The lender had been out of business for years. The assignments kept coming
A Queens homeowner is suing Mortgage Electronic Registration Systems, Inc. over what she calls years of false mortgage assignments carried out on behalf of a lender that had already shut down.
The lawsuit was originally filed in New York state court in May 2026 and sat in the system for months. MERS removed the case to the US District Court for the Eastern District of New York on November 5, bringing it into federal jurisdiction and putting it back on the radar.
The suit names MERS as the sole defendant and seeks class action status on behalf of what the filing describes as "thousands of minorities, residents of the State of New York" who allegedly lost their homes through the same process.
The backstory
The homeowner took out a mortgage through Lend America, LLC in November 2004. According to the filing, that lender did not last long. The suit states that on October 20, 2009, "the United States filed a fraudulent action against Lend America for fraudulent mortgage practices." Six weeks later, the complaint says, Lend America shut its doors for good. Lend America was a Melville, New York-based lender whose closure followed federal enforcement action by the US Department of Justice and the FHA.
But the mortgage assignments kept coming.
According to the lawsuit, MERS - the nationwide electronic registry that tracks who services and owns mortgages across the US - kept executing assignments of the homeowner's mortgage years after Lend America had folded. The first alleged assignment, the filing says, came on April 2, 2012, with MERS "acting in its capacity of a company that no longer existed (i.e., as agent of Lend of America), assigning the mortgage to itself." Two months later, the suit alleges, MERS assigned the mortgage to CitiMortgage. Two more assignments followed, according to the filing, "well after Lend America's dissolution."
The lawsuit alleges that MERS and CitiMortgage together "fraudulently suppressed MERS' lack of authority to assign the underlying mortgage." CitiMortgage is not a defendant in this case. It filed a foreclosure action against the homeowner on May 7, 2015, according to the complaint.
Where the chain breaks
There is a further wrinkle. The lawsuit says it was not until related bankruptcy proceedings that it came to light that the mortgage was allegedly owned by a different entity entirely - something called CMLTI Asset Trust. The filing also alleges that before Lend America even ceased operations, the mortgage had already been transferred to a Ginnie Mae investment trust - identified in the suit as "Guaranteed REMIC Pass-Through Securities and MX Securities Ginnie Mae REMIC Trust 2004-106." Neither that trust nor its trustee, the complaint says, were ever parties to the foreclosure, and neither had assigned their interest to CitiMortgage.
In short, the lawsuit paints a picture of a mortgage that had already moved elsewhere being reassigned by an entity that, according to the filing, no longer had the authority to do so.
The discrimination claims
The lawsuit brings six separate counts. Each one alleges that MERS acted out of "racial animus" against the homeowner and the proposed class. The complaint states the homeowner is "a person of Black/African American descent" and "a member of a protected class." According to the filing, MERS "engaged in unlawful discriminatory practice in aiding an alleged creditor(s) and/or officer(s) or agent(s) or employee(s) thereof," and "acted discriminatorily in granting, withholding, extending, and renewing terms or conditions of credit on the basis of race."
The claims rely on federal civil rights statutes that protect the right to make contracts and hold property regardless of race, as well as the New York State Constitution, the New York State Human Rights Law, and the New York City Human Rights Law.
Two additional counts argue that the statute of limitations should not apply. The first invokes the "continuing wrong" theory - essentially, that each new assignment was a fresh violation, not a single old one. The second alleges "fraudulent concealment," claiming that MERS hid material facts from the homeowner and the class with each foreclosure proceeding.
What MERS says - so far
MERS has not filed a formal response to the lawsuit. Its removal filing, prepared by Womble Bond Dickinson (US) LLP, notes that the complaint misspells the company's name - dropping the final "s" from "Systems." The removal also corrects the complaint's description of MERS as headquartered in Virginia, stating it is a Delaware corporation with its main office in Georgia. According to the removal filing, the mortgage at issue was valued at $294,654.
In its removal notice, MERS reserves all defenses, including challenges to jurisdiction, the statute of limitations, and the right to oppose class certification.
The homeowner seeks compensatory and punitive damages, an injunction, moving expenses, and attorney's fees.
What it means for the industry
For mortgage professionals, this case zeroes in on a question the industry has chewed over for more than a decade: what happens to MERS assignments when the original lender no longer exists, and who carries the exposure when that chain gets challenged in court.
None of the allegations in the lawsuit have been tested, and no court has made any findings on the merits.
