Two Michigan registers of deeds have filed a class action lawsuit against Mortgage Electronic Registration Systems (MERS) for allegedly not paying proper county and state transfer taxes.

Curtis Hertel, register of deeds in Ingham County and Nancy Hutchings, the register of deeds in Branch County, claim in a lawsuit filed in the 30th Circuit Court in Ingham County Tuesday morning that MERS – along with several of the nation's largest banks and their foreclosure attorneys – violated statutory requirements imposed by the County and State Real Estate Transfer Act.

According to the lawsuit, the defendants allegedly issued property transfer documents to the registers of deeds without stating the true value of the property. Because of the failure by MERS to deliver these real property values on a transfer deed, neither county or state real estate transfer taxes have been paid on thousands of assets throughout the state.

“The defendants breached their duties to investigate the facts required to properly and legally file an appropriate property transfer deed with the actual value of the property and pay the appropriate transfer taxes within the time allowed after filing of the real estate assignment,” the lawsuit charges.

The Register of Deeds said that the transfers usually take place after a sheriff's sale on a foreclosed home.

“This is another case we've found where the state's residents have been shortchanged by questionable bank practices,” Hertel said. “The law requires that transfer tax is paid on the value of a property, whenever that property is transferred on a document such as a deed. The big banks have found multiple ways of dodging those taxes.”

Both Hertel and Hutchings filed this lawsuit as a class action complaint because they are hopeful that additional Register of Deeds' will sue MERS for what is allegedly being done in all 83 Michigan counties. 

“It's time for this nonsense to stop,” Hutchins said. “These organizations need to step up to the plate, pay the transfer tax that is due and stop claiming exemptions that by law they are not entitled to.”

The plaintiffs are seeking to recoup the unpaid taxes from MERS, which Hertel said could be millions of dollars for both state and county taxes. He added that MERS is turning the entire mortgage industry into a “shell game” because they are not publicizing all of their information.

A MERS spokesperson said the company could not comment on the allegations because it has not yet received the lawsuit.

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