MERS Petition on Fees Rebuffed by U.S. Supreme Court

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By Chris Bruce

Oct. 31 — The U.S. Supreme Court let stand a Connecticut Supreme Court ruling requiring Mortgage Electronic Registration Systems Inc. (MERS) to pay higher recording fees in that state, opening the door for similar action by other states ( MERSCORP Holdings v. Malloy, U.S., No. 15-cv-01538, cert. den. 10/31/16 ).

In February, the Connecticut court upheld amendments to state law that require MERS — a private company that manages a major mortgage registration database — to pay recording fees that are roughly three times higher than other mortgagees.

In June, MERS asked the U.S. Supreme Court to hear its appeal, backed by banking and mortgage groups that said other jurisdictions might enact similar laws if the Connecticut decision was allowed to stand.

In a statement, MERSCORP Holdings spokeswoman Janis L. Smith cautioned against reading too much into the court's Oct. 31 action. “The denial of our Petition does not mean that increases in recording fees only applicable to MERS documents will be deemed constitutional in other states or attempts to increase fees by other states will go unchallenged.”

At issue is a two-tiered Connecticut system governing filing fees that parties to home mortgage loans must pay to record mortgage documents in public land records offices. In 2013, Connecticut legislators amended the law to require higher fees for any mortgage nominee operating a national database.

MERS, saying it was clearly targeted by the 2013 amendments, said the law violated equal protection guarantees of the U.S. and Connecticut constitutions, and the U.S. Constitution's dormant commerce clause. The Connecticut Supreme Court disagreed.

MERS, which has faced numerous lawsuits in recent years that challenge the validity of its registration system, petitioned the U.S. Supreme Court, with support from the Mortgage Bankers Association and other trade associations.

In a July brief, the trade groups said the ruling, unless overturned, would leave other states “free to arbitrarily impose substantially greater recording fees” simply because the loans are registered on a national registry.

That would mean “discriminatory increases” in other charges imposed on lenders, the trade groups said.

To contact the reporter on this story: Chris Bruce in Washington at cbruce@bna.com

To contact the editor responsible for this story: Mike Ferullo at mferullo@bna.com

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