COUNTY OF WASHINGTON, PENNSYLVANIA vs U.S. BANK | Brief explaining the validity of suit against U.S. Bank for its use of MERS

IN THE COURT OF COMMON PLEAS OF WASHINGTON COUNTY, PENNSYLVANIA

Civil Division

COUNTY OF WASHINGTON, PENNSYLVANIA, on behalf of itself and all other similarly situated Pennsylvania Counties, Plaintiff, vs. U.S. BANK NATIONAL ASSOCIATION, Defendant.

BRIEF IN OPPOSITION TO THE PRELIMINARY OBJECTIONS OF U.S. BANK NATIONAL ASSOCIATION TO PLAINTIFF’S SECOND AMENDED COMPLAINT

I. INTRODUCTION Defendant U.S. Bank National Association (“U.S. Bank”) has lodged preliminary objections in this class action against it brought by the County of Washington, Pennsylvania, (the “County”), on its own behalf and on behalf of and all other similarly situated Pennsylvania Counties (collectively, the “Counties”). The essence of the County’s case is simple: U.S. Bank must record mortgage assignments when mortgage notes are conveyed to it in the securitization process because Pennsylvania statutory and equitable law require it. Pennsylvania statutory law requires Defendant to record mortgage assignments in the securitization process. Under the conspicuous heading “NECESSITY OF RECORDING AND COMPULSORY RECORDING,” 21 Pa. Stat. § 351 states that “all . . . conveyances . . . shall be recorded in the [relevant] office for the recording of deeds.” The Pennsylvania Supreme Court has said that a mortgage assignment is a conveyance that must be recorded. Pines v. Farrell, 577 Pa. 564, 576 (Pa. 2003). The Eastern District of Pennsylvania just months ago found that there is a statutory duty to record as well, rejecting identical arguments to the contrary presented by Defendant here. See Montgomery County Recorder of Deeds v. MERSCORP, ---F. Supp. 2d---, No. 11-6968, 2012 WL 5199361 (E.D. Pa. Oct. 19, 2012). Defendant acts as trustee for residential mortgage backed security (“RMBS”) trusts in which it has represented that all rights to mortgage loans have been conveyed to it. Yet, Defendant has not recorded, or caused to be recorded, mortgage assignments for such loans on mortgaged properties in Washington County and throughout the Commonwealth of Pennsylvania. U.S. Bank is in plain violation of the law, must make corrective recordations of mortgage assignments, and pay the County the necessary recording fees. The law of equity also requires Defendant to record the mortgage assignments. U.S. Bank at the time its RMBS trusts were created did not hold perfected mortgages, yet represented that it possessed all the rights to certain mortgage loans attached to the properties deposited in the trust, free and clear of any encumbrance. With these representations, it attracted investors to its RMBS trusts because it could claim that its mortgages have priority over other competing liens on the mortgaged properties, the right to foreclose on non-performing mortgages, favorable tax treatment, insulation from the bankruptcy of other entities in the mortgage loans’ chain of title, and other benefits. U.S Bank, however, did not record, or cause to be recorded, all mortgage assignments at the time the trusts were created, nor did it pay the accompanying fees, which is to say, U.S. Bank failed to perfect its interest in these mortgages and misled its investors about the perfection of these mortgages. Rather, U.S. Bank merely transferred notes to the trusts it administered and recorded the change in note ownership only in the records of Mortgage Electronic Registration Systems, Inc. (“MERS”), a private corporation created for the express purpose of circumventing the payment of mortgage assignment fees to county governments. Transfers within the MERS system are insufficient to perfect the mortgage for the transferee. Absent a recording of a mortgage’s assignment with the County Recorder of Deeds, the mortgage is unperfected in the hands of the transferee. In short, U.S. Bank failed to use the County’s recording services for the assignments necessary for the securitization, yet it represented to the public and to RMBS investors that the RMBS trusts had the benefit of perfected mortgages, a benefit that could only be obtained by using the County’s services for recording assignment. U.S. Bank has greatly profited by falsely claiming that it has obtained a benefit that only the County can provide; the County is willing to grant U.S. Bank that benefit, but requires that U.S. Bank follow Pennsylvania law and pay for it like any other citizen. Because it has not, U.S. Bank has unjustly received a benefit that it should not be allowed to retain. See Montgomery County, 2012 WL 5199361, at * 12 (finding claim stated for unjust enrichment); See Walker County, Ala. v. U.S. Bank Nat’l Ass’n, No. 2012-000046.00 (Cir. Ct. of Walker County, Alabama) (Aug. 27, 2012), attached hereto as Exhibit 1 (denying Defendant’s motion to dismiss nearly identical complaint that contained unjust enrichment claim). [...]