Two MI Counties File Class Action Suit against MERS and Banks for Being Tax Cheats

Two MI County Registers of Deeds–Curtis Hertel of Ingham (Lansing’s county) and Nancy Hutchins of Branch–have filed a class action suit against MERS, seeking the taxes the banks should have been paying to counties and the state every time they transfer property, plus penalties.

Plaintiffs are seeking money and punitive damages, tax penalties, costs, and attorney fees in the return of unpaid taxes, interest and penalties to Plaintiffs as class representatives of the 83 counties of the State of Michigan.

In addition to MERS, BoA, Chase, Wells Fargo, and Citi, the suit cites parts of the state’s biggest foreclosure mills, eTITLE, 1st Choice Title, and Attorney’s Title and Fannie Mae. The suit argues that the defendants had a duty to record the real value of property transferred in the state, and by failing to do so, they cheated counties out of the taxes on those property transfers.

Defendants, as grantors, makers, executors, issuers and deliverers of deeds or instruments conveying an interest in real property under MCL 207.507, had a DUTY to declare the true value of the property and full consideration given/received on the face of each and every property transfer documents in Exhibit 2, as well as all those other similar filings made by Defendants; or in the alternative Defendants had a DUTY to attach an affidavit to the deeds and instruments stating the true value of the property. Defendants had these same DUTIES with regard to all those other deeds and instruments filed by them in all 83 counties of the State of Michigan over the last 15 years.

Defendants made, executed, issued and/or delivered for recording with the Registers of Deeds in all 83 counties in Michigan, assignments and other real property transfer documents transferring all or part of an interest in real property without stating the actual and true value of the property on the face of the instrument; and without alternatively attaching an affidavit stating the true value of the property interest being transferred. MCL 207.504/MCL207.525(2).

As a direct consequence of Defendants’ failure to properly make, execute, issue, and/or deliver real property transfer deeds, assignments, and other documents recorded in the 83 counties of the State of Michigan transferring property and security interests, neither County nor State Real Estate Transfer Taxes have been paid on thousands of real property transfers filed by/for Defendants across the counties of the State of Michigan as required by law.

When Hutchins filed a similar suit covering just Branch County–a rural county with a population of 45,000–in August, she estimated the county had lost $100,000 in the last 5-10 years. Even in Ingham County alone, with its population of over 250,000, that number is going to be much higher. Add in the state taxes, and the money will start to add up.

But the principle will be even more important: the banks have been cheating counties and states with this MERS scheme. It’s time they finally paid taxes like the rest of us.

23 replies
  1. Sojourner says:

    When you add in the costs of defending themselves, it would probably be cheaper for MERS et al to just pay up!

  2. emptywheel says:

    @Sojourner: Except then they’ll have to do so in every county and state in the country. Not gonna happen.

    Particularly given that the numbers for Ingham are probably a lot higher than Branch. I suspect there are very few people who got sold predatory mortgages in Branch, and probably a lot fewer weird securitizations.

  3. MadDog says:

    I’ve always had a wish that an injured party would win such a suit and then charge the very same interest that the banksters use on their credit cards. You know, something like 28% compounded daily.

    Hey, just like the banksters, the one who is owed the money gets to choose their own rates.

    If I use the Branch county example ($100,000 over the last 10 years at 28% interest), I get the following when compounding daily:


    Then of course one could use “payday loan” interest rates instead. Say 400%. Using the numbers $100,000 over the last 10 years at 400% interest but we’ll give them a break and compound annually, I get the following:


    Yup, they’ll owe almost a Trillion dollars!

  4. rugger9 says:

    I hear you, MadDog, and it does have the ring of fairness to it.

    Good luck getting that past a courthouse paid [off] to protect the MOTUs. But they do have it coming, especially the mahogany suite denizens. I’d like to see a way to get their filthy bonuses back, especially the ones tied into TARP, the RICO statue allows for this, I believe.

  5. earlofhuntindon says:

    Here’s hoping the suit survives challenge to its status as a class action. The class action is a tool available to the unempowered that governments and this Supreme Court have taken great pains to spike. It leads to accountability, which can be so rude as to disrupt a Georgetown cocktail party.

  6. rugger9 says:

    The fact the counties are owed the recording fees shouldn’t be in dispute, that principle goes back centuries to English common law. However, I’d bet the banks will claim that all of that stare decisis is all wrong and they have a better way.

  7. bmaz says:

    Do not understand why this is not pled in terms of fraud, conspiracy and, maybe, RICO (although I would have to think about that more before definitively saying that).

  8. MadDog says:

    @bmaz: I too was curious why no criminal charges, but then it does seem that “white collar” criminals rarely get on local prosecutor radar screens.

    And now that I’m thinking about it, they rarely show up on federal prosecutor radar screens.

    Am I on to something? *g*

  9. rugger9 says:

    Usually the white collar guys can afford the good lawyers that will drag things out or turn the prosecution into a pretzel. After a few rounds of that, the prosecutors go for the easy marks to puff up the conviction rates for their future AG campaigns.

  10. Bob Schacht says:

    @emptywheel: “@Sojourner: Except then they’ll have to do so in every county and state in the country. Not gonna happen. ”

    Oh, how I wish that the suit wins! I just hope that all of the “too big to fail” take a significant hit. If Geithner & Co. won’t break up the Bigs, I hope these lawsuits will. Their leadership during the real estate bubble all need to be utterly humiliated and stripped of all their illicit wealth.

    Bob in AZ

  11. thatvisionthing says:


    – Does this do anything to clarify chain of title?

    – Is there a statute of limitations?

    – If there is no clear chain of title, even for the bank, then what?

    Just saying, I want chain of title addressed before it’s too late. I’m still stuck on Bill Black

    …without evidence of debt, there is no debtor and no creditor.

    …and Bobby Ewing in the shower:

    In the beginning, there was your mortgage. The minute after you signed and left the office, the mortgage got sold. So your mortgage was bought and paid for then. Then they shredded the notes (*ping*) and sold and sold and sliced and diced air and wind pudding and CEOs got bonuses on those churned earnings and Bobby went away and… The moment they shredded the note (*ping*), you’re in dreamland. All the gazzzzillions are a dream. And now… wake up sleepyhead, Bobby’s in the shower and the mortgage was paid.

    My dream, I’m sticking to it. Just like the banks.

  12. thatvisionthing says:

    @thatvisionthing: Just to clarify how confusing the confusion is, from transcript of Harry Shearer’s first interview of Yves Smith on Le Show, last December (long excerpt from an hour-long podcast — I think the proportions keep it fair use?) MERS is such an onion of a mess, I don’t know how to pare this better:

    HARRY SHEARER: Now as I read what you’re writing, these mortgages don’t just go from the originating institution into the trust. A lot of them travel a very circuitous journey through a number of different sets of corporate hands – or at least in names of corporate hands, if hands can have names – and that each time the mortgages passed from one set of hands to another it would in ordinary practice go through the county recorder’s office in the county where the house the mortgage is on is located, and there’d be a fee, a recordation fee attached, and by doing what they’ve done, they’ve saved themselves some amount of money. There’s a court case in Massachusetts, I think, where the county recorder says, “Hey, you guys didn’t run your transfers though this office and you owe us $500,000, which doesn’t sound like a lot, times all the numbers of counties in the United States, still is like chump change to banks, though one wonders that they did it to save that. But on the other side of the picture, if I’m not mistaken, one reason that the lockbox as you call it, or the trust, has these specific restrictions on when the mortgages can be in there and you can’t be postdating them and getting them in late is for the tax implications of the trust – do I have that right?

    YVES SMITH: That is correct. This is a whole multilayered issue. And that’s why it’s a little bit hard to peel all the layers of the problem back. You’re correct that there are a whole bunch of different motivations for why they skipped these steps, but basically, yes, the overview is correct that it was always a provision in these contracts that it would not go directly from, say, the Countrywide to, say, the trust, but they would always go through intermediary parties because they wanted to establish something called, I hate to say it, “bankruptcy remoteness.” They wanted once the mortgages got into the lockbox, that if Countrywide got in trouble, that people that Countrywide owed money to, or the FDIC, couldn’t say, “Hey, you guys sold it to that trust when you owed us money. You shouldn’t have done this. We’re going to go to the trust and grab it back.” Investors did not want to be exposed to that, and so the way to make sure that no one could go to the trust and grab the mortgage back from the investors was to have it go through several intermediary parties and each time it went through it had to be something called “a true sale,” and there were certain legal requirements for that. But basically, all the agreements say that it had to go through these parties and the note, which is – it’s like a check. It literally had to be endorsed by each party. So if it went from A to B, you’d have to show that A signed it over. And then you had to show that B picked it up and that B signed it over. And then if it went to a C, that C signed it over. And then that it finally went to D. The normal minimum chain was A-B-C-D. So you normally had at least two parties in the middle. That was hassle, and you’re right that the recording fees were a motivation.

    The banks used an entity which was set up in the late ’90s called MERS to try to skip those recording fees. That’s part of this question. But yes, that they were supposed to go through this conveyance chain, that they did it to skip recording fees, they did it to save hassle, and they basically appear as a whole industry to have just decided they were going to change their procedures to save money and hassle and never bothered changing their legal contracts. I mean, that’s the crazy part. You know, so they had this huge gap between what they committed to everybody to do and what they didn’t do. And the tax issue, you’re correct, is one of the reasons.

    The other reason that this is difficult to fix, because from a tax perspective, the reason they made everything so rigid was that the little legal lockbox was supposed to be passive and the tax laws required that the mortgages had to get in there by a certain point in time that’s basically subject to incredibly limited restrictions. It either had to be in there by the time the deal was sold to investors or, at the very worst across all these deals, 90 days after. And the window – you know, the subprime market died in 2007, three months past when that market stopped is long past.

    HARRY SHEARER: Let’s take that detour that you offered for a moment, MERS, which as I’ve been reading about it in your blog is a fascinating little subworld. What do the initials stand for?

    YVES SMITH: Mortgage Electronic Registration System.

    HARRY SHEARER: And it’s a database of these transactions?

    YVES SMITH: More or less. I mean, it actually serves two functions. One of the things it does is to track mortgage servicing rights. So if you’re, you know, the people who are “MERS members,” only “MERS members” have access to it, which basically means servicers, who are the guys who handle the payments every month – you know, they’re the ones who take the money from the borrowers and when they get the money they redistribute it to – they handle all the mechanics of distributing to investors, and they also handle the foreclosure procedure, so they have a lot of administrative duties.

    HARRY SHEARER: So services – pardon me just a minute – servicers are the function that the bank used to have when it held onto the mortgage.

    YVES SMITH: That’s correct. And typically – some of them are independent. A lot of them are departments within banks, which gets a bit confusing, because you’ve got – you know, for example, you’ve got a bank like Wells Fargo wearing its hat as Wells Fargo Servicing, but it doesn’t own the loan, the loan is owned by a bunch of investors. You know, so you do have people wearing sort of – what? you know, who am I today? – relative to all the different parties. So one role is they keep track of – you know, you punch a particular loan number into MERS and the MERS members are typically the servicers and the foreclosure mills. You and I can’t go to MERS and become a MERS member.


    YVES SMITH: Aww. So they keep track of who’s servicing the loan. They also supposedly keep track of who actually owns the loan. The problem with “they supposedly keep track” is that compliance by all of these little servicers is voluntary, and there are no penalties if they are slow to input the data. So, you know, one thing that everybody suspects but again can’t prove is that again when the note was supposed to move through all these intermediary parties, even if it was done – remember there was a period when it looks like this was done correctly – it doesn’t even mean the transfers were properly recorded in MERS. And there are cases – of course, we’re seeing these increasing number of cases coming to light – where the wrong party shows up trying to foreclose, or sometimes multiple parties show up to foreclose, and again, if MERS had any integrity, that should be impossible. So, again, we’re seeing evidence on the ground that the theory of what a great system MERS is versus the practice of how it works is not so hot. And needless to say, ordinary citizens don’t like the fact that in the old world, they used to be able to go down to their courthouse and see who actually held the mortgage. And now the whole thing has disappeared into the bowels of MERS and the public can’t find out what the heck is going on here.

    HARRY SHEARER: How many employees does MERS have?

    YVES SMITH: Uh, 47, and I think it may be up to 48.

    HARRY SHEARER: (laughs)

    YVES SMITH: So they’ve outsourced all the database, I believe, to Electronic – EDS, Electronic Data Systems, so it’s really almost a virtual company and they have this very bizarre corporate structure which has been described as unorthodox to the point of being virtually fraudulent where the MERS members will temporarily put on a MERS hat and say, “Oh, even though I work full-time for _____ – again, say Wells Fargo – I’m going to temporarily be a MERS signing officer and do all these things in the name of MERS even though MERS never paid me a nickel. I mean, it’s just – there’s this whole crazy set of arrangements they’ve come up with which now that people have looked at it, they are beginning to question the legitimacy of a lot of the ways that it does business.

    HARRY SHEARER: How many people have signed documents as supposed MERS officers?

    YVES SMITH: Well, it’s kind of hard to know, because again MERS won’t tell us, but at any one point in time MERS has over 20,000 signing officers authorized on its behalf.

    HARRY SHEARER: (laughs) Twenty thousand officers! And 47 employees. If you took it at face value, you’d say that’s a rather top-heavy organization, wouldn’t you?

    YVES SMITH: Exactly. Exactly. That’s one of the reasons why this whole arrangement is so questionable. It’s obvious MERS can’t properly supervise these people. And then they claim, “Oh, well, we only give people limited authority. They can only operate in this teeny space, so how could they do any damage?” Well, again, there’s evidence on the ground that contradicts that. For example, they claim that they’ve got electronic procedures so that no one could possibly transfer a mortgage from one party to another without both sides authorizing it. It’s what they call an electronic handshake. Supposedly somebody on one side of the transaction has to authorize it before the party on the other side could move it. Well, you’ve got lots of evidence in courts that MERS signing officers have also shown up as the supposed signing officer on behalf of entities that went bankrupt a long time ago. So it is impossible for the entity that went bankrupt two years ago to have authorized this person to do anything on their behalf. There are lots of cases of that.

    HARRY SHEARER: The only person who could authorize something once a corporation is in bankruptcy is the bankruptcy referee, right?

    YVES SMITH: You’re absolutely correct.

    HARRY SHEARER: (laughs)

    YVES SMITH: And there’s no evidence that this happened. So there’s just so much chicanery going on.

    …and then they go on for at least another 30 minutes…

  13. alinaustex says:

    Do any of these banks have corporate offices in Delaware or New York ?
    Would the MERS law suits filed by Delaware & New York be helpful to these MI class action suits .
    My hats is off to the the Delaware & New York state attorney generals for bringing this action . Where is the MI state attorney general regarding the MI county class action ?
    Could these various county , state , and other lawsuits be “nationalized ” ?
    And while we are ‘dreaming ” about holding banks accountable -any way to tie any of this to Timmie and Maiden Lane ?

  14. Masoninblue says:

    @rugger9: The civil RICO statute allows treble damages and also authorizes a court upon a proper showing to impose an immediate freeze on all of the personal assets of named defendants and the assets of the RICO enterprise, which would be MERS and the defendant banks that profited from the unlawful scheme. The freeze would remain in effect pending the ultimate resolution of the case and likely put the defendant banks out of business since they cannot conduct business without access to the money.

    Don’t know if the plaintiffs have alleged any RICO violations. Bank fraud and securities fraud are defined as predicate offenses under the statute. Plaintiffs would only need to assert that defendants committed two predicate offenses to survive a motion to dismiss a RICO count.

    I’d have to review the complaint and do a little research to be certain, as I’m not absolutely sure that a RICO count would survive a 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, but I am intrigued, to put it mildly, by the possibilities (I’m not certain how or whether plaintiffs pled it).

  15. Govt Mule says:

    I live in Essex County, Mass. and the Registrar of Deeds said that for just the southern half of the county, that MERS has gipped taxpayers out of about $22 million in fees for the past decade or so (at $75 per change in title). Now that’s just half the county so the total damage is probably close to $50 million and that’s just one county in one state. What are we talking about, a billion or more?

  16. Marc Michon says:

    yes but its worse than we think
    they sold 10 mortgages on each house then sold those over and over
    see and collateral fraud yes is prosecutable under RICO but also prosecutable under current laws. this is why banks want to fraudclose fast
    so person getting thrown out doesn’t know there is 10 mortgages on his home
    no, titles will not be clear as any 10 owners of mortgages on one house can later foreclose as its a criminal system. from top to bottom judges, police, politicians, district attorneys are all participants in the criminal activity its not a economic,political problem it is a criminal problem
    >thatvisionthing yes Black has it right but because of fraud is why banks don’t want to show note you have no right to face your accuser
    hey Maddog yes they should pay interest!

  17. thatvisionthing says:

    @Marc Michon and Masoninblue: Ianal and I read the Yves Smith interview over again several times this morning and also the Michigan court papers, trying to get a frame to understand what the game is and where the moves are. I don’t get it, like seven ways from Sunday.

    First of all, this is a class-action suit by two Michigan county registers against 14 named and an as yet unknown (infinite?) number of to-be-named defendants (John Doe as MERS signer and John Doe Corporations 1-MMM) for county and state taxes not paid on improper filings, plus penalties and damages and costs, for a 15-year period. The filings were incomplete/improper because they didn’t state on their face or in an attachment the true value of the property or their reason for failure to pay tax or applicable exemption.

    Which confuses me. Filings, what filings? I thought MERS sidestepped the county registers after the first filing naming MERS as trustee or nominee. And that all the mortgage securitizing slicing and dicing and churning for bonuses happened after that, outside the registers’ view and hands. I thought that, as Yves and Marc Michon said, in all the smoke and mirrors there could be errors upon errors of ownership. And when I look at that sentence and that word ownership, I get double vision, because I know there’s a real estate title which is not the same thing as the debt note, and I don’t understand the distinction here. It’s all mortgage to me.

    And filings with who, the Registers of Deeds? In which case, aren’t the Registers statutorily at fault too for having accepted the incomplete/improper filings in the first place? (See #47 in the court papers.) Of note, exhibits are referred to that I can’t see online (see #16, 28-30 and 45).

    And filings made by what is I think a top-to-bottom chain of defendants – MERSCORP, MERS, Fannie Mae, Bank of America NA, Wells Fargo Bank NA, JP Morgan Chase, Chase Home Mortgage (“a division of Chase Bank NA and JPMorgan Chase”), Citimortgage, three title companies, and three attorneys who signed as MERS VPs. I changed the name order to put it in what I think is top to bottom chart order. But I dunno.

    I try to make a flow chart grid in my mind and there are holes. Bank levels would seem to go from parent Bank to child Bank NA to grandchild Bank Mortgage Company, which leads me to expect 4 banks x 3 levels = 12 bank defendants, but there are only 5. And how can Chase Home Mortgage be a division of JP Morgan Chase and Chase Bank NA, and even if that’s possible, how then is only JP Morgan Chase named as a defendant and not Chase Bank NA?

    Chase, Wells Fargo Bank and Citimortgage are identified as principal shareholders of MERS. (But not BoA and Fannie Mae?)

    MERS is identified as a “foreign corporation” owned and operated by MERSCORP, a Delaware corporation (huh?) whose registered agent is the Corporation Trust Company. Bank of America, Chase and Citimortgage all have a common registered agent in Michigan, CT Corporation System (wikipedia says CT Corporation started out in the 1890s as Corporation Trust Company). (Huh?)

    The three attorneys named, Kivi, Coon and Isaacs, are identified as MERS VP signers (robosigners?), though this Michigan Messenger news article identifies them as foreclosure attorneys associated with two of the title companies named – Coon and Kivi with Attorneys Title, and Isaacs with eTitle.

    #50 says the value can be “determined by review and ministerial inspection of the public financing records for each property, Defendants records, and the local taxation authorities records collection of notes concerning the market value/taxable value of each property.” Really? I thought the point was that the public records were false and the defendants and their records were smoke and mirrors. From the Michigan Messenger:

    “MERS has transformed the entire mortgage industry into a giant shell game”, said Hertel. “The current servicer of a mortgage is no longer a matter of public record, and once a property is foreclosed, the real games begin, as deeds and other paperwork are filed in such a way to avoid transfer taxes at every step. Property ownership is clouded, and the simple task of collecting transfer tax has been turned into this legal battle, largely because of the involvement of MERS.”

    Is the point of this to get to discovery – all the unnamed John Does? Is the point of this to demonstrate that true value is meaningless? Is the point of this to demonstrate that ownership is meaningless? Or is the point of this to piggyback on the MERS fantasy and tax each fantastic metastasis at every opportunity?

    I dunno.

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