Beaufort County has filed a lawsuit against Mortgage Electronic Registration Systems, a nationwide mortgage database that is owned by nearly two-dozen large banks and mortgage services.
County officials say the company's records do not always accurately reflect a loan's owner.
The company also does not consistently alert the county Register of Deeds Office when loans on properties are bought, sold or bundled into a tradable security. Instead, the record indicates only that MERS owns the note, county attorney Josh Gruber said.
"These activities have caused massive confusion and has made many of the Beaufort County Register of Deeds recording systems inaccurate and unreliable," Gruber said in a statement.
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Jason Lobo, director of communications for Merscorp Holdings, MERS' parent company, said in an email that the company has fought and won similar lawsuits in North Carolina, Florida and other states.
"There is no merit to the claims against Merscorp Holdings Inc. or Mortgage Electronic Registration Systems Inc. and (we) will defend against this complaint, as we have with others," he wrote.
The case was filed in the Beaufort County Court of Common Pleas by the Bluffton firm of Vaux & Marscher, which is representing the county. Vaux & Marscher will be paid only if MERS or other defendants are required to pay damages.
The defendants include Bank of America, J.P. Morgan Chase and HSBC Mortgage Corp. Local banks that are MERS members and named in the lawsuit are S.C. Bank and Trust, Coastal States Bank and Tidelands Bank.
The county wants MERS and its members to correct the public records to accurately reflect who owns mortgages on local properties. If that's not possible, the county seeks "compensatory, consequential and punitive damages for the destruction and harm caused to the Beaufort County Recording System."Beaufort County is the first county in South Carolina to sue MERS and its member banks. Although similar lawsuits against MERS have failed, Gruber says the county has taken a novel approach by targeting what it claims are inaccuracies in the public record.
"MERS has recorded documents in our system that basically show them as being listed as the mortgage holder when in fact they are not," he said.
The county believes this is a problem for several reasons. One is that the county is required under state law to keep accurate property records that include the mortgage holder. Another is that the current records obscure true ownership and mortgage information on local properties.
"At the end of day," Gruber said, "a Beaufort County citizen cannot walk into the Register of Deeds Office and know without a shadow of doubt who owns or services their mortgage."