* MERS seeks dismissal of test case
* Judge asks why Delaware doesn't seek new laws
* Judge weighs whether "Kafkaesque" MERS was deceptive
By Tom Hals
WILMINGTON, Del, May 30 Attorneys for the state
of Delaware struggled at a court hearing on Wednesday to keep
alive a closely watched lawsuit against MERS, the electronic
mortgage registry accused of abuses in housing foreclosures.
The state's lawsuit, announced at press conference in
October, is seen as a test case for addressing concerns that
homes were being seized from defaulted borrowers without
following proper procedures.
The Mortgage Electronic Registration Systems Inc, known as
MERS, is an electronic-lien registry created by the mortgage
banking industry as a way to streamline and speed up the
mortgage recording and transfer process.
Delaware attorneys are seeking an injunction to force MERS
to correct problems with its database. MERS, meanwhile, asked
the chief judge of the state's Court of Chancery to dismiss the
lawsuit, arguing that the allegations did not violate Delaware's
Deceptive Trade Practices Act.
And while Judge Leo Strine was clearly sympathetic to the
problems faced by delinquent borrowers who had no idea with whom
to negotiate when trying to save their homes, he repeatedly
questioned a state lawyer about why they had decided to sue MERS
and under the deceptive trade practices law.
"The system has errors. How do I get to deceptive?" Strine
asked Deputy Attorney General Jeremy Eicher.
Strine also told Eicher twice not to "make stuff up" as
Eicher seemed to veer from the original arguments made in the
Eicher's boss, Delaware Attorney General Beau Biden -- son
of U.S. Vice President Joe Biden -- sat watching in the
Strine also wondered if the state would be better off trying
to fix the "Kafkaesque" problems of MERS by going through the
legislature or by ensuring existing foreclosure rules were
Biden declined to comment following the hearing.
Other lawsuits against MERS have had mixed success. A
federal judge in Phoenix last year dismissed a group of lawsuits
filed by homeowners who said foreclosures based on MERS
documents were invalid.
If Strine allows the lawsuit to proceed, the state will be
able to begin the discovery process and demand documents and
witnesses from MERS, although the registry's attorney said the
company was already cooperating with a state investigation.
The case is State of Delaware v MERSCORP Inc and Mortgage
Electronic Registrations Systems Inc, Delaware Court of
Chancery, no. 6987.