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In middle of foreclosure chaos, local firm keeps popping up

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In Arkansas, Kansas and Maine, state supreme courts have ruled that MERS can't foreclose on homes, because it doesn't own the loans. The Kansas Supreme Court called the company's relationship with lenders "akin to that of a straw man."

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In May, Judge Arthur Schack of Brooklyn, N.Y., threw out a foreclosure case after ruling that the assignment of a loan to a bank by MERS was "defective." He said an attorney's explanations for it were "so incredible, outrageous, ludicrous and disingenuous that they should have been authored by the late Rod Serling, creator of the famous science-fiction television series, The Twilight Zone." He dismissed the case.

Challenges continue to come.

In Kentucky, lawyer Heather Boone McKeever recently filed a state class-action suit and a federal civil-racketeering suit, both naming MERS. She argued in one filing that banks and lenders used MERS to facilitate "illegal mortgage registration, transfer and wrongful foreclosures" and that MERS "was created for the unlawful purpose of hiding and insulating the brokers and originators of predatory toxic loans from accountability and liability."

"I'm very cynical at this point," McKeever said in an interview. "I think it was created to commit fraud."

In rejecting these allegations, MERS points to numerous instances in which judges, state and local officials, and ratings agencies have recognized its legitimacy.

"These days, we have seen a growing trend by lawyers using the tactic of alleging that MERS is engaging in various types of wrongdoing to stall or prevent foreclosures," spokeswoman Karmela Lejarde said. "This tactic has proven time and again to be unsuccessful."

Lejarde pointed to cases in Arizona and Missouri in which judges ruled in the company's favor. The MERS Web site mentions other cases that the firm says demonstrate its right to act on behalf of lenders.

Several years ago, on a message board still active on the MERS Web site, one participant accused the company of participating in fraud and concealing the transfer of loans from public scrutiny.

The company's president and chief executive, R.K. Arnold, responded by insisting that MERS actually increased the transparency of the mortgage system and reduced the cost of homeownership by making the industry more efficient.

"We're not perfect," Arnold wrote, "but there's nothing sinister about who we are and what we do."

dennisb@washpost.com chaa@washpost.com


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