A federal judge has dismissed a lawsuit filed by 14 Kentucky county attorneys against a mortgage registration firm.
U.S. District Court Judge Henry Wilhoit Jr. said Boyd County Attorney Phillip Hedrick and others lacked statutory standing to sue the Virginia-based Mortgage Electronic Registration Systems, known as MERS.
Hedrick was not immediately available for comment.
The suit alleged MERS schemed to avoid paying Kentucky counties millions of dollars in fees.
It said the Kentucky legislature in 2006 changed state laws to require mortgage assignments to be recorded. It also instituted a $6 surcharge on recordings to provide a permanent source of funding for Kentucky's Affordable Housing Trust Fund.
The judge, in ruling against the county attorneys, cited a February 2013 order from the Sixth Circuit Court of Appeals that said county clerks lacked standing to sue MERS.
Janis Smith, a spokeswoman for MERSCORP Holdings, said Tuesday that the company's system for registering mortgage loans "fulfills" Kentucky laws.
Last January, Kentucky Attorney General Jack Conway claimed in a lawsuit filed in Franklin Circuit Court that MERS violated Kentucky's Consumer Protection Act by failing to disclose when mortgages were sold or transferred from one bank to another.
The 36-page suit alleged that MERS was required to record mortgage assignments in the appropriate county clerk's office, which collects a $12 fee for each mortgage recorded.
Many banks and mortgage lenders sell outstanding loans to free up money for new loans. They use a mortgage assignment to legally grant the loan obligation to the new mortgage holder.
MERS said there is no merit to Conway's suit.
Conway spokeswoman Allison Martin said Tuesday that Conway's lawsuit against MERS is "active in Franklin Circuit Court. We are awaiting two rulings on motions that were filed back in the summer."
MERS was created in 1995. Its corporate stockholders include Bank of America, Wells Fargo, Fannie Mae, Freddie Mac and the Mortgage Bankers Association.
Hundreds of thousands of Kentucky loans are registered in MERS, Conway said, and more than 70 million mortgages have been registered on the system nationwide.
Conway declined to put a number on how many alleged violations might have occurred in Kentucky with MERS, but he said the suit calls for fines of as much as $2,000 for each violation.
Conway's lawsuit also made civil claims that MERS was created to "unjustly enrich and pad its bottom line at the expense of consumers and the Commonwealth of Kentucky."