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Texas counties consider suing MERS over mortgage assignments, filing fees

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Two Texas counties are contemplating a lawsuit against Mortgage Electronic Registration Systems for an alleged failure to pay mortgage assignment recording fees to local clerks' offices. If Bexar County, which includes San Antonio, and Hidalgo County, which borders Mexico in South Texas, decide to sue, three Texas counties will have brought lawsuits against Reston, Va.-based MERS. Harris County, the third-most populous in the country and home to Houston, is looking into a similar lawsuit, and the Dallas County DA Craig Watkins already filed suit. Watkins sued MERS in September, claiming the mortgage registry owed the county $50 million to $100 million in mortgage transaction filing fees. In the suit, Dallas County alleges MERS, its parent company Merscorp Inc., and others acted as a shadow recording system to avoid county recording fees. MERS became a critical part of the mortgage boom and securitization process, as the registry allowed financial firms to re-assign mortgages by making updates to the system and foregoing new recordings at local counties. Bexar County is now considering similar claims, but remains in the investigatory stages, sources said. Edward Schweninger, who leads the Bexar County DA's civil division in San Antonio, said, "We are looking into that issue." But, Schweninger said it's still unknown who the potential defendants will be at this point. He said the county is working with attorneys to evaluate all of the potential claims, as well as similar cases filed in other counties. Schweninger said he may raise the issue with Bexar County commissioners next week to obtain approval to hire outside counsel to probe the issue. Arturo Guajardo, the Hidalgo County clerk, said the issue recently came to his attention, and his county is also talking to outside counsel to evaluate its position in relation to MERS. "I am keeping my eyes open and waiting," said Guajardo when asked about the next step in the process. When the Harris County DA's office said it would consider a lawsuit similar to the one filed in Dallas County, MERS said it could not comment on cases that have yet to be filed. After Harris County started looking into the possibility of suing for filing fees, a MERS spokesperson released a statement: "I reiterate that MERS complies with the recording statutes and mortgage regulations in Texas (as well as other states) and the legality of MERS' business model has already been affirmed in numerous cases decided by Texas courts and by federal courts. Should any new litigation be filed, we will defend the merits in the appropriate venue." Write to Kerri Panchuk.

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