IN THE COURT OF COMMON PLEAS OF CHESTER COUNTY, PENNSYLVANIA, RICHARD T. LOUGHERY, IN HIS. OFFICAL CAPACITY AS THE RECORDER OF DEEDS IN AND FOR THE COUNTY OF CHESTER, PENNSYLVANIA; THE OFFICE OF THE RECORDER OF DEEDS IN AND FOR THE COUNTY OF CHESTER, PENNSYLVANIA; and THE COUNTY OF CHESTER, PENNSYLVANIA, PLAINTIFFS, CIVIL ACTION MERSCORP HOLDINGS, INC., fik/a MERSCORP, INC.; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; BANK OF : AMERICA, N.A.; THE BANK OF NEW: NO. WH-I0N YORK MELLON; THE BANK OF : NEW YORK MELLON TRUST. 3 COMPANY, N.A.; CITIBANK, N.A JURY TRIAL DI CITIMORTGAGE, INC.; DEUTSCHE BANK NATIONAL TRUST COMPANY; DEUTSCHE BANK ‘TRUST COMPANY AMERICAS; GATEWAY FUNDING DIVERSIFIED MORTGAGE SERVICES L.P.; HSBC FINANCE CORPORATION; HSBC BANK USA N.A.; JBMORGAN CHASE BANK, N.A.; TRIDENT MORTGAGE COMPANY, L.P., WELLS FARGO BANK, N.A.; and DOE CORPORATIONS I THROUGH 100, DEFENDANTS. NOTICE TO DEFEND You have been sued in court. If you wish to defend against the claims set forth in the following pages, you must take action within twenty (20) days after this complaint and notice are served, by entering a written appearance personally or by attorney and filing in writing with the court your defenses or objections to the claims set forth against you. You are warned that if you 4805349fail to do so the case may proceed without you and a judgment may be entered against you by the court without further notice for any money claimed in the complaint or for any other claim or relief requested by the plaintiffs. You may lose money or property or other rights important to you YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE, IF YOU DO. NOT HAVE A LAWYER, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW. THIS OFFICE CAN PROVIDE YOU WITH INFORMATION ABOUT HIRING A LAWYER. IF YOU CANNOT AFFORD TO HIRE A LAWYER, THIS OFFICE MAY BE ABLE TO PROVIDE YOU WITH INFORMATION ABOUT AGENCIES THAT MAY OFFER LEGAL SERVICES TO ELIGIBLE PERSONS AT A REDUCED FEE OR NO FEE. Lawyer Referral and Information Service Chester County Bar Association 15 West Gay Street West Chester, PA 19380 (610) 429-1500 4865349OBERMAYER REBMANN MAXWELL & HIPPEL Bon! & ZACK LLC By: Louis B. Kupperman (Pa. Atty. No. 22236) ° By: Michael J. Boni (Pa. Atty, No. 52983) William J. Leonard (Pa. Atty. No. 42362) Joshua D. Snyder (Pa. Atty. No. 88657) Zachary S. Davis (Pa. Atty. No. 93290) John E. Sindoni (Pa. Atty, No. 91729) Rigel C. Farr (Pa, Atty, No. 316869) 15 St. Asaphs Road One Penn Center, 19" Floor Bala Cynwyd, PA 19004 1617 John F. Kennedy Boulevard Telephone No.: 610-822-0200 Philadelphia, PA 19103-1895 Fax No.: 610-822-0206 ‘Telephone No.: 215-665-3000 Fax No.: 215-665-3165 Counsel for Plaintiffs RICHARD T. LOUGHERY, INHIS OFFICIAL: COURT OF COMMON PLEAS OF CAPACITY AS RECORDER OF DEEDSIN—:- CHESTER COUNTY, AND FOR THE COUNTY OF CHESTER, : PENNSYLVANIA PENNSYLVANIA: THE OFFICE OF THE RECORDER OF DEEDS IN AND FOR THE, COUNTY OF CHESTER, PENNSYLVANIA; and THE COUNTY OF CHESTER, PENNSYLVANIA, PLAINTIFFS, CIVIL ACTION v. MERSCORP HOLDINGS, INC., fik/a MERSCORP, INC.; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; BANK OF AMERICA, N.A.; THE BANK | OF NEW YORK MELLON; THEBANK OF; No, !4-l0/13 NEW YORK MELLON TRUST COMPANY; eee N.A.; CITIBANK,N.A.; CITIMORTGAGE, INC. DEUTSCHE BANK NATIONAL TRUST; COMPANY; DEUTSCHE BANK TRUST COMPANY AMERICAS; GATEWAY FUNDING DIVERSIFIED MORTGAGE : SERVICES, L.P.; HSBC FINANCE 2 JURY TRIALDEMANDED CORPORATION; HSBC BANK USA, N.A.; JPMORGAN CHASE BANK, N.A.; TRIDENT MORTGAGE COMPANY, L-P.; WELLS FARGO BANK, N.A.;and DOE CORPORATIONS | THROUGH 100, DEFENDANTS.CIVIL ACTION COMPLAINT. Plaintiffs, Richard T. Longhery, in his official capacity as the Recorder of Deeds in and for the County of Chester, Pennsylvania, the Office of the Recorder of Deeds in and for the County of Chester, Pennsylvania, and The County of Chester, Pennsylvania (collectively, “Chester County” or “Plaintiffs”), by and through their undersigned counsel, bring this Complaint against Defendants MERSCORP Holdings, Inc., ffk/a MERSCORP, Inc. (“MERSCORP”), Mortgage Electronic Registration Systems, Inc. (“MERS”), Bank of America, N.A., The Bank of New York Mellon, The Bank of New York Mellon Trust Company, N.A., Citibank, N.A., CitiMortgage, Inc., Deutsche Bank National Trust Company, Deutsche Bank ‘Trust Company Americas, Gateway Funding Diversified Mortgage Services, L.P., HSBC Finance Corporation, HSBC Bank USA, N.A., JPMorgan Chase Bank, N.A., Trident Mortgage Company, L.P., Wells Fargo Bank, N.A., and Doe Corporations 1 through 100 (the foregoing banks and financial institutions are collectively referred to hereinafter as “Defendant Banks,” and, together with MERSCORP and MERS, as “Defendants”) and, in support thereof, state as follows: NATURE OF THE ACTION 1. This aetion is brought to remedy the economic and public interest harms caused to Chester County and its citizens by Defendants’ illegal and systematic violation of well- established and time-honored Pennsylvania law requiring mortgage assignments to be publicly recorded. 2. By deliberately failing to record thousands of mortgage assignments affecting properties located within Chester County, Defendants have wrongfully avoided—and continue to wrongfully avoid—the payment of millions of dollars of mandatory recording fees owed to Chester County.3. Pursuant to Pennsylvania law, every conveyance of interests in land, including mortgage assignments, must be recorded in the office of the recorder of deeds in and for the county in which the real property is located. See 21 P.S. § 351; see also Montgomery County v. MERSCORP, Inc., 904 F, Supp. 2d 436, 445 (E.D. Pa. 2012) (Joyner, J.) (hereinafter “Montgomery County I”) (“[W]e conclude that [the statutory language of] 21 Pa. Stat. § 351, means that all conveyances shall be recorded ... [and that] the Legislature’s organization of the statutes respecting recording of different categories of documents shows that it intended precisely this result.”) (emphasis added). 4. Instead of publicly recording mortgage assignments and paying the required fees, Defendants have utilized their own private electronic registration system specifically created and designed by them io circumvent and evade the requirements of Pennsylvania’s recording laws, 5. This conduct constitutes a willful violation of law. See Montgomery County v. MERSCORP, Inc., No. 11-cv-06968, 2014 U. Dist. LEXIS 89222, at *62-63 (E.D.Pa, July 1, 2014) (Joyner, J.) (hereinafter “Montgomery County I”) (MERSCORP’s and MERS’s failure to record mortgage assignments “is, was and will in the future be, in violation of the Pennsylvania Recording law—most particularly 21 P.S. § 351.”) (emphasis added), 6. Through their illegal combina nn and conspiracy to violate Pennsylvania's recording laws, Defendants” actions have caused gaps, omissions, and inaccuracies to exist in the County’s land records, thereby undermining the integrity of the County's centuries-old public Jand recording system. 7. Defendants’ willful failure to record mortgage assignments and pay statutorily required recording fees to Chester County has adversely affected the quality of life of the County’s citizens by depriving the County of funding necessary for the provision of essentialCounty services, including children and youth initiatives, veterans’ affairs, emergency services, and the operation of the Pocopson Home for the Aged. 8. Notwithstanding their willful violations of Pennsylvania's recording laws, Defendants have unjustly benefited from the operation and existence of Chester County’s public land recording system by appearing to hold good title to, and true ownership of, mortgages encumbering tens of thousands of properties located within Chester County. 9. Toredress the injuries caused to Chester County by Defendants’ wrongful conduct, Plaintiffs bring claims against Defendants to quiet title and for damages for Defendants” negligent and/or ful violation of 21 P.S. § 351, unjust enrichment, civil conspiracy, and civil aiding and abetting. Plaintiffs also seek permanent declaratory and injunctive relief to remedy Defendants’ ongoing violations of Pennsylvania’s recording laws and to prevent such violations from occurring in the future. JURISDICTION AND VENUE 10. This Court has jurisdiction over the subject matter of this action pursuant to 42 Pa.C.S. § 931, and over each of the Defendants pursuant to 42 Pa.C.S, §§ 5301 and 5322, as each Defendant conducts business in, has an interest in real property located in, and has directed its wrongful conduct at, Chester County. 11. Venue is proper in this Court under Pennsylvania Rules of Civil Procedure 1006, 2130, and 2179(a), because: (a) all real property that is the subject of this action is located within Chester County; (b) Defendants regularly conduct business in Chester County; and (c) the transactions and occurrences giving rise to Plaintiffs’ causes of action took place, or were required to take place, in Chester County.PARTI 12. Plaintiffs Richard T. Loughery, Recorder of Deeds in and for the County of Chester, Pennsylvania, and the Office of the Recorder of Deeds in and for the County of Chester, Pennsylvania, are responsible for the operations of the public land records within Chester County. tall times relevant hereto, Plaintiff Richard T. Loughery, in his official capacity as the elected Recorder of Deeds in and for the County of Chester, Pennsylvania, was the official charged with the responsibility of properly recording land transfers and conveyances of interest in real property, including mortgage assignments, in Chester County, and with the collection of mandated recording fees on behalf of the County. 13. Plaintiff, The County of Chester, Pennsylvania, is a political subdivision of the Commonwealth of Pennsylvania existing and operating as a County of the Third Class under the provisions of The County Code, Act 130 of 1955, P. L. 323. 14. Defendant MERSCORP Holdings, Inc. (“MERSCORP”), formerly known as MERSCORP, Inc., is a Delaware corporation with its principal place of business at 1818 Library Street, Suite 300, Reston, Virginia 20190. MERSCORP owns and operates the MERS® System, an electronic registry system used to track mortgage assignments in lieu of recording such assignments with, and paying recording fees to, county recorders of deeds offices. There are over six thousand (6,000) members that use the MERS® System (collectively, “MERS Members”), several thousand of which are residential mortgage servicers. 15. _ Defendant Mortgage Electronic Registration Systems, Inc. (“MERS"), a wholly- owned subsidiary of Defendant MERSCORP, is a Delaware corporation which shares its principal place of business with MERSCORP at 1818 Library Street, Suite 300, Reston, Virginia 20190. MERS is identified in the public land records of Chester County as the so-called “nominee” and/or“mortgagee of record” for Defendant Banks and other MERS Members on thousands of residential mortgages encumbering lands located within Chester County. 16. Defendant Bank of America, N.A. is a national banking association with its principal place of business at 100 North Tryon Street, Suite 170, Charlotte, North Carolina. Bank of America, N.A. isa MERS Member, a shareholder of MERSCORP, and a member of the MERSCORP and MERS boards of directors. Defendant Bank of America, N.A., directly and indirectly through its agents, employees, subsidiaries, predecessors and/or related companies, including but not limited to CWALT, Ine., Countrywide Home Loans, Inc., Countrywide Financial Corporation, CWABS, Inc., CWMBS, Inc., BAC Home Loans Servicing LP (fik/a Countrywide Home Loans Servicing, LP), BAC GP, LLC (fk/a Countrywide GP, Ine. and .ctions involving multiple Countywide GP LLC), and LaSalle Bank, N.A., has engaged in trar assignments of mortgages encumbering real property located within Chester County without recording the mortgage assignments in the Office of Recorder of Deeds in and for Chester County, 17. Defendant The Bank of New York Mellon is a New York state-chartered bank with its principal place of business at One Wall Street, New York, New York. Defendant The Bank of New York Mellon Trust Company, N.A., is a national banking association with its main office at 400 South Hope Street Los Angeles, California. Defendants The Bank of New York Mellon and The Bank of New York Mellon Trust Company, N.A., directly and indirectly through their agents, employees, subsidiaries, predecessors and/or related companies, have engaged in transactions involving multiple assignments of mortgages encumbering real property Jocated within Chester County without recording the mortgage assignments in the Office of Recorder of Deeds in and for Chester County.18. Defendant Citibank, N.A. is a national banking association with its principal place of business at 701 East 60th Street North, Sioux Falls, South Dakota, Defendant CitiMortgage, Inc. is a New York corporation with its principal place of business at 1000 Technology Drive, O’Fallon, Missouri. CitiMortgage, Inc. is a MERS Member, a shareholder of MERSCORP, and a member of the MERSCORP board of directors. Defendant Citibank, N.A. is a MERS member. Defendants CitiMortgage, Inc., and Citibank, N.. , directly and indirectly through their agents, employees, subsidiaries, predecessors and/or related companies, including but not limited to Citigroup Financial Products, Inc., Citigroup Global Markets Realty Corp., Citigroup Mortgage Loan Trust Inc., Citi-Residential Lending, Inc., Citicorp Acceptance Company, Inc., CitiFinancial, Inc., CitiFinancial Mortgage Company, Inc., Citigroup Mortgage Loan Trust, Inc., Citicorp Holdings Inc., Principal Residential Mortgage, Inc., and Wholesale Mortgage, Inc., have engaged in transactions involving multiple assignments of mortgages encumbering real properties located within Chester County without recording the mortgage assignments in the Office of Recorder of Deeds in and for Chester County. 19. Defendant Deutsche Bank National Trust Company is a federally charted non- depository trust company with its principal place of business at 2000 Avenue of the Stars, Los Angeles, California. Defendant Deutsche Bank Trust Company Americas is a state-chartered bank organized under the laws of the State of New York with its principal place of business at 60 Walll Street, New York, New York. Defendants Deutsche Bank National Trust Company and Deutsche Bank Trust Company Americas are MERS Members. Deutsche Bank National Trust Company and Deutsche Bank Trust Company Americas, directly and indirectly through their agents, employees, subsidiaries, predecessors and/or related companies, have engaged in transactions involving multiple assignments of mortgages encumbering properties located withinChester County without recording the mortgage assignments in the Office of Recorder of Deeds in and for Chester County, 20. Defendant Gateway Funding Diversified Mortgage Services, L.P. is a Pennsylvania limited partnership whose general partner, Gateway Funding Group, Inc., is a Pennsylvania corporation with its principal place of business at 300 Welsh Road, Building No. 5, Horsham, Pennsylvania 19044. Gateway Funding Diversified Mortgage Services, L.P. is a MERS Member. Gateway Funding Diversified Mortgage Services, L.P., directly and indirectly through its agents, employees, subsidiaries, predecessors and/or related companies, has engaged in transactions involving multiple assignments of mortgages encumbering properties located within Chester County without recording the mortgage assignments in the Office of Recorder of Deeds in and for Chester County. ral Defendant HSBC Finance Corporation, f/k/a Household International, Inc., is a Delaware corporation with its principal place of business at 2700 Sanders Road, Mettawa, Illinois. Defendant HSBC Bank USA, N.A. is a national banking association with its principal place of business at 1800 Tysons Blvd., McLean, Virginia. Defendant HSBC Finance Corporation is a shareholder of MERSCORP and HSBC Bank USA, N.A. is a MERS Member. HSBC Finance Corporation and HSBC Bank USA, N.A directly and indirectly through their agents, employees, subsidiaries, predecessors and/or related companies, have engaged in transactions involving multiple assignments of mortgages encumbering properties located within Chester County without recording the mortgage assignments in the Office of Recorder of Deeds in and for Chester County. 22. Defendant JPMorgan Chase Bank, N.A., is a national banking association with its principal place of business at 1111 Polaris Parkway, Columbus, Ohio. JPMorgan Chase Bank,N.A. is a MERS Member and former shareholder of MERSCORP. JPMorgan Chase Bank, N.A., directly and indirectly through its agents, employees, subsidiaries, predecessors and/or related companies, including but not limited to Chase Home Finance, LLC, Chase Home Finance Inc., Chase Home Mortgage Corp., Chase Manhattan Mortgage Corporation, Chase Mortgage Services Inc., Washington Mutual Bank, N.A., WaMu Capital Corp., Washington Mutual Mortgage Securities Corp., WaMu Asset Acceptance Corp., Long Beach Mortgage, Long Beach Securities, Bank One Corporation, Bear Stearns Asset-Backed Securities I, LLC, EMC Mortgage LLC, and EMC Mortgage Corporation, has engaged in transactions involving multiple assignments of mortgages encumbering properties located within Chester County without recording the mortgage assignments in the Office of Recorder of Deeds in and for Chester County. 23. Defendant Trident Mortgage Company, L.P. is a Delaware limited partnership with its principal place of business at 431 W. Laneaster Avenue, Devon, Pennsylvania. ‘Trident Mortgage Company, L.P.’s general partner is TRMC LLC. Trident Mortgage Company, L-P. is a MERS Member. Trident Mortgage Company, L.P., directly and indirectly through its agents, employees, subsidiaries, predecessors and/or related companies, has engaged in transactions involving multiple assignments of mortgages encumbering properties located within Chester County without recording the mortgage assignments in the Office of Recorder of Deeds in and for Chester County. 24, Defendant Wells Fargo Bank, N.A. is a national banking association with its prineipal place of business at 101 North Phillips Avenue, Sioux Falls, South Dakota. Wells Fargo Bank, N.A., is a MERS Member, a shareholder of MERSCORP Holdings, Inc., and a member of the MERSCORP board of directors. In 2008, Wells Fargo & Company, the parentcompany of Wells Fargo Bank, N.A., acquired Wachovia Bank, N.A., another MERS Member, which was subsequently merged into and operated as part of Wells Fargo Bank, N.A. Wells Fargo Bank, N.A., directly and indirectly through its agents, employees, subsidiaries, predecessors and/or related companies, including but not limited to Wachovia Bank, N.A., has engaged in transactions involving multiple assignments of mortgages encumbering properties located within Chester County without recording the mortgage ssignments in the Office of Recorder of Deeds in and for Chester County. 25. Defendants Doe Corporations 1 through 100 are parties whose true names and identities are presently unknown to Plaintiffs. Once the Doe Corporations’ identities and participation in the MERS® System become known through discovery, Plaintifi’s reserve the right to join them in this action. 26. Plaintiffs further reserve the right to join Defendants’ predecessors in interest once sufficient discovery is conducted to enable Plaintiff's to identify such entities. Moreover, because Defendants may acquite other entities, or divest themselves of some operations and transfer them to new entities, Plaintiffs reserve the right to join such new or different entities and all suecessors in interest to Defendants after sufficient discovery has been completed. FACTUAL BACKGROUND State Recording Laws 27. Asearly as the 17th Century, American Colonies passed property recordation statutes requiring a lender to record mortgages and assignments of mortgages. 28. Recording statutes were adopted, inter alia, “to prevent disputes over property rights and to facilitate the use of land as collateral by creating a transparent public record that provides certainty in private bargains.” Christopher L. Peterson, Foreclosure, SubprimeMortgage Lending, and the Mortgage Electronic Registration System, 78 U. Cin. L. Rev. 1359. 1364-65 (2010). 29. All fifty states and the District of Columbia retain recording statutes similar to their colonial predecessors. 30. State recording laws ensure that the public can always ascertain who owns any particular piece or tract of land and, consequently, who has the right to sell such land: Since the founding of the American republic, each county in the United States has maintained records of who owns the land within that county. Most states track changes in ownership of land, including mortgages and deeds of trust, by maintaining records indexed through the names of grantors and grantees. These grantor-grantee indexes allow individuals and businesses contemplating the purchase or financing of land to investigate—or hire a title insurer (o investigate—whether a seller or mortgagor actually owns the land being offered for sale or mortgage... A public, enduring, authoritative, and transparent record of all land ownership provides a vital information infrastructure that has proven indispensable in facilitating not only mortgage finance, but virtually all forms of commerce. Christopher L. Peterson, Two Faces: Demystifying the Mortgage Electronic Registration System's Land Title Theory, 33 Wot. & Mary L. Rev. 111, 114-15 (2011) (emphasis added, footnotes omitted). Pennsylvania’s Mandatory Recording Statutes and County Recording Fes 31. Pennsylvania adopted its first recording act in 1717. It remains in force today. 21 P.S. § 351. A primary objective of Pennsylvania’s statute is to protect subsequent bona fide purchasers from injuries caused by secret pledges of property. See Montgomery County II, 2014 U.S. Dist. LEXIS 89222, at *21-22. 32, Asearly as 1848, the Pennsylvania Supreme Court explained that:The intention of the acts requiring [instruments affecting title to real estate] to be recorded was to secure subsequent purchasers and mortgagees against prior secret conveyances and fraudulent encumbrances; and therefore when a person has notice of a prior conveyance, it is not a secret conveyance by which he can be prejudiced Mott v. Clark, 9 Pa. 399, 405 (1848), 33. Two years later, the Supreme Court further explained: ‘The principle [that] runs through the whole system of our recording acts, [is] that the object is to give public notice in whom the title resides; so that no one may be defrauded by deceptious appearance of title... The recording laws, like all other public laws are intended for the benefit and security of the people generally. Salter v. Reed, 15 Pa. 260, 263-64 (1850). 34. As the United States District Court for the Eastern District of Pennsylvania held just a few months ago, “[t}hese holdings remain undisturbed despite the passage of more than 150 years and thus the underlying purpose behind the Pennsylvania recording acts remains clear —4o provide notice to the public of the identities of those who hold an interest in real estate as well as notice of the true nature of the transaction on record.” Montgomery County Il, 2014 U.S. LEXIS 89222, at *22-23 (collecting cases). 35. To assure protection of the public’s interest in having notice of interests in land, Pennsylvania’s recording law also requires that “all deeds, conveyances, contracts, and other instruments of writing . .. shall be recorded in the office for the recording of deeds in the county where such lands .. .” are located. 21 P.S, § 351 (emphasis added). The recording laws further provide that all conveyances affecting title to lands must be recorded within ninety (90) days of their execution or be adjudged fraudulent and void against subsequent purchasers for value, 21 P.S. § 444, and that no mortgage “shall be good or sufficient to convey or pass any freeholdrecorded within interest or inheritance, or to grant any estate therein for life or years,” unless six (6) months of its execution. 21 P.S. § 621. 36. The Pennsylvania Supreme Court has expressly ruled that under Pennsylvania law, mortgages and mortgage assignments are “conveyances” within the meaning of Pennsylvania’s recording statutes including, infer alia, 21 P.S. § 351. Pines v Farrell, 848 A.2d 94, 100 (Pa, 2004) (emphasis added). 37. Thus, the recording of mortgage assignments is mandatory and compulsory under 21 P.S. § 351. See Montgomery County Il, 2014 US. Dist. LEXIS 89222, at *24 n.9; Montgomery County I, 904 F.2d at 444-45. 38. The fee for recording mortgage assignments is established “by the fee bill in effect in the county in which such assignment is recorded.” 21 P.S. § 623-4. 39. The fee bill presently in effect in Chester County sets the requisite fee for recording mortgage assignments at $71.00 ($69.00 base fee plus a $2.00 notation fee). See Fee Schedule of the Office of Recorder of Deeds in and for Chester County, effective September 1, 2014, attached hereto as Exhibit “A.” MERSCORP and MERS 40. MERSCORP is a privately held stock company owned and operated by powerful participants in the nation’s mortgage industry. 41, MERSCORP’s current shareholders include, among other entities, Defendants Bank of America, CitiMortgage, Inc., HSBC Finance Corporation, and Wells Fargo Bank, N.A. See hitps://www.mersine.org/about-us/shareholders (last visited September 22, 2014). 42. MERS was expressly and purposefully created to circumvent the legal requirements imposed upon the mortgage industry by state recording laws, requirements the Mortgage Banking Association of America derisively dismissed in a 1993 “White Paper” as B“vestiges of seventeenth century real property law,” and a“tyranny...of forms.” See Wwour Loan Book Entay Concert For THE Mortaace Finance Inpustry, October 25, 1993, at Forward, attached hereto as Exhibit “B,” (“White Paper”). 43. The “White Paper” laid out the foundation for the creation of what is known today as the MERS® System—the private, confidential, non-public electronic mortgage registry system utilized by the Defendant Banks to circumvent Chester County’s public land recording system. MERSCORP, which runs and manages the MERS” System, has enabled Defendant Banks and other MERS Members to avoid the public recording system by electronically “registering” mortgage assignments on its private website, and has aided and abetted such registrations in direct and willful disregard of Pennsylvania’s recording laws. 44, By using the MERS® System, Defendant Banks and other MERS Members have wrongfully bypassed the public land recording system to avoid paying the fees required for recording mortgage assignments. 45. _ Iistark contrast to the integrity and accuracy of the time-honored public land recording system maintained by the Chester County Recorder of Deeds, the MERS® System is, inherently untrustworthy and bereft of reliability. As recently as 2011, MERS confirmed that it does not verify, update, or confirm any of th formation and purported ownership interests registered on its system, and expressly disclaimed any warranty or responsibility for such information: DISCLAIMER: MERS makes no representations or warranties regarding the accuracy or reliability of the information provided, MERS disclaims responsibility or liability for errors, omissions, and the accuracy of any information provided. MERS does not input any of the information found on the MERS" System, but rather the MERS Members have that responsibility regarding mortgage loans in which they hold an interest. Users of this information have the responsibility to verify the accuracy, currency “4and completeness of the information, ‘The information docs not constitute the official legal record and is for information purposes only. The servicer listed should be contacted for further information, Peterson, 53 We. & Mary L. Rev. at 127-28. 46. Defendants’ use of the MERS® System to “register” mortgage assignments, instead of publicly recording them in accordance with Pennsylvania law, and their practice of naming MERS as a “nominee” and/or “mortgagee of record” on Defendant Banks" and other MERS Members’ mortgages has obscured the identities of the holders of the mortgages because the true identities of the mortgages are known only to individual MERS Members. Not even MERSCORP or MERS is able to identify the holders of mortgage interests on the unreliable MERS® System because “neither MERS nor MERSCORP is involved in reporting the transfer, sale or purchase of any promissory notes by a MERS® System member to another” or “to one who is not a MERS® System member.” Montgomery County II, 2014 U.S. Dist. LEXIS 89222, at *50 (quoting declaration of William C. Hultman, Vice President of Legislative Affairs for MERSCORP and former MERS officer) (internal quotation marks omitted) (emphasis added). 47. — Given the flaws in the MERS® System and its masking of the true identities of title holders, Defendants’ use of the MERS® System and disregard of Pennsylvania’s mandatory recording laws have: (a) created gaps, omissions, and inaccuracies in the public land records of Chester County, (b) caused confusion among property owners, (c) damaged the integrity of the County’s land records, and (d) denied Chester County millions of dollars in recording fees. 48. By using MERS’s private, members-only MERS® System for electronically registering mortgage assignments instead of publicly recording all mortgage assignmentsaffecting Chester County properties with the County’s Recorder of Deeds office, Defendants have violated 21 P.S. § 351 MERS Membership, “Certifying O1 rs,” and the MI ystem 49. Access to the MERS" System is restricted to MERS Members and MERS shareholders. 50. Pursuant to MERSCORP’s Rules of Membership, a “MERS Member” can be any “organization or natural person who has signed a Membership Agreement and is not more than 60 days past due as to the payment of any fees due and owing to MERS.” cit MERS Members pay a small fee ($11.50) to register a mortgage loan on the MERS* S yystem, and an even smaller fee ($2.50) to register assignments of their mortgages through the MERS® System. 52. Although MERS is a shell corporation with few if any employees and does not make, originate, or service mortgage loans, tens of millions of mortgages in the United States name MERS as the so-called “nominee” and/or “mortgagee of record” for Defendant Banks and other MERS Members, including tens of thousands in Chester County alone. 53. Despite having very few if any employees, MERS claims to have tens of thousands of “vice presidents” and “assistant secretaries,” so-called “certifying officers,” who are able to register mortgages and mortgage assignments on the MERS" System. 54. Professor Christopher L. Peterson has exposed the myth of MERS’s “certifying officers” as sham MERS’s...corporate structure ... is so unorthodox as to be considered arguably fraudulent. Because MERSCORP. ... does not have the personnel to deal with...its purported ownership of millions of home mortgages ... [and] ... the massive amount of paperwork and litigation involved with its business model, MERSCORP simply farms out the [MERS] 16identity to employees of mortgage servicers, originators, debt collectors, and foreclosure law firms. MERS invites financi companies to enter names of their own employees into a MERS web page that then automatically regurgitates boilerplate corporate resolutions that purport to name the employees of other companies as certifying officers of MERS. These certifying officers also take job titles from MERS and stylize themselves as cither assistant secretaries or vice presidents of MERS, rather than taking titles from the company that actually employs them. These employees of the servicers, debt collectors, and law firms sign documents pretending to be vice presidents or assistant secretaries of [MERS] even though neither MERSCORP Ine. nor MERS Ine. pays compensation or provides benefits to them. Astonishingly, MERS “vice presidents” are simply paralegals, customer service representatives, and foreclosure attorneys employed by other companies. MERS even sells its corporate seal to nonemployees on its Internet site for twenty-five dollars each. Ironically, [MERS]—a company that nominally owns 50 percent of the nation’s residential mortgages—does not have any of its own, employees, but still purports to have over twenty thousand assistant secretaries and vice presidents. This corporate structure leads to inconsistent positions, conflicts of interest, and confusion Peterson, 53 Wat & Mary L. Rev., at 120-21 (emphasis added), 55. MERS enters into a residential mortgage transaction when a lender names MERS as its “nominee” and/or “mortgagee of record.” See Montgomery County I, 904 P. Supp. 2d at 439-440, 441; Montgomery County I, 2014 U.S. Dist. LEXIS 89222, at *11-13, n4, 56. As of 2011, nearly sixty percent (60%) of all of the residential mortgages existing in the United States name MERS as “nominee” and/or “mortgagee of record,” Peterson, 53 Wa, & Mary L. Rev. at 117, including tens of thousands in Chester County. 57. Residential mortgage transactions involve two distinct instruments: (1) a promissory note, which is a negotiable instrument representing the borrower's repayment obligation over the term of the loan; and (2) and a mortgage, which grants a security interestin the land of the borrower and entitles the holder of the promissory note to foreclose on the property in the event of default. See Montgomery County I, 904 F. Supp. 2d at 439; see also Phyllis K, Slesinger & Daniel McLaughlin, Mortgage Electronic Registration System, 31 Inano L. Rev, 805, 808 (1995). 58. The mortgage recites that it exists as security for the promissory note. The promissory note recites the attendant mortgage. When a lender sells the promissory note to another lender, the interest in the land created by the mortgage is transferred with the note as a matter of law. In other words, the assignment of a mortgage note carries with it an assignment of the mortgage. ‘The two instruments eannot be legally decoupled. Carpenter v. Longan, 83 U.S. 271, 274 (1872) (an assignment of a promissory note carries the mortgage with id; see also McCall v, Lenox, 9 Serg. & Rawle 302, 312 (Pa. 1823) (“A mortgage is a charge upon the land; whatever will give the money, will carry the estate in the land along with it. The estate in land is the same thing as the money due upon it ... the assignment of the debt, or forgiving it, will draw the land after it, as a consequenc: 59. A sale or assignment of a mortgage alone, by contrast, does not transfer any right to the underlying obligation evidenced by the note. See Montgomery County II, 2014 U.S. Dist. LEXIS 89222, at * 31 (“Under well-settled, long-held American law, where ‘mortgaged premises are pledged as security for a debt’...the note and mortgage are inseparable...” Thus, ‘{ajn assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.”” (quoting Carpenter v, Longan, supra, 83 U.S. at 274 (emphasis added)).. Mortgage Securitization 60, — Mortgage securitization is an invention of the financial industry. It involves a series of multiple steps to combine streams of principal and interest payments on assembledpools of residential mortgages and using them to monetize specialized financial instruments, commonly known as “certificates,” issued by special-purpose trusts for sale to investors. See generally Christopher L. Peterson, Predatory Structured Finance, 28 Caxoozo L. Rev. 2185, 2208-12 (2007); Steven L. Schwartz, The Alchemy of Asset Securitization, 1 Stan. J. L. Bus. & Fin. 133, 135 (1994); Anna Gelpern & Adam J, Levitin, Rewriting Frankenstein Contracts: Workout Prohibitions in Residential Mortgage-Backed Securities, 82 8. Cat. L. Rev. 1075 (2009). 61. Mortgage securitization involves a minimum of four steps: (a) a mortgage loan is originated by a lender bank, finance company, or mortgage broker; (b) a financial institution, acting as a “sponsor,” assembles a poo! of mortgage loans that it either originated or purchased from lenders; (c) the pool of mortgage loans is sold by the sponsor to a special- purpose subsidiary called a “depositor,” which has no other assets or liabilities, in order to segregate the mortgage loans from the sponsor’s assets and liabilities; and (d) the depositor sells the mortgage loans to the trustee of the single-purpose real estate mortgage investment conduit (“REMIC”) trust which, in turn, sells the pass-through mortgage-backed securities in the form of certificates to investors who receive the income generated by the payments made on the underlying mortgage loans. See Gelpern & Levitin, 82 8. Cat. L. Rev. at 1081-86. 62. As part of the first and second steps in the mortgage securitization process, Defendants Bank of America, N.A., CitiMortgage, Inc., Gateway Funding Diversified Mortgage Services, L..P., HSBC Bank USA, N.A., JPMorgan Chase Bank, N.A., Trident Mortgage Company, L.P., Wells Fargo Bank, N.A., and many other MERS Members sell, transfer, and assign mortgages they have originated or purchased to various sponsors, including affiliates and predecessors of Defendant Banks such as CWALT, Inc., CountrywideHome Loans, Inc., CitiFinancial Mortgage Company, Inc., Wholesale Mortgage, Inc., HSBC Finance Corporation, HSBC Mortgage Services, Inc., and EMC Mortgage Corporation. 63. ‘These entities then sell, transfer, and assign the mortgages in turn to various depositors, including Defendant Banks’ affiliates such as CWABS, lit. 64. Finally, these depositors sell, transfer, and assign the mortgages to the trustees of REMIC trusts for eventual sale of the mortgage-backed certificates to investors. Defendants ‘The Bank of New York Mellon, The Bank of New York Mellon Trust Company, N.A., Citibank, N.A., Deutsche Bank National Trust Company, Deutsche Bank Trust Company Americas, HSBC Bank USA, N.A., JPMorgan Chase Bank, N.A., and Wells Fargo Bank, N.A., and their affiliates, are among the largest trustees for REMIC trusts in the nation, 65. The certificates sold to investors as part of the residential mortgage securitization process typically have a higher value than other investment options because of two features: bankruptcy remoteness and favorable tax treatment for the trust issuer as a REMIC under Section 860 of the Internal Revenue Code, 26 U.S.C. §§ 860A-8606. 66. Bankruptcy remoteness means the assets of the trust cannot be brought into the bankruptcy estate of another entity. . 67. Favorable tax treatment results from the REMIC trust qualifying as a “pass- through” entity for federal tax purposes, which means the trust investors are taxed individually. The trust itself is not taxed, thereby avoiding the double taxation that occurs when a non-pass through entity such as a corporation is taxed on its earnings and then its investors are taxed again on distributions received from the corporation. See generally 26 U.S.C. §§ 8604-8606. 2068. Before MERS existed, rating agencies and investors required that all mortgage assignments be recorded in the public land records to ensure a clean chain of ttle to the tue and current owner of promissory notes and mortgages. See Slesinger & McLaughlin, 31 Ipanio L. Rey. at 808, . 69. Once the MERS® System was put in place, however, it was used by Defendants and other MERS Members as an alterna eto the legally mandated public recording system. Creation of this private, members-only, system was specifically done to “cut out payment of county recording fees. .. [making it] significantly cheaper for intermediary mortgage companies and investment banks that packaged mortgage securities.” Peterson, 53 Wu. & Many L. Rev. at 117. Thus, the MERS® System was specifically created to make securitization and REMIC trusts significantly cheaper for Defendant Banks and other MERS Members to utilize. 70. Although MERS has been set up as a “shadow,” private mortgage assignment system members still rely on the official public recording system when it suits their needs or interests, such as when they institute mortgage foreclosure proceedings or pursue securitizations, 71. Inthe typical case, MERS Members will execute multiple assignments among themselves that are registered in the MERS® System, but are not recorded with the Chester County Recorder of Deeds. In the event of a foreclosure or securitization, however, the public recordation of a “final” mortgage assignment oceurs in order to facilitate the foreclosure or securitization. In other words, after engaging in multiple assignments using their private system 21to avoid paying recording fees, Defendants selectively and s ingly utilize the public land recording system only to benefit themselves economically.' Example of a MERS Chester County Mortgage in the Securitization Process 72. On August 9, 2005, Defendant Gateway Funding Diversified Mortgage Services L.P. (“Gateway”) extended a $359,650.00 purchase money loan to two Chester County homeowners (“homeowners” or “Borrowers”). ‘The loan was secured by a residential mortgage (“Mortgage”) on a Chester County property located at 459 South Saddlebrook Circle, Chester ‘Springs, Pennsylvania 19425. 73. ‘The Mortgage identifies Gateway as the Lender, but lists MERS as “nominee” for the Lender and identifies MERS (not Gateway) as the mortgagee. The Mortgage form language, which is identical to the language used by other Defendant Banks and MERS Members in their mortgage forms, identifies MERS as follows: “MERS is a separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns. MERS is the mortgagee under this Security Instrument.” 74. ‘The Mortgage was recorded with the Chester County Recorder of Deeds on September 1, 2005. 75. On July 23, 2013, eight years after the original Mortgage was granted, MERS filed of record in the Chester County Recorder of Deeds Office an Assignment of Mortgage dated July 8, 2013, assigning and transfer if the Mortgage to Defendant Bank of New York Mellon Corporation f/k/a The Bank of New York as “Trustee for the Certificate Holders of ' To the extent Defendants record mortgage assignments to facilitate foreclosure proceedings or securitizations, they cdo so well after the deadlines imposed by 21 P.S, §§ 444 and 621. In such cases, the mortgage assignment is often recorded many years or even a decade ater the deadlines have passed. 22CWALT, Inc., Alternative Loan Trust 2005-49CB, Mortgage Pass-Through Certificates, Series 2005-49CB.” 76. — The prospectus supplement for Mortgage Pass-Through Certificates, Series 2005- 49CB, indicates that mortgage loans were securitized through a REMIC trust known as CWALT, Inc., Alternative Loan Trust 2005-49CB on or about September 29, 2005. Based on the fact that the homeowners’ Mortgage was subsequently assigned, eight years later, to the trustee of Alternative Loan Trust 2005-49CB, upon information and belief, the homeowners’ Mortgage ‘was originally included in the pool of residential mortgage loans that were securitized on or about September 29, 2005. 77. The prospectus supplement for the securitization identifies Countrywide Home Loans, Inc. as the sponsor of the securitization and CWALT, Inc. as depositor, both of whom are affiliates of Defendant Bank of America, N.A. The trustee for the CWALT, Inc., Alternate Loan Trust 2005-49CB is Defendant Bank of New York Mellon f/k/a The Bank of New York. 78. Upon information and belief, the securitization process of the homeowners’ Mortgage loan required at least three (3) prior assignments of the loan before the July 8, 2013 assignment, 79. Prior to the securitization, the homeowners’ Mortgage loan needed to be transferred to Countrywide Home Loans, Inc., as the sponsor of the securitization. It is unclear whether Countrywide Home Loans, Inc. acquired the homeowners’ Mortgage loan directly from MERS as nominee for Gateway or if there were additional assignments of the homeowners? Mortgage loan prior to it being obtained by Countrywide Home Loans, Inc. 80. According to the prospectus supplement and the pooling and servicing agreement governing the Alternate Loan Trust 2005-49CB, as part of the securitization, Countrywide Home 23Loans, Inc. either sold the mortgage loans directly to CWALT, Ine., as depositor, or those loans were sold to the “depositor by one or more special purpose entities that were established by Countrywide Financial Corporation, or one of its subsidiaries, which, in turn, acquired those mortgage loans directly from Countrywide Home Loans, Inc.” 81. According to the prospectus supplement and the pooling and servicing agreement governing the Alternate Loan Trust 2005-49CB, as part of the securitization, CWALT, Inc., as depositor, then immediately sold, transferred, and assigned its interests in the mortgage loans to ‘The Bank of New York (n/k/a Defendant Bank of New York Mellon), as trustee for CWALT, Inc., Alternate Loan Trust 2005-49CB. 82. None of the interim assignments required for the securitization were recorded by the Defendants with the Chester County Recorder of Deeds. Instead, upon information and belief, they were registered by Defendants on the MERS® System to evade payment of the recording fees due to Chester County. MERS?’s Role in Subprime Mortgage Securitization Contributed to the 2008 Mortgage Foreclosure 83. The securitization of residential mortgages accelerated in the mid-1990s as a consequence of the development of the MERS® System. See Peterson, 53 Wm. & Mary L. Rev. at 116. 84. While the rampant drive to securitization gave birth to MERS, the MERS® ‘System contributed to the expansion of subprime mortgage-backed securitizations that fueled the housing bubble that spread across the nation beginning in the late 1990s until the collapse of the housing market in the fall of 2008. 1d; see also Peterson, 78 U. Civ. L. Rey. at 1359-61, 1397- 98, 1407. 2485. _ In just a few short years after the introduction of the MERS® System, the majority of the nation’s residential mortgage lenders and originators shifted their business models to embrace the MERS proxy system to maximize their own profits by cutting out payments to county recorder of deeds offices. See Peterson, 53 Ww. & Mary L. Rev. at 117. 86. The speed with which MERS embedded itself into the subprime residential mortgage market and the magnitude of its impact on that industry were unprecedented and radical. 1d; see also Peterson, 78 U. Cin. L. Rev. at 1406. 87. “[O}ne particular company...has been a party in more subprime mortgage loans L. Rev. at 1361 than any other”"—MERS. Peterson, 78 U. 88. _ “{SJubprime mortgage lending... forced the American economy to the brink of a depression and fundamentally undermined world faith in American consumer financial markets.” Id, a 1359, 89. “[T]he MERS stem was one additional contributing...cause of the American mortgage foreclosure crisis. MERS facilitates predatory structured finance by decreasing the exit costs of originators... [Bly serving as the...proxy in recording and foreclosure, MERS abetted a fly-by-night, pump-and-dump, no-accountability model of structured mortgage finance.” Jd. at 1398. Pennsylyani Against MERS, MERSCORP, and MERS Members 90. — State and local entities have brought suits to rein in MERSCORP’s and MERS’s illegal and deceptive practices. Pennsylvania counties and recorders of deeds have recently filed lawsuits against MERSCORP, MERS, and various MERS Members seeking to remedy some of the harms these entities have inflicted across the state.91. ‘The Montgomery County Recorder of Deeds, for example, filed a federal class action against MERSCORP and MERS on behalf of itself and all similarly situated county recorders offices in Pennsylvania (cited and referenced hereinabove as Montgomery County 1 and I), 92. The class action complaint seeks to compel MERSCORP and MERS to record mortgage assignments, past, present, and futtire and pay the associated fees, 93. On July 1, 2014, The Honorable J. Curtis Joyner granted Montgomery County’s motion for partial summary judgment ruling that the failure of MERSCORP and MERS to record mortgage assignments in the Montgomery County Recorder of Deeds office file “is, was and will in the future be, in violation of the Pennsylvania Recording law—most particularly 21 P.S. § 351.” See Montgomery County II, 2014 U.S. Dist. LEXIS 89222, at 62-63. 94. On September 24, 2014, the Montgomery County Recorder of Deeds filed a second class action on behalf of itself and all similarly situated county recorders offices in Pennsylvania. This second complaint named the following financial institutions as defendants: The Bank of New York Mellon, The Bank of New York Mellon Trust Company, N.A., Citibank, N.A., Deutsche Bank National Trust Company, Deutsche Bank Trust Company Americas, HSBC Bank USA, N.A., JPMorgan Chase Bank, N.A., and Wells Fargo Bank, N.A. The class action against the MERS Member defendants is currently pending before Judge Joyner and asserts claims for violation of 21 P.S. § 351, quiet title, unjust enrichment, and for declaratory and injunctive relief. Complaint, Montgomery County v. The Bank of New York Mellon, et al., No. 2:14-cv-05500 (E.D. Pa. 2014).95. Washington County, Pennsylvania, has filed a state court class action against U.S. Bank, N.A. Complaint, County of Washington, Pennsylvania v, U.S. Bank Nat'l Ass'n, No. C= 63-CV-201107095 (Wash. Cnty. Com. PI. 2011). U.S. Bank, N.A. is not a party to either this lawsuit or the Montgomery County action. 96. Washington County claims, inter alia, that U.S. Bank has been unjustly enriched because it received benefits when creating mortgage-backed security trusts — including priority on the mortgages, the right to foreclose on non-performing mortgages, favorable tax treatment, and insulation from the bankruptey of other entities in the mortgage loans’ chain of title — without recording mortgage assignments at the time the trusts were created or paying the recording fees, all of which were preconditions for enjoying those benefits. In addition, ‘Washington County seeks declaratory judgment that the notes in the residential mortgage backed security trusts are unsecured debt, and declaratory and injunctive relief related to properties foreclosed upon by U.S. Bank. 97. — Finally, the Recorder of Deeds in and for Delaware County, Pennsylvania, has filed a lawsuit against MERS, MERSCORP, and various financial institutions that are MERS Members, asserting claims for negligent and/or willful violation of 21 P.S. § 351, quiet title, unjust enrichment, declaratory judgment, and a request for injunctive relief. ‘The Delaware County Recorder's action was recently remanded from the United States District Court for the Eastern District of Pennsylvania back to the Court of Common Pleas of Delaware County. Defendants Have Inflicted Harm — And Continue to Inflict Harm — ‘To Chester County’s Pul \d Records 98. ‘The Chester County Recorder of Deeds office serves the publie interest by recording conveyances in publicly available records, see 16. P.S. § 9731, and without such a reliable system, “no one”—including Defendants, other MERS Members, or members of the 27publie—“would be safe in purchasing real estate, or in loaning upon the strength of it, as security.” Prouty v. Marshall, 74 A. 550, 574 (Pa. 1909); see also M'Caraher v. Commonwealth, 5 Watts & Serg. 21, 26 (Pa. 1842) (recorders of deeds “enable all persons to obtain knowledge of the state of titles to real estate by deeds and conveyances”) 99. The completeness and accuracy of public land records is vital. See Peterson, 53 Wo. & Mary L. Rey. at 115 (“A public, enduring, authoritative, and transparent record of all land ownership provides a vital information ‘infrastructure that has proven indispensable in facilitating not only mortgage finance, but virtually all forms of commerce.”).. 100. The well-established county recording system is time-honored and has worked reliably for hundreds of years, as Professor Peterson has noted: For centuries, American mortgage lenders eagerly recorded their ‘mortgages with county recorders because state land title laws created incentives for recording and disincentives for not recording. For example, if'a mortgagee fails to record its mortgage properly and then someone subsequently buys or lends against the home and records its interest, the subsequent purchaser or lender often can take priority over the first mortgagee. Similarly, if'a mortgagee assigns a mortgage to an investor, that investor eagerly ‘would record documentation reflecting the assignment to protect, against the possibility that the original mortgagee would assign the same mortgage to a different investor. Id. (footnotes omitted). 101. Expert analysis of county land records reveals that there are multiple missing assignments for MERS mortgages that should have been recorded; that MERS’s data is, incomplete and in contradiction to securitization deal documents; and that title to properties burdened by MERS mortgages has been corrupted by MERS’s failure to record a complete chain of title, See Montgomery County I], 2014 US. Dist. LEXIS 89222, at *54-56. 28102. Further, title searchers and consumers cannot ascertain who currently owns the note secured by a MERS mortgage and neither a mortgagor nor the courts can ascertain the identities of the true owners of interests in real estate. Pennsylvania’s land records have been rendered unreliable by MERS and of little use in evaluating the marketability of tile or even the credit worthiness of a consumer. Jd. 103. Over the past several years, substantial numbers of Chester County residents who were facing foreclosure have not known what entity owned their mortgage or to whom they should be making theit mortgage payments because Defendants’ use of the MERS® System has, evaded Chester County’s public land recording system and rendered the County’s land records incomplete and inaccurate. See id. at *56-57. 104. The public has an important interest in access to a permanent repository of all conveyances so that citizens may (a) know the true identities of all parties in the chain of title, (b) verify the accuracy of all conveyances affecting title to real property, and (c) examine copies of the actual documents. These interests are advanced when mortgage assignments and other conveyances are timely and properly recorded in accordance with Pennsylvania law. 105. Defendant Banks use the MERS" System to circumvent the statutorily mandated recording of assignments of mortgages and evade payment of mandatory recording fees. This illegal scheme has broken once transparent chains of title in Chester County land records by creating gaps, omissions, and inaccuracies in the County's land records. 106. The MERS” System undermines the integrity of the public land recording system upon which it was built, and upon which it still relies. R. K. Amold, MERS’s former President and CEO, has admitted under oath that the MERS” System could not exist or function without 29the public land recording system in place in Pennsylvania and the other states. See Montgomery County I, 2014 U.S. Dist. LEXIS 89222, at *58-59 (“... the MERS system couldn’t exist if the recording system didn’texist.”) (quoting R. K. Arnold testimony before the Circuit Court for Montgomery County, Alabama, in Henderson v. Merscorp, Inc. (emphasis added)). 107. As the Amold testimony confirms, Chester County’s public recording system confers a benefit that is recognized, valued, and appreciated by Defendants. 108, Defendants accept, enjoy, and retain this benefit without paying the legally mandated fees that fund it. Defendants conform to state law recording requirements only when it is advantageous for them to do so, such as when necessary to initiate foreclosure proceedings or pursue residential mortgage loan securitizations. 109. Itis unjust to permit Defendants to enrich themselves while violating Pennsylvania law and depriving Chester County of the fees used to fund essential County services such as children and youth initiatives, veterans’ affairs, emergency services, care for the aged, and the operations of the County’s Recorder of Deeds office. 110, Pursuant to the doctrine of nullum tempus occurrit reipublicae (time does not run against the King), there is no statute of limitations applicable to Plaintiffs? claims, which accrued to Plaintiffs in their governmental capacities and which seek to enforce public rights and obligations imposed upon Defendants under state law. COUNTI QUIET TITLE 111. Plaintiffs hereby incorporate the above paragraphs as if fully set forth herein. 112. Pennsylvania Rule of Civil Procedure 1061(b)(3) creates a right of action to permit enforcement of 21 P.S. § 351 requiring that all conveyances of mortgages, including mortgage assignments, be recorded. 30113. In Pennsylvania, quiet title action “may be brought...o compel an adversary party (0... record... any document, obligation, or deed affecting any right, lien, ttle, or other interest in land.” Pa.R.C.P. 1061(b(3). Pennsylvania law permits any party interested in a conveyance, such as a mortgage assignment, to bring a quiet title action under Rule 1061(b)(3). 114. A quiet title action to compel recordation is available to Plaintiffs because Plaintiffs have direct and compelling interests in the recordation of mortgage assignments in Chester County. 115. Defendants’ failure to record mortgage assignments and their corresponding violations of 21 P.S. § 351 have deprived Plaintiffs of the recording fees due and owing to Chester County. Plaintiffs consequently have the requisite pecuniary interest to bring this quiet title action to compel recordation of all mortgage assignments. 116. Defendants possess documents and other data reflecting mortgage assignments that should have been recorded, and possess the information necessary to facilitate public recordation of those mortgage assignments. 117. Plaintiffs seek an order compelling Defendants to record all of their mortgage assignments in the Recorder of Deeds Office in and for the County of Chester to restore the accuracy of the County’s public land records and to establish, once again, clean title to properties located within Chester County. COUNT It NEGLIGENT AND/OR WILLFUL VIOLATION OF 21 118, Plaintiffs hereby incorporate the above paragraphs as if fully set forth herein. 119. Defendants knew of, or showed reckless disregard for, the duties imposed upon them by Pennsylvania law, specifically 21 P.8. § 351 31120. Defendants deliberately failed to record mortgage assignments in the public record to evade payment of mandated recording fees. 121. Defendants’ unlawful actions substantially frustrated Pennsylvania's recording laws, causing Chester County losses of tens of millions of dollars in recording fees and rendering its public recording system inaccurate and incomplete. 122, Asa proximate result of Defendants’ negligent and willful violations of 21 P.S. § 351, Plaintiffs have been damaged in an amount to be ascertained at trial COUNT II UNJUST ENRICHMENT. 123. Plaintiffs hereby incorporate the above paragraphs as if fully set forth herein. 124. Based upon Defendants’ wrongful conduct, Plaintiffs seck to recover in equity monies held by Defendants that rightfully belong to Plainti 125. Plaintififs conferred benefits on Defendants by establishing and maintaining the public land recording system in Chester County, Defendants accepted and appreciated, and continue to accept and appreciate, those benefits 126. Further, when Defendants circumvented the County’s public land recording system through their use of the MERS® System, they benefitted from the pretended appearance of having good title to mortgages affecting properties located within Chester County, a pretense which allowed them to cheaply engage in secutitizations of thousands of Chester County mortgage loans and sell such loans for value through the REMIC trusts they created and operated. Defendants also appreciated, and continue to appreciate, those benefits 127. Defendants’ acceptance of the foregoing benefits and corresponding failure to compensate Plaintiffs has resulted in an unconscionable bargain ~ inequitably depriving Chester 32County of tens of millions of dollars in recording fees while delivering financial benefits to the Defendants. 128. Plaintiffs seek equitable relief to prevent the unjust enrichment of Defendants by requiring payment to Plaintiffs for all fees wrongfully avoided by Defendants, plus interest, attomeys’ costs and fees, and exemplary damages as allowed by law and equity. COUNT IV CIVIL CONSPIRACY TO VIOLATE 21 P.S. § 351 129, Plaintiffs hereby incorporate the above paragraphs as if fully set forth herein. 130. Defendants in this action have intentionally and maliciously conspired amongst themselves and with other unnamed co-conspirators to violate the provisions of 21 P.S. § 351. 131. Defendants acted in combination to create a private mortgage registration system designed to bypass public recording laws-and evade payment of fees required by Pennsylvania law. 132. Asa proximate result of Defendants’ misconduct, Plaintiffs have been damaged in an amount to be ascertained at trial, COUNT v AIDING & ABETTING 133. Plaintiffs hereby incorporate the above paragraphs as if fully set forth herein. 134, A defendant is liable to a plaintiff under Pennsylvania law if: - he (a) does a tortious act in concert with the other or pursuant toa common design with him, or (b) knows that the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself, or (©) gives substantial assistance to the other in accomplishing a tortious result and his own conduet, separately considered, constitutes a breach of duty to the third person. Restatement (Second) of Torts § 876.135. Defendants operated and used the MERS® System pursuant to an express agreement and understanding among themselves and other MERS Members to avoid recording mortgage assignments and paying mandated recording fees notwithstanding a duty to do so under Pennsylvania law. -See 21 P.S. § 351 136. Through the use of the MERS® System, Defendants specifically intended, and acted in concert with others, to evade paying recording fees in Chester County and deprive Plaintfis ofthe revenue generated from payment of recording fees. 137. Asa result of the coordinated conduct alleged herein, Defendants’ breached the duty owed to Plaintiffs for payment of recording fees for mortgage assignments on properties located within Chester County. 138. Pursuant to the common design and scheme of the MERS® System, Defendants concealed, and continue to conceal, mortgage assignments and transfers to evade payment of recording fees. 139. Defendants gave substantial assistance to each other and other MERS Members to accomplish the evasion of recording fees. 140. Asa direct and proximate result of Defendant’ common plan, scheme, breach of duty, and substantial assistance to other MERS Members, Chester County has been injured through the non-payment of recording fees. 141, Asa proximate result of Defendants’ misconduct, Plaintiffs have been damaged in an amount to be ascertained at trial. Defendants are each liable for the entire harm to Plaintiffs. ‘See Restatement (Second) of Torts § 875 (“Each of two or more persons whose tortious conduct is legal cause of a single and indivisible harm to the injured party is subject to liability to the injured party for the entire harm. 34COUNT VI LARATORY JUDGMENT AND PERMANENT INJUNCTION FOR ILURE TO RECORD MORTGAGE ASSIGNMENTS: DI DEFENDANTS’ F 142. Plaintiffs hereby incorporate the above paragraphs as if fully set forth herein. 143. This is an action against Defendants for a declaratory judgment pursuant to 42 Pa. CS. § 7531 et seq., and for permanent injunctive relief. 144. Asa result of Defendants’ actions, Plaintiffs are uncertain about the true holders ing title to properties in Chester County. 145. Plaintiffs seek an order compelling the recording of all mortgage assignments in the Office of the Recorder of Deeds in and for the County of Chester, together with the payment of the required recording fees, to restore order to the land records of Chester County. 146. Plaintiffs have a bona fide, actual, imminent, present and practical need for a declaration that the failure to prepare and timely record mortgage assignments is a violation of 21 P.S. §§ 351 and 444 147. Plaintiffs seek a declaratory judgment and a permanent injunction requiring Defendants to properly record in the public record any and all assignments of mortgages known to Defendants affecting properties located within Chester County, and to pay the required recording fees attendant thereto, JURY DEMAND 148, Plaintififs hereby request a trial by jury on all issues so triable in this case, PRAYER FOR RELI WHEREFORE, Plaintiffs pray for the following relief (a) For judgment against Defendants and in favor of Plaintiffs on all causes of action asserted in this Complaint;(b) Entry of a judgment against Defendants quieting title to all mortgages recorded by Defendants in Chester County; (© Entry of an award of compensatory damages in an amount in excess of $50,000; (Restitution and disgorgement of all monies due and owing to Plaintiffs for unrecorded mortgage assignments; (©) A declaration and determination by the Court that Defendants’ failure to record mortgage assignments and pay the accompanying fees is and was in violation of Pennsylvania law; (® A permanent mandatory injunction requiring Defendants to record in the Office of the Recorder of Deeds in and for the County of Chester, Pennsylvania, and pay the requisite recording fee for, all mortgage assignments affecting properties located within the County of Chester, Pennsylvania whether such assignments are “registered” on the MERS® System or not; (g) The costs of suit incurred herein; (hb) Pre-judgment interest to the extent allowed by law; (@ For punitive and exemplary damages in an amount to be ascertained at trial; @ For reasonable and necessary attorneys’ fees; and, (&) For such other and further relief as the Court deems proper and just. 36DATED: October 10, 2014 Respectfully submitted, OBERMAYER REBMANN MAXWELL & Hippet LLP By: bn B kup == uuis B, Kuppernian (Pa. Atty. No. 222: William J. Leonard (Pa. Atty. No. 42362) Zachary 8. Davis (Pa. Atty, No, 93290) Rigel C. Fart (Pa. Atty. No. 316869) One Penn Center, 19th floor 1617 John F. Kennedy Blvd. Philadelphia, PA 19103-1895 Telephone No.: 215-665-3000 Fax No.: 215-665-3165 Bont & ZACK LLC By: DeddueD. Be fichael J. Boni (Pa. Atty. No. 52983) Joshua D. Snyder (Pa. Atty. No. 88657) John E. Sindoni (Pa. Atty. No. 91729) 15 St. Asaphs Road Bala Cynwyd, PA 19004 ‘Telephone No.: 610-822-0200 Fax No.: 610-822-0206 37VERIFICATION 1, Richard T. Loughery, the Recorder of Deeds in and for the County of Chester, Pennsylvania, hereby state that I am a Plaintiff in the foregoing action, that Lam authorized to make this Verification on behalf of Plaintiffs, and that the statements made in the foregoing Complaint are true and correct to the best of my knowledge, information and belief understand that false statements herein are made subject to the penalties of 18 PaCS. § 4904 relating to unsworn falsification to authorities.EXHIBIT A.01 umgg'g 0g S| mmooy tpreg sINyoig, 9 SINGHNIDOC JOWNONVT NOERIO Japiooayy ap JO BBO WALSHHD FO ALNNOD22) LAN 240 sopn}uy 007698 Sey Jo SHR pre swomDEET ‘sR 2B .smBUnsry ‘ smoNDEsUES ELOY, stain 004 9 AEC [le sate p "SAAT FO SENN awed 2514/1 24° SPN gO BEE -sFMOWY aeEXHIBIT BWHOLE LOAN BOOK ENTRY CONCEPT FOR THE MORTGAGE FINANCE INDUSTRY A JOINT PUBLICATION OF THE INTERAGENCY TECHNOLOGY TASK FORCE (IAT) - MORTGAGE BANKERS ASSOCIATION, FANNIE MAE, FREDDIE MAC, & GINNIE OCTOBER 25, 1993FORWARD ‘This White Paper talks about something new-~a central, electronic registry for tracking interests in mortgages. The Whole Loan Book Entry (WLBE) concept is being proposed with the initial purpose of virtually eliminating mortgage assignments. The tyranny of these forms, vestiges of seventeenth century real property law, should end now that the information they carry can be harnessed electronically. By using a means of communication called electronic data interchange, or EDI, mortgage sellers, warehouse lenders, mortgage investors, and servicers will be able to obtain, transfer, and identify interests in mortgages essentially on a real time basis. The interested pparties will be able to access the central registry, and the registry will be able to communicate with them even though each may be using proprietary business systems for internal operations. The registry will be housed in an independent legal entity and will assume the role.of mortgagee of record for all registered loans. This status will facilitate its collection and dissemination of critical mortgage information. ‘This exciting concept is being developed by the InterAgency Technology Task Force (IAT). The IAT js a joint effort of Fannie Mae, Freddie Mac, Ginnie Mae, and the Mortgage Bankers ‘Association of America, Its mission is to apply technology to inerease the efficiency and reduce the costs of mortgage banking and related services. It currently is involved in developing standardized EDI formats for investor reporting and Joan delivery. Once these standards are in place, establishing the industry's EDI infrastructure, the WLBE concept can be implemented, ‘On behalf of the IAT, I invite you to read the White Paper ~ctitically-- and to complete the attached comments form. ‘The White Paper does not purport to be a final blueprint with an established set of construction specifications. Rather, itis a rough sketch that needs refinement. So, please, send in your comments, identify your concerns, and offer your suggestions, Your responses will allow the IAT to fine-tune the concept and move forward, Your comments will make a difference. A number of MBA members and other industry participants already have participated in focus groups and surveys, and their ideas have been incorporated into this White Paper. I want to thank everyone who took the time to attend the focus groups and review the White Paper. We have all benefitted from their efforts. MBA also is extremely proud to be sponsoring the IAT and participating in its activities. We sincerely commend the vision of the Agencies in exploring innovative solutions to today's problems. When reading the White Paper, you will note that the proposed electronic clearinghouse may facilitate a number of new electronic transactions that could greatly increase the efficiency of the mortgage finance industry. To paraphease John Sculley on the subject of computers: ‘The computer is more than a tool, itis a medium. Just as the typeface standardized information-changing us from a’ society where information was at the metey of monks busy with hand copying into a fact-loving society where nonfiction outsells, fiction-so EDI will change the way we look at the world. Our goal is to replace paper shuffling with efficient communication of meaningful information. We can't achieve this goal in a vacuum. ‘The IAT needs the support and insights of all the many parties jons. Please make your thoughts known. Qa Lh Warren Lasko Executive Vice President Mortgage Bankers Association of Americaim, v. Vi. va. TABLE OF CONTENTS EXECUTIVE SUMMARY Introduction & Background. Objectives & Approach. Initial Findings... Clearinghouse Organizational Model.. Next Steps... - CURRENT SITUATION Overview. Closing and Investor Delivery Servicing Transfers... Lien Release Process, WLBE CONCEPT Overvi Description of Potential Process.. Opportunity for Cost Savings........... Clearinghouse Organizational Model. Clearinghouse Structure... * Legal & Regulatory Framework. Future of the WLBE System. POTENTIAL IMPACTS, IV-l ‘CONCLUSION & NEXT STEPS......... ore | APPENDIX - FOCUS GROUP COMMENTS Title Companies/Closing Agents......... Vie Warehouse Lenders. VEL Lenders/Servicers. VI-2 Document Custodians. v3 Recorders....... VI-3 COMMENTS FORM. . VI1, EXECUTIVE SUMMARY INTRODUCTION & BACKGROUND. ‘Today, mortgage investors transfer mortgage ownership and servicing rights using the same process as required by seventeenth century real property law. Note endorsements, mortgage assignments, and satisfaction documents must be prepared, verified, and delivered, and mortgage assignments and releases must be recorded. ‘This process is cumbersome and paper intensive, costing the mortgage industry hundreds of millions of dollars each year. ‘A number of industries in similar situations have leveraged information technology t0 reduce processing costs, Thirty years ago, stock and bond registration and trading procedures were primarily paper-based. Similar to the use of assignments in transferring mortgage rights, stock and bond certificates were issued to investors to evidence ownership of securities.’ Each time a security was bought or sold, the original paper certificate was destroyed and a new certificate was issued to the buyer. As trading volumes increased over time, the paper work became unmanageable, causing delays in trade settlement dates. Because of these problems, the securities industry began to implement book entry systems to streamline the process, eventually reducing costs by over 90% 7 In recent years, the mortgage banking industry has used information technology to reduce costs for "back~ office" and retail operations, but it continues to use paper-based methods to record. and track mortgage rights, Based upon benefits realized from book entry systems in other industries, it would appear that a Whole Loan Book Entry (WLBE) system for tracking mortgage rights could significantly reduce the costs associated with transferring these rights. ‘Over the past several months, an InterAgency Technology Task Force (IAT), comprised of representatives from the Mortgage Bankers Association (MBA), Fannie Mae, Freddie Mac and Ginnie Mae, has been evaluating the potential for an industry-sponsored WLBE system that would serve as a central repository to electronically register and track ownership of mortgage rights. Participants would use existing data communication services to access and update mortgage rights information in the WLBE system, The proposed system would be designed not only for use by Fannie Mae, Freddie Mac, and Ginnie Mae, but also by conduits, portfolio lenders, and other mortgage investors, OBJECTIVES ACH ‘The intial goat ofthe TAT has been to develop an understanding of the potential advantages and drawbacks of creating a WLBE system and report those findings in a White Paper at the October 1993 MBA Annual Convention. The findings reflect the development of a working concept that is being presented for discussion and further refinement “The White Paper uses the information gathered from industry focus group meetings conducted by the IAT with various participants in the mortgage finance industry, The White Paper presents the concept, identifies issues/opportunities, and seeks industry guidance in shaping the concept. Its the hope and desire of the IAT that the White Paper will provoke thought and discussion on the idea of a WLBE system for the industry as a means for streamlining the process for transferring mortgage rights Mortgage sight refers to any bens), eal or scusy iret na morgage. Inthe morgage indus. these rights are often {epnated whet ender sll losin sacordary marks, bt ran the morgage servicing hts. For example, a momageservieet thay have lege to foi mostgage serving requests, tthe ia eso has the beneficial Hrs and ight tothe tmongaze ash Nows 7 Stine and D. Tencta, Teenolory in Rankine, Creating Value aad Daswuving Profits, 1990, page 181 MHINITIAL FINDINGS OVERVIEW In the short term, a ook entry system for the mortgage industry shows temendous potential to significantly reduce the costs associated with transferring mortgage rights. As initially envisioned, the WLBE system would include a Clearinghouse to track mortgage ownership immediately after loan closing, climinating the need to manually prepare and record assignments for subsequent transactions, and enabling increased efficiencies in document custody and lien release processing. Preliminary research indicates that the WLBE system could save the industry $164 million annually, or a cost savings of $65.15 pet loan over the mortgage life eycle (Figure I-1)> In addition to these projected cost savings, by establishing a single system for tracking mortgage ownership rights, the WLBE system could improve legal notice procedures and fraud detection capabilities. Looking toward the future, there is every reason to believe that the WLBE system could provide the framework for offering new services such as: standardized loan delivery to investors settlement and payment services ‘government or agency reporting faci electronic mortgage closings CURRENT SITUATION In 1993, itis estimated that the mortgage industry will spend $260 million on the following activities to transfer mortgage rights: * Preparation ion, and management of assignment documents - over its life, an average loan requires approximately four unrecorded and two recorded assignment documents Movement and recertification of loan files - on average loan files are moved 83% of the time between closing and investor delivery and 90% of the time during servicing transfers . jon release process - lien releases require an average of eight separate mailings between parties to release the mortgage lien to the borrower ESTIMATED COST SAVINGS FROM WLBE SYSTEM The WLBE system could eliminate most assignment processing, induce investors to immobilize loan documents, and reduce mailing and notification costs during lien release processing. It is estimated that the WLBE system could reduce the current costs for these operations from $260.5 million to $96.5 milion annually, a savings of over 60% (Figure I-1). These estimated cost savings are based on preliminary surveys and economic forecasts. In the next phase of this project, the IAT will work with the industry 10 finalize the WLBE design and perform a full cost-benefit analysis, > ‘nes otherwise ned, cat data cntine in hs reo was derived rom dhe flowing sours: tuueageney Technology Task Forces “Survey af Industry Focus Group Saisie Fansis Mae Beosonice Deparment Repon. "Mongage Finance Maret; Revenue Estates St Rescarh Comparaton Repo: "Gtnts ofthe Moregge indus 192" MBA Escnomies Deparment nd Faonie Mae Economies Department 12Figure 11 ESTIMATED ANNUAL INDUSTRY SAVINGS OF WLBE ! Cost Categorie Staoatoo” | enaey | tamed Assignment Processing sass $20 su Decemea eit $m 5 902 sm ua $483 sus s Bs ‘TOTAL $260.5 $96.5 $164.0 COST IMPACT PER LOAN OF WLBE DURING LIFE CYCLE * ] sages PeRaaGmane “suetttsemse® | hrechcie Tania] aati) [Eoin Co TEE Based on projected 1993 volumes: Oxgiions - 8,300,000; Serving tansers 300,000; Payots- 6,900,000 (nga! number Dt tans base on 10 yoo pisection, ides conventional amd goverment, confortaige and non-conforming loa) » Buches cons of document fmavemeat and cerufcation for inl depost wits collars zgendocumeat custom, Estnited $1600 pet foun, The nial posi and cerifeaton wil sonnet eur unde the WLEE sym. 5 Gon ace zero rly for subrogee movemsnt and cetiction de ery inspobizaion of oan ies (ee note *Costineures daring th fe fhe Loam. ASsumes tac servicing fights ae tansfcred 2 tes in oan’ ieEliminate the Need for Most Assignments ‘Once the WLBE Clearinghouse is established as the mortgagee of record, all subsequent transfers of ‘ownership would be recorded electconically, eliminating the need to physically prepare, deliver, record, ‘and cack assignment documents, ‘The estimated cost savings for assignment processing over the life of the loan would average $40.75 per loan. Reduce the incentive to Relocate Documents In addition to eliminating costs associated with mortgage assignments, the WLBE concept could reduce costs related to the movement and certification of loan documents. ‘The WLBE system would require a ‘one-time certification of loan documents according to specific standards, reducing the risk of errors and omissions. This would potentially reduce the incentive for buyers of mortgage rights to relocate and recertify loan files. If loan documents are immobilized at the original collateral agent/document custodian, the document movement and certification costs for each subsequent loan transfer could be eliminated, saving the industry an average of $22.40 per loan, Increased Effictencies During the Lien Release Process By providing a centralized location for mortgage ownership information, the WLBE system could eliminate certain mailing costs associated with lien release processing. Currently, when a loan is paid off, paper documents are mailed back and forth between settlement agents, servicers, and document custodians, Participants in the WLBE system could reduce lien release processing costs hy atleast $2.00 for each loan, by atilizing electronic transmissions instead of the mail, USE NAL MC CLEARINGHOUSE MODEL AND STRUCTURE : Existing business entities such as the Depository Trust Corporation (DTC) and the Participants ‘Trust ‘Company (PTC) provide successful models for establishing a structure for the WLBE Clearinghouse." That is, the Clearinghouse would be established as an independent corporate entity, but it would be sponsored ‘by and operated for the benefit of its users. Users would share in ownership and management according to their membership status and level of participation. Only slight modifications to the existing process of transferring mortgage rights would be required for users to participate in the WLBE system and take advantage of the greater efficiencies the system could provide. ‘The WLBE system could potentially have several classifications of participants based upon their roles and the value they would derive from membership. Any group entitled to information on the ownership or servicing of a mortgage could participate in the system. Itis likely that some industry groups would simply be suppliers of information or services (¢.g., settlement agents or tax services), while others would be customer/users and owner/users, Embedded in the Clearinghouse concept are essential issues that need to be resolved such as user fees. legal ‘structure, technological requirements, data requirements, and contro! procedures for computer interfaces and facilities. In the area of technological requirements, it would be necessary to develop a system that is reliable and a system architecture that is open to all industry participants, “ ‘The DIC and PIC provide ook enty frites forte secures nds. 14‘The technology to implement a WLBE system and jts related costs cannot be a barrier to participation. Direct links with the Clearinghouse could be established with only a personal computer and modem in conjunction with EDI Electronic Data Interchange) translation software. Lenders and other participants ‘would use modems or similar devices to communicate with the Clearinghouse via available data networks. ‘An integral part of the WLBE Clearinghouse concept would be the exchange of data between the Clearinghouse and its members in a standardized format. To facilitate the efficient electronic transmission ‘of data, the Clearinghouse would establish and implement EDI standards. EDI would enable Clearinghouse ‘members to transmit data in a common, standardized format. EDI will be a key ingredient (0 the success of the WLBE concept. LEGAL AND REGULATORY FRAMEWORK ‘The objective of the WLBE concept is to establish the system while working within the existing framework of real estate law, rather than attempt to effect change through either the judicial or legislative processes. Articles 3 and 8 of the Uniform Commercial Code (UCC) and existing real estate law set the foundation for creating a book entry trading process for mortgages. Under existing law, it is generally not necessary to record an assignment of lien in the public land records to sell a loan, perfect a security interest in a loan, or establish ownership of the loan. However, recorded ‘mortgage assignments insure the proper and timely notice to third parties of the existence of the lien transfer and insure the transferee's receipt of notices affecting mortgaged property (e.g., filing of federal, state or local tax liens, junior lien foreclosures, property condesnnation, and bankruptcy filings). Contracts between the Clearinghouse and its participants will define the Clearinghouse’s rights and obligations as mortgagee of record, while contracts between participants will further define the role of the Clearinghouse and will serve to develop the WLBE concept to its fullest potential NEXT STEPS ‘The IAT will continue to work with the industry co analyze this opportunity. Many operational and legal issues need (0 be examined in more detail to assess the concept’s viability, Your comments and suggestions on the WLBE concept are vital if we are to develop a system that will address all of the relevant issues and move the industry forward with this important initiative. Please complete the comments form located in the back of the White Paper by December 14, 1993, and retum it to Dan McLaughlin, (202) 861-6528, or Phyllis Slesinger, (202) 861-6543, at the MBA, 1125 15th Street, N.W., Washington, DC 20005, or fax it to them at (202) 822-6320,1. CURRENT SITUATION OVERVIEW ‘Today, the process for transferring and tracking mortgage rights is paper-intensive, time-consuming, and costly. A major portion of these costs stem from the need to prepare, record, and manage physical assignment documents that ate required to evidence interests in mortgages. Additionally, the current paper- based process leads to significant inefficiencies in document custody, loan/pool certifieation, and lien release processing (Figure 1-1). Figure 1-1 CURRENT PROCESS CLOSINGANVESTOR DELIVERY _ |! ‘SERVICING TRANSFERS tl | ap ee ee = Tm” [oa w Ava ince bow pee bese S| Gt Se ace LIEN RELEASE ia’ — he > fhe —> seiemen ERX} “tenter” QJ sertemers KT peconters ED Seatemese ae ‘om Sm “er ed Tagend: a Soba [Preparing procesing,& racking ql : cognac i ison Golia -Moig ceri ton dcsnens | [Menai P b aOver the life of a loan, mortgage rights are transferred an average of five times (including sales of both ownership and servicing rights). In 1993, itis estimated that the mortgage industry will spend $260 million on the following activities to transfer mortgage rights (Figure 11-2): © Preparation, recordation, and management of assignment documents - over its life, an average loan requires approximately four unrecorded and two recorded assignment documents = Movement and recertification of loan files - on average loan files are moved 83% of the time between closing and investor delivery and 90% of the time during servicing transfers * Lien release process - lien releases require an average of eight separate mailings between Parties to release the mortgage lien to the borrower Figure 11-2 (CURRENT COSTS FOR TRANSFERRING MORTGAGE RIGHTS | cae Taagkiner | Srwne = a ‘Sie = Prete ‘sagnettremice [rein seo 800 a teeta | re s0 sr . "Mie eapcs19 lne OrgnsAt0 00 Sey ef9 P -650%0 (shar ens re tn asco ign eng Of these activities, assignment processing is by far the most expensive, and will cost the industry an estimated $135 million in 1993, ‘The cost of moving loan documents during transfers of mortgage rights is also significant, with 1993 expenses projected at close to $80 million. Finally, in 1993, the lien release process will cost the industry almost $50 million in mailing and notification costs alone. ‘The following sections describe in more detail the current process flows and estimated costs for tracking ‘mortgage rights in the areas of closing and investor delivery, servicing transfers, and lien release processing. 12CLOSING AND INVESTOR DELIVERY ‘The costs of assignment preparation and document custody functions after the closing process will vary depending on how the loan was funded and if itis delivered into the secondary market. In the simplest case, the originating lender holds the loan in portfolio, requiring neither mortgage assignments nor third party document custody fees, A more likely scenario involves interim financing and the sale of the loan to the secondary market. Under these circumstances, there is a need for several assignments and various document custody services, Most lenders deliver loans into the secondary market. In addition, mortgage bankers use warehouse lines of credit to fund their origination activity and sell virtually all of their production. During the closing and Aelivery process, there are an average of 1.8 assignments created for each loan at an average cost of $8.50 per loan (Figure 3A). The cost associated with moving loans during this process has been estimated at $6.40 per loan (Figure 1-3B). Figure 1.38 Figue 138 ‘Assignment Costs Per Loan ‘Loan File Movement Costs Per Loan ' Closing and Investor Delivery ‘Closing and Investor Delivery sypeotsigmen | seme, | Z2O=S0RD Name of Pluinsfi7Appellant’s Attorney: nis Kappan, Eee Pe. Aly No 2220) 1 Check heve ityou have no attorney (are a Se-Represented {Pro Se Li igant) TORT (cio nor include Mass Tor) CONTRACT (o not inclu Judymens) Nature of the Case: Place an “X" to the left of the ONE ease category that most accurately deseribes your PRIMARY CASE. Ifyou ate niaking more than one type of claim, check the one that you consider most important, AL APPEALS: PROFESSIONAL LIABLITY Dental D Legal Dy Medicat By Other Professi 1 Ground Rent Gj Landioed/Tenant Dispute 1D Mortgage Foreclosure: Residential G1 Mortgage Foreclosure: Commercial Partition Bi Quiet Title Ey other: TH intensional 1 Buyer Paint ‘Administrative Agencies Ey Matious Proseetion Ey bets Cotecton: Credit Card Ty Bout ot Agsimenc 5 Motor Vehicie 5 Dest Colleton: Other Board oP Elesupns Product Liability (does not include -_ . 2 7y, ss * aan Dippin owe a _ - 1 Otter: = —— casero D Asbestos Hse BB Toxic Tort - DES. Ey Tonic Tort implant REAL PROPERTY MISCELLANEOUS a one. Waste C1 Ejcctment Common Law/Statutory Arbitration 1D Other: D Eminent Domain/Condemmation 1 Declaratory Judgment Ey Mandamus Non-Domestic Relations: Restraining Order ‘Quo Warranto Replovin Dotter: Updated 12011Chester County Court of Common Pleas Cover Sheet Docket No: Yi) Plaintiff(s): (Name, Address) Richard T. Loughery, In His Oficial Capacity as Recorder of ‘Deeds in and For The County Of Chester, Pennsylvania 313 W. Market Street, Suite 3302, P.O. Box 2748, West Chester, PA 19980-0891 Plaintiff’ s/Appellant’s Attorney (circle one) (Name, firm, address, telephone and attomey ID) ‘ae 8. Kupermon Pa Ay No, 2206), Obarmayr Rabon ase pel LP ‘Gna Penn Car 17 stn Renrdy va, Tibor Paacophin, 2 ST 855 ‘Sepeane vse Defendant(s): (Name, Address) MERSCORP Holdings, Inc., fikia MERSCORP, Inc. 1818 Liberty Street, Suite 300, Reston, VA 20130 (Soe attachment for complete list of Defendants) Are there any related cases? Please provide case nos. No Defendants who are proceeding without counsel are strongly urged to file with the Prothonotary a written statement of an address AND a telephone number at which they can be reached. Ie this camp fom Nagel Da dg, war appen (C) Fat or) Dtedz Ine wigealcio? Jury Trial Demanded €@) Yes () No "Nature of case if not on previous cover sheet — Please choose the most applicable ‘Annulment Custody » Conciliation Required Custody: Foreign Order Custody - No Conciliation Required Divorce - Ancillary Relief Request Divorce - No Ancillary Relief Requested Foreign Divorce Foreign Protection from Abuse Paternity Protection from Abuse ‘Wit of Certiorar Injunctive Relief Mechanics Lien Claim Iesuance of Forsgn Subpoena xs Name Change au, 8 Petition for Structured Setiement’ >. Standby Guardianship Arbitration Cases Onl ‘tbittation Date b=) Atbiteation Tine] ascarid rv cena ae pasate isles Osta an toueetmar ae puss orene Heres oguto atl dean on al Notice of Trial Listing Date Pursuant to C.CR.CP- 2495, i this case is noFBibject compulsory arbitration it willbe presumed ready for tial ‘oelve (12) months from the date of the initiation ofthe suit and willbe placed on the tial lst one (1) year from the date the suit was filed unless otherwise ordered by the Cour. To obtain relief ftom automatic tral listing a party must proceed pursuant to C.C.R.CP. 249.3(b), request an administrative conference and obtain a court order defering the placement ofthe ease on the til list until a later date. ile with: Chester County Justice Center, Prothonotary Office, 201 W, Markot St, Ste. 1425, PO Box 2746, West Chester, PA. 19380-0989 ‘These cover sheets must be served upon all other parties to the action imme Submit enough copies for service. ely afterSUPPLEMENT TO CHESTER COUNTY COURT OF COMMON PLEAS COVER SHEET DEFENDANTS" NAMES AND ADDRESSES [Defendant MERSCORP Holdings, Inc. f/k/a! MERSCORP, Inc. is listed on the Chester County Court of Common Pleas Cover Sheet] Mortgage Electronic Registration Systems, Inc. 1818 Library Street, Suite 300, Reston, Virginia 20190 Bank of America, N.A. 100 North Tryon Street, Suite 170, Charlotte, North Carolina The Bank of New York Mellon One Wall Street, New York, New York ‘The Bank of New York Mellon Trust Company, N.A, 400 South Hope Street, Los Angeles, California Citibank, N.A. 701 East 60th Street North, Sioux Falls, South Dakota CitiMortgage, Inc. - 1000 Technology Drive, O°Fallon, Missouri Deutsche Bank National Trust Company sf oo 2000 Avenue of the Stars, Los Angeles, California Deutsche Bank Trust Company Americas 60 Wall Street, New York, New York Gateway Funding Diversified Mortgage Services, L.P. 300 Welsh Road, Building No. 5, Horsham, Pennsylvania 19044 HSBC Finance Corporation, f/k/a Household International, Inc. 2700 Sanders Road, Mettawa, Illinois HSBC Bank USA, N.A, 1800 Tysons Blvd., McLean, Virginia JPMorgan Chase Bank, N.A. 1111 Polaris Parkway, Columbus, Ohio Trident Mortgage Company, L.P. 431 W. Lancaster Avenue, Devon, Pennsylvania Wells Fargo Bank, N.A. 101 North Phillips Avenue, Sioux Falls, South Dakota