New York and Delaware...have a unique place because all of the mortgage-backed securities were actually pools of mortgages deposited into New York trusts or Delaware trusts...To get this done you need resources, you need jurisdiction and you need will...
What we realized...is that we all needed to work together. New York's securities law is a stronger securities law in some ways than the federal law. Some of our statutes of limitations, though, are shorter so we can't go as far back. The federal statute is longer. We need everyone together.
What he did was outline two factors we need to keep in mind when looking for accountability. First of all, no matter where a mortgaged home is located in the U.S., the securities into which they were bundled and traded were deposited in trusts located in New York or Delaware. In other words, that is where jurisdiction for some of these crimes will lie.
And secondly, he pointed out that New York's securities law is stronger than federal law. In other words, in cases where the statute of limitations has not run out, a New York state prosecution will be stronger than a federal prosecution.
With all this in mind, its interesting to see that today, AG Schneiderman announced a major lawsuit against several banks for deceptive and fraudulent use of the electronic mortgage registry known as MERS.
Attorney General Eric T. Schneiderman today filed a lawsuit against several of the nation’s largest banks charging that the creation and use of a private national mortgage electronic registry system known as MERS has resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process. The lawsuit asserts that employees and agents of Bank of America, J.P. Morgan Chase, and Wells Fargo, acting as "MERS certifying officers," have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have. The lawsuit names JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., as well as Virginia-based MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc.
The lawsuit further asserts that the MERS System has effectively eliminated homeowners' and the public's ability to track property transfers through the traditional public records system. Instead, this information is now stored only in a private database – which is plagued with inaccuracies and errors – over which MERS and its financial institution members exercise sole control. Additional defendants include BAC Home Loans Servicing, LP, Chase Home Finance LLC, EMC Mortgage Corporation, and Wells Fargo Home Mortgage, Inc.
This suit is not being handled by the new federal unit Schneiderman is co-chairing. But its exactly the kind of thing he was talking about in the interview with Maddow - states and the federal government will work together to use the right jurisdiction to gain maximum accountability.
Poutragers are already jumping on this as a signal that Schneiderman is pulling out of the settlement deal still being negotiated on foreclosure fraud between the banks, 50 state attorney generals, and the feds. What they continue to miss is that that suit is focused narrowly on the robo-signing aspect of foreclosures. The MERS registry is a whole other issue.
Of course they're also missing what Schneiderman said above about the importance of working toether to use the right jurisdiction.
Its looking more and more to me like the banks involved in all of this are in for one very long difficult season. I suspect this is merely the opening salvo of more to come.