Consumer Finance Insights
July 29, 2016

Goodwin Files Supreme Court Amicus Brief On Behalf Of The Mortgage Industry

On July 25, 2016, Goodwin filed a certiorari-stage amicus brief on behalf of the Mortgage Bankers Association, Consumer Mortgage Coalition, and several other mortgage industry groups.  The case involves a Connecticut law that tripled recording charges for mortgages and mortgage assignments when Mortgage Electronic Registration Systems, Inc. (MERS) is a party to a mortgage.  On February 8, 2016, the Connecticut Supreme Court held that the law did not discriminate against interstate commerce in violation of the dormant Commerce Clause. 

The industry’s amicus brief detailed the history of how federal government and industry partnered to create MERS to address significant recording backlogs, errors, costs, and fraud that occurred in county recording offices as securitization increased in the 1980s and 1990s.  Instead of having to draft, execute, ship, record, and track mortgage assignments in paper format every time a loan was transferred from one party to another, MERS allowed lenders to track loan transfers electronically on the MERS® System’s national electronic database.  Two decades later, the vast majority of new home loans are made using the MERS® System.  National, regional, and online lenders, as well as federal law enforcement agencies and state governments, now rely on the MERS® System to facilitate lending and detect fraud. 

The brief argued that Connecticut’s law, which imposes three-fold recording fees if a national electronic database like MERS is a party, facially discriminates against interstate commerce in direct violation of the dormant Commerce Clause.  The brief went on to describe how Connecticut’s law, if allowed to stand and if followed by other states, could not only significantly impair lenders’ use of the MERS® System, but could also adversely affect other aspects of the mortgage lending industry and interstate commerce generally.