Arguments made in mortgage registry suit

The U.S. Court of Appeals for the Third Circuit heard arguments Thursday that could clear the way for Pennsylvania counties to reap tens of millions of dollars from the banking industry's mortgage-registry system.

A federal judge in Philadelphia ruled last June that the registry, known as MERS, used its members-only database to illegally circumvent county recorders' offices.

As a result, Judge J. Curtis Joyner wrote, counties lost tens of millions of dollars in recording fees, the accuracy of public records was compromised, and home loans were sold time and again without the knowledge of homeowners or county recorders.

Before deciding damages, Joyner and the plaintiffs - led by Montgomery County recorder Nancy J. Becker - asked the Third Circuit or the Pennsylvania Supreme Court to certify whether state law requires that mortgages be recorded.

The law states that land conveyances "shall be recorded in the office for the recording of deeds."

MERS argued that the statute applies only "if the lender wants to give the world notice of the lien," attorney Robert Brochin told the three-judge panel Thursday.

Joseph Kohn, representing Pennsylvania's 67 county recorders, said the meaning of the word shall is just as clear for deeds as it is for taxes.

"That doesn't mean 'if' you want to pay taxes, this is where you 'can' do it," Kohn said.

Judges Michael A. Chagares, Cheryl Ann Krause, and Maryanne Trump Barry had sharp questions for both sides but seemed to agree that the question will have significant bearing on at least five other cases pending against MERS.

The court gave no time frame for when it might rule.