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After Judge Keeps County's Suit Against Mortgage Processer in Dallas, a Nudge to Settle

It's been close to five months since Dallas County District Attorney Craig Watkins went after Mortgage Electronic Registration System over what Watkins claimed were "tens of millions in uncollected filing fees owed to the citizens of Dallas County." But since then little has been said about the suit, which was filed in county court and moved to the federal docket in October. Turns out, there was quite a bit of action involving the suit only yesterday.

For starters MERS had tried to get the court to move Dallas County's case to federal court in Arizona, where a judge in October dismissed dozens of suits filed by homeowners against MERS. But Dallas and Montgomery County, Pennsylvania -- which is trying to get $15.7 million from the company tasked with recording and transfer mortgages on behalf of, among others, Fannie Mae and Freddie Mac -- didn't want that to happen. Neither does John G. Heyburn, a federal judge for the Western District of Kentucky, who signed an order yesterday refusing that motion, writing:

While Dallas County shares some general background questions of fact regarding the formation and operation of the MERS system, there are important distinctions that weigh against including Dallas County in [the Arizona cases]. Most importantly, all existing [Arizona] actions were brought by homeowners or borrowers who brought suit concerning their impending or completed foreclosure. In contrast, Dallas County involves the propriety of the MERS system's failure to pay recordation fees under Texas's recording statutes.

Then, based on that ruling, U.S. District Judge Reed O'Connor here told Dallas County and MERS to huddle up by no later than February 22 and sort this thing out -- or, more accurately, "consider the nature and basis for their claims and defenses [and] the possibilities for a prompt resolution of the case." He wants a joint report from them by no later than March 7, which should answer: Do they still want to go to trial, or are they willing to consider mediation to settle the suit? We'll know soon enough.

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