Hartford Business Journal

www.HartfordBusiness.com February 29, 2016 • Hartford Business Journal 3 Continued By Gregory Seay gseay@HartfordBusiness.com A recent Connecticut Supreme Court rul- ing affirming the state's imposition of higher realty-recording fees on an elec- tronic mortgage registry will preserve a vital revenue stream for the state and its munici- palities, but also maintains higher closing costs for many borrowers, experts say. Operating as Mortgage Electronic Regis- tration Systems Inc. (MERS), a consortium of several hundred mortgage lenders — including many of America's biggest — had challenged a 2013 state statute that imposed a higher filing fee in Connecticut for real estate borrower-lend- er documents and deeds that MERS routinely files nationwide on behalf of those lenders. Parent MERSCORP Holdings Inc., of Res- ton, Va., said in an email that, in the wake of the court's Feb. 8 ruling, it "continues to believe that the challenged statute violates the United States Constitution and intends to explore its legal options.'' The U.S. Supreme Court would be its next stop. MERS was created in the 1990s to provide large mortgage lenders and investors a con- venient vehicle to publicly record their stakes in realty and other assets securing the loans. Critics have complained that MERS-record- ed realty deeds and other documents filed in communities nationwide often cloud the identities of mortgage stakeholders, and was partly responsible for amplifying the depth of last decade's subprime-mortgage crisis. In its Connecticut appeal, MERS claimed, among other things, that the state's decision to triple the filing fee three years ago to a minimum $159 for MERS's members was not only arbitrary and capricious, but constituted an illegal "taking.'' But the state's highest court disagreed, not- ing that the state was within bounds in impos- ing a higher fee to preserve revenue that the state, as well as cities and towns, were losing as a result of MERS' format for filing mortgage papers, liens and deeds, observers say. The decision leaves Connecticut with a bifurcated filing-fee system, experts say, in which borrowers from MERS-affiliated lend- ers face higher fees as part of their loan-settle- ment, or closing costs, than those whose lend- ers handle their own document-filing chores. According to the state Treasurer's Office, Connecticut's share of real estate-filing fees amounted to $24 million each in fiscal 2014 and 2015, money that has flowed directly into the state's coffers. "It's not that big a deal,'' said Fairfield fore- closure attorney Christopher Brown, who sued MERS in a separate matter eight years ago. "It's really only important to MERS. … MERS is going to figure out a way to charge [borrowers] for those increased fees.'' Meantime, town clerks statewide are relieved not only that the higher-filing-fee statute was upheld but that it spares them the headache of having to prepare refunds to MERS, said West- port Town Clerk Patricia Strauss. Municipalities keep a portion of each fee for their filing services. "It would have been interesting to know how we were going to pay all that money back that we had collected,'' said Strauss, who is president of the Connecticut Town Clerks Association. Before they were raised, Connecticut's statutory mortgage-document filing fees were fixed at $10 for the first filed page, plus $5 for each additional page. But the 2013 statute imposed extra fees of $3 and $40 per filing. At the same time, the statute set a defini- tion for a "nominee of a mortgage'' that clearly singled out MERS. For transactions involving MERS and other "mortgage nominees,'' the state set a filing fee of $159. The fee for realty filings where MERS isn't a party is $53. MERS sued the governor, attorney gener- al, state treasurer and several others, asking state court to set aside the higher fees being imposed on it. The lower court upheld the fees, so MERS appealed. In the appeal, the state Supreme Court addressed several legal theories that MERS embraced as the core of its legal challenge. One was that by imposing a higher user fee on MERS, the state breached its "equal protec- tions'' guaranteed by the Connecticut and fed- eral constitutions. The High Court disagreed. "To prevail on an equal protection claim, a plaintiff first must establish that the state is affording different treatment to similarly situated groups of individuals,'' Justice Rich- ard N. Palmer wrote in his opinion. The court, too, rejected MERS' other legal 2016 SEE WHAT THE FUTURE HOLDS FOR THE REGION'S AEROSPACE AND DEFENSE INDUSTRY New England Defense Summit April 14-15, 2016 CONNECTICUT CONVENTION CENTER H HARTFORD, CT REGISTER TODAY! Early Bird rates available. For detailed information, please visit www.rade-commons.org/summit Presented by Mortgage-fee collections Connecticut's annual share of mortgage-document recording fees remitted to the State Treasurer's Office from all municipal town clerks. Mortgage-Document Year Fees Fiscal 2012 $21,028,908.00 Fiscal 2013* $23,909,415.00 Fiscal 2014 $24,290,210.00 Fiscal 2015 $24,205,870.00 Fiscal 2016** $16,370,026.00 * C T B E G I N S D R A W I N G H I G H E R F E E S F O R F I L I N G S A S S O C I A T E D W I T H M O R T G A G E E L E C T R O N I C R E G I S T R A T I O N S Y S T E M S I N C . ( M E R S ) . * * A S O F F E B . 1 6 , 2 0 1 6 . S O U R C E : C T S T A T E T R E A S U R E R ' S O F F I C E CT High Court upholds bifurcated mortgage filing fees P H O T O | E M I L I E Z H A N G , S H U T T E R S T O C K . C O M

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