Photo: Wikimedia Commons
The New York State Attorney General announced today he was filing suit against Bank of America, JPMorgan, and Wells Fargo over the creation of an electronic mortgage database that allegedly led to fraudulent foreclosure proceedings.The Mortgage Electronic Registry System (MERS) was a national database owned by the banks.
It allowed individual mortgages to be moved quickly through the securitization process and either sold directly to investors or be further packaged into collateralized debt obligations.
The lawsuit alleges that as the value of homeowner mortgages fell along with the value of the financial products they were components of, the three banks used the MERS to initiate foreclosure proceedings.
The suit claims these proceedings were improper and fraudulent because data in MERS was rife with inaccuracies and because it was not publicly available.
In his press release, Attorney General Eric Schneiderman said the following:
“The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages. Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law …”
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.