Massachusetts Expands Probe Of Illegal Foreclosures

The investigation into alleged irregularities in mortgage foreclosures may be about to move in a new direction.

Massachusetts Attorney General Martha Coakley has disclosed that her office will investigate Mortgage Electronic Registration Systems (MERS) for its alleged role in illegal foreclosures.

The revelation comes as attorneys general from around the nation are attempting to reach a huge financial settlement with major loan servicers over last year's robo-signing scandal. In a letter to registrars of deeds across Massachusetts, Coakley said she would not be a party to any robo-signing settlement if it lets MERS off the hook.

Database of mortgages

MERS is a huge records database of mortgages against pieces of real estate. It was created by mortgage bankers as a way to make the recording of mortgages and transfer of property faster and more efficient.

A desire for speed and efficiency is what led to the robo-signing scandal in the first place. In states requiring a judicial process, a mortgage servicer was required to swear that they had read the foreclosure document and verify that the foreclosure was justified. Only then could the process take place.

But by 2009 there were so many foreclosures taking place that banks allegedly took shortcuts to speed up the process. In an undetermined number of cases, robo-signers were employed to sign the unread documents, a violation of the law.

Unlawful foreclosures

What does all this have to do with MERS? In her letter, Coakley said her office is "investigating creditor misconduct in connection with unlawful foreclosures, including failure to establish the right to start a foreclosure."

In other words, Coakley suspects that loan servicers, relying on information supplied by MERS, initiated foreclosure proceedings in Massachusetts before they had the right to do so.

"We have focused particularly on creditors' reliance on MERS and whether MERS conforms to the requirements of Massachusetts law, in the context of foreclosures and otherwise," the letter stated.

The reliability of MERS information, and the manner in which the data is maintained, are possible areas of Coakley's investigation.