MERSCORP Holdings, Inc. v. Malloy: Game Changer? Connecticut Supreme Court Upholds New Fee on Lending Industry

As local budgets faced pressures from the recent economic downtown, counties across the country filed a series of lawsuits arguing that state land records statutes required lenders to create and record mortgage assignments where notes were transferred, and seeking millions of dollars in recording fees that they otherwise would have earned had lenders recorded mortgage assignments after the creation of MERS.

The lending industry won virtually all the lawsuits. Courts have generally rejected the counties’ lawsuits because (1) recording statutes are permissive rather than mandatory, and do not impose a duty to record mortgage assignments; and (2) counties have no right of action to enforce alleged violations of land records statutes.

If you can’t sue, pass legislation:  Connecticut creates a new fee structure.

Connecticut adopted a different approach.  It amended its recording statute — Conn. Gen. Stat. § 7-34a — in 2013, to require a “nominee of a mortgagee” to pay an additional tier of fees when recording any document in the state’s land records.  MERS is the only entity that falls within the definition of “nominee of a mortgage” under the amended statute.

The 2013 amendment created a two-tier recording fee structure.  It retained the pre-amendment recording fees, which are generally applicable to MERS mortgagees and non-MERS mortgagees alike:  $53 for the first page of each filed document, $5 for each subsequent page, and an additional $2 per assignment of mortgage from the third assignment on.

The 2013 amendment then imposed a second tier of fees that only “nominees of mortgagees” must pay in addition to the first tier fees:  $126 for the first page of a mortgage assignment or release, and $5 for each additional page thereafter; and $116 for the first page of any other document.

MERS filed suit against the State of Connecticut in July 2013, arguing that the two-tiered statute violated MERS’s equal protection rights, deprived MERS of substantive due process, and represented an unlawful taking.  The Connecticut Superior Court upheld the statute on May 19, 2014, and MERS appealed to the Connecticut Supreme Court.

The Connecticut Supreme Court rejects MERS’s constitutional challenge.

Much more info here…

Copy of the opinion here…