can prevent the vandalism and eventual blight which often follow when houses are boarded and vacant for weeks and months.

"And if we want to take steps to remedy that or even to enter into to a positive dialogue with the company about what's going on and how we can fix this, currently we can't because MERS has that information and doesn't disclose it," explained Skrenes.

A spokeswoman for MERS said the company doesn't comment on pending litigation.

MERS has been sued in other states by groups challenging the company's standing in foreclosures.

The results of the lawsuits have been mixed. Some have been dismissed, while others have been upheld.

State Rep. Joe Mullery, a DFL lawmaker whose district includes north Minneapolis neighborhoods hard hit by foreclosure, welcomed the lawsuit.

Mullery and others authored bills last session that if enforced would add significant new protections to people who've been victims of predatory lenders.

Regardless of the lawsuit outcome, Mullery said the next package of foreclosure protection proposals he'll put on the table this session includes a requirement that lenders be notified who was foreclosing on them and the lender will be required to notify a counseling service.

"The counseling service is going to be able to get within a certain amount of time, within days, accurate information and who to negotiate who has authority for the lender. That's going to be in our new package of laws," Mullery said.

Minneapolis Legal Aid is joined by the North Carolina-based Center for Responsible Lending in the lawsuit against MERS.

Today's lawsuit is but the latest salvo in an expanding legal challenge to lenders and others.

In Minnesota a handful of cases against disreputable mortgage brokers, value inflating appraisers and other unethical real estate professionals have resulted in convictions and fines.

Around the country some cities and neighborhoods are bringing suit against big banks in what is a growing effort to win damages for individuals and cities victimized by unscrupulous lending practices.

Your support matters.

You make MPR News possible. Individual donations are behind the clarity in coverage from our reporters across the state, stories that connect us, and conversations that provide perspectives. Help ensure MPR remains a resource that brings Minnesotans together.