After Judge Keeps County's Suit Against Mortgage Processer in Dallas, a Nudge to Settle

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It's been close to five months since Dallas County District Attorney Craig Watkins went after Mortgage Electronic Registration System over what Watkins claimed were "tens of millions in uncollected filing fees owed to the citizens of Dallas County." But since then little has been said about the suit, which was filed in county court and moved to the federal docket in October. Turns out, there was quite a bit of action involving the suit only yesterday.

For starters MERS had tried to get the court to move Dallas County's case to federal court in Arizona, where a judge in October dismissed dozens of suits filed by homeowners against MERS. But Dallas and Montgomery County, Pennsylvania -- which is trying to get $15.7 million from the company tasked with recording and transfer mortgages on behalf of, among others, Fannie Mae and Freddie Mac -- didn't want that to happen. Neither does John G. Heyburn, a federal judge for the Western District of Kentucky, who signed an order yesterday refusing that motion, writing:
While Dallas County shares some general background questions of fact regarding the formation and operation of the MERS system, there are important distinctions that weigh against including Dallas County in [the Arizona cases]. Most importantly, all existing [Arizona] actions were brought by homeowners or borrowers who brought suit concerning their impending or completed foreclosure. In contrast, Dallas County involves the propriety of the MERS system's failure to pay recordation fees under Texas's recording statutes.
Then, based on that ruling, U.S. District Judge Reed O'Connor here told Dallas County and MERS to huddle up by no later than February 22 and sort this thing out -- or, more accurately, "consider the nature and basis for their claims and defenses [and] the possibilities for a prompt resolution of the case." He wants a joint report from them by no later than March 7, which should answer: Do they still want to go to trial, or are they willing to consider mediation to settle the suit? We'll know soon enough.

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Staff Iran-Conoco
Staff Iran-Conoco

Commentator "Guest" has it right. Even if the claims asserted by the lawbyers (lawyer-lobbyers) Lisa Blue-Baron and Stephen Malouf, who Waktins has contracted to file the MERS case had any merit, MERS has a strong defense of assumed risk and a strong counter claim of contributory negligence against Dallas County.

Unfortunately, the civil claims Dallas County should pursue against Blue-Baron and Malouf arising from the fraudulent inducement of Dallas County commissioners into approving the unconscionable 25% contingency fee contract is unlikely to receive honest consideration from Judge O'Conner who only recently allowed Blue-Baron and Malouf to take $21 million under color of the lawfulness of a contingency fee contract Blue-Baron and Malouf had also fraudulently induced Albert Hill, III to sign.

The decision by Judicial Panel on Multidistrict Litigation (JPML), on which Judge Heyburn serves as Chairman, to keep the MERS case in Judge O'Conner's court has nothing to do with the JPML's responsibilities for cost-effective judicial process, including minimizing lawyers' fees, and has everything to do with using the Blue-Baron's and Malouf's influence on the JPML through Malouf's brother-in-law and JPML member Judge Royal Furgeson.  See Amicus Curiæ Information Regarding Judge W. Royal Furgeson, Jr. at http://UnCoverUp.blogspot.com (PACER Document 198 for MDL No. 2119).

harold
harold

What lawyers are representing the county? DA's or private attorney's? If private who are they and how are they being paid?

NewsDog
NewsDog

I hope MERS goes to go to court because they can win. Chain of Assignment is vastly different than Chain of Title. MERS registers and tracks Chain of Assignment. For Watkins it's about trying to look like he is fighting to get Dallas County $$$$. When he looses how will he explain to voters the costs the County encurred.

Bob
Bob

DA Craig Watkins has received some powerful backing in this lawsuit, from the New York State AG, who just filed a similar lawsuit against MERS and NY banks.  Apparently, Watkins is on the right track here.

Brenda Marks
Brenda Marks

Here's hoping District Attorney Watkins holds out for every single dime.  This is a summary judgment case.  The fees were owed and absolutely no evidence exists that they were paid to the county.  In addition, the fees were collected at closing and pocketed by either the original loan processor/holder or MERS once the numerous automatic flips occurred.  For MERS to fight this, they have to admit that they didn't file any of the title documentation, which violates not only state law but the Texas Constitution as well. 

Guest
Guest

To begin, there was a filing with the county for each loan called a deed of trust.  The county got a fee for each deed of trust that gets filed.  The deed of trust is different from the note.   

What didn't happen is the lien holders didn't go to the county and force them to do a bunch of paperwork each time a note was assigned to a different bank.  Notes  are not recorded.  There isn't a law that requires assignments of a note to be recorded.  There never has been such a law on the books in Texas. 

By not going to the county to file every one of these assignments, the banks saved the county from being forced to hire an army of additional people to shuffle extra paperwork.  The burden on the county of doing what Watkins says the county should have been doing would be huge.  The County has known about MERS and never had a problem with it because it benefited from the system.   

Not only does the substance of the claim fail, but the damages the county is asking for is absurd.  The county would be required to offset the fees it says it is entitled to with the savings it had for not having to hire additional people to handle the work it wasn't forced to do.  This should net out to basically $0.  Otherwise, the lawsuit is saying is that the recording fees are really taxes that are intended to produce positive revenue for the county rather than to cover the costs of recording the deeds.  I'm not aware of any part of the Texas Constitution that allows the counties to levy such a tax.   

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