BOSTON (Reuters) - Massachusetts Attorney General Martha Coakley will investigate Mortgage Electronic Registration Systems, a key player in the U.S. mortgage system, over its possible role in connection with illegal foreclosures.
While the probe continues, Coakley said, she will not sign an agreement between state attorneys general and major banks related to foreclosures if the deal absolves banks from liability related to mortgage securitization.
In a letter dated Monday, Coakley said her office was "investigating creditor misconduct in connection with unlawful foreclosures, including failure to establish the right to start a foreclosure."
"We have focused particularly on creditors' reliance on MERS and whether MERS conforms to the requirements of Massachusetts law, in the context of foreclosures and otherwise," Coakley said.
A MERS spokeswoman said the organization will cooperate, adding that Coakley's assertions are without merit.
"The use of MERS has been litigated in Massachusetts courts and judges have upheld the legality of the MERS business model in the Commonwealth," MERS' Janis Smith said in a statement.
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.
The Reston, Virginia, enterprise claims to own about half of all mortgages in the United States, and is involved in about 60 percent of new mortgages issued.
Coakley wrote to registers of deeds across Massachusetts that her office intends to gather "critical information" for its investigation over the next week.
State attorneys general have been meeting with the nation's largest mortgage servicers to make what is expected to be a multi-billion-dollar settlement for robo-signing and other irregularities in handling foreclosures that surfaced in 2010.
In her letter, Coakley said that Massachusetts "will not sign on to any global agreement with the banks if it includes a comprehensive liability release regarding securitization and the MERS conduct."
MERS has been accused of sloppy record-keeping and worse in its massive computer database of U.S. mortgages.
Recent decisions by some state and federal courts have ruled that MERS does not have the right to transfer promissory notes and mortgages.
Reporting by Ros Krasny. Editing by Robert MacMillan