Sometimes, when people try too hard to save money they end up spending more – it has even become a comic relief as it became a theme in some comic strips. But it becomes unfunny when it seems to cheat the nation of millions of dollars in funds. This is exactly what’s happening right now, if Americans are to believe the different lawsuits filed against the mortgage servicers’ loan processing company.

The Mortgage Electronic Registry System (MERS) is a private company formed by banks in 1997 as an alternative to paperwork. Owned by big mortgage companies like Bank of America, Citigroup, GMAC, JPMorgan Chase, and Wells Fargo, MERS uses an electronic system in tracking changes in home ownership. Currently, it has registered 3 of 5 loans on the market – this totals 65 million loans.

Prior to MERS, banks would have to pay the county land recording office a small fee every time a mortgage was sold. It was a minimal fee at $30 or so but it became too much for the banks when, during the 1990s boom, they pooled millions of mortgages into securities. Since this led to larger and larger tabs, MERS was created as a way around the fees.

Now, this solution is making banks face lawsuits that will force them to pay billions of dollars in penalties. These same banks are in deep water as they also face investigation by 50 state attorneys general for foreclosure fraud. And MERS is also being blamed as its ability to act on behalf of banks for title transfers is being questioned.

The industry’s mortgage machine has rarely been challenged though always complained about by counties for lost revenues. But years on the housing market crash and months after the fraud allegations, MERS is now in the line of fire. It has been dubbed by a Nevada lawyers as “an admitted fee-avoidance scheme”.

The suit alleges that for more than a decade, the nation has been losing billions of dollars in revenue as MERS allows banks to elude counties’ fees and to circumvent American property law. MERS defends itself saying that its process is legal. It goes on to say that its process has even saved the housing industry $2.4 billion in recording costs.

County recorders, on the other hand, say it is not only concerned about the money. It is more concerned with the integrity of recording title transfers. Martin County, Minnesota recorder Kay Wrucke says, “We do want to preserve the integrity of our public records. That is our top priority. If it’s not in the public record, how can you know whether the title is clear on a home?”