MERS could be liable to class for overcharging them for foreclosure fees and costs

The Plaintiffs in Trevino v. Merscorp, Inc. — F.Supp.2d —-, Civ.Action No. 07-568, (D.Del., September 2008) brought a class action complaint against Mortgage Electronic Registration Systems, Inc. (MERS), and the loan servicer, among others, challenging MERS’s flat fee arrangement on referring foreclosure and other enforcement proceedings to attorneys. The complaint alleged that MERS overcharged Plaintiffs and the class for costs and expenses, including attorney’s fees, to enforce the mortgages in foreclosure and other enforcement proceedings. Based on this alleged conduct, Plaintiffs asserted claims for breach of contract, unjust enrichment and breach of the duty of good faith and fair dealing alleging that because MERS had arrangements with attorneys for flat-fee, per-case rates a borrower subject to an enforcement action should be obligated to reimburse MERS for no more than the fee MERS pays its attorneys. Instead, MERS allows its attorneys and/or loan servicers to collect fees directly from the borrower in an amount substantially in excess MERS’s flat-fee obligation. The Court denied MERS’s motion to dismiss finding that the allegations as plead stated a claim for breach of contract. It found that the Mortgage Note was an enforceable contract between MERS, as mortgagee of record, and the Plaintiffs, as mortgagers. It agreed that the allegation that MERS breached the Mortgage Note by charging and collecting costs, fees and expenses from Plaintiffs which were not incurred, and to which it was not entitled stated a claim for breach of contract. The court also sustained the counts sounding in unjust enrichment and breach of the duty of good faith and fair dealing.

Download Related Document