Bank of America, JPMorgan Chase and Wells Fargo have agreed to pay $5.9 million each to partially settle a lawsuit brought last month by New York's Attorney General. Citi, which was not named in the original suit, will also pay $5.9 million and Ally Financial $1.25 million, according to Reuters.

According to the suit, the three named banks used Mers to illegally bring foreclosure proceedings against home owners who had defaulted on their loans. Bank employees, acting as "Mers certifying officers," have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have, argued authorities.

The financial industry created Mers in 1995 to allow institutions to evade local county recording fees, avoid the hassle and paperwork of publicly recording mortgage transfers, and facilitate the rapid sale and securitisation of mortgages. Mers operates as a membership organisation, and most large companies that participate in the mortgage industry - by originating loans, buying or investing in loans, or servicing loans - are members. Over 70 million loans nationally have been registered in Mers System, including about 30 million currently active loans.

Because of its designation as the nominal mortgagee in the public records, Mers has granted over 20,000 "certifying officers" the authority to act on its behalf, to assign mortgages, to execute foreclosure paperwork, and to submit filings in bankruptcy proceedings.

The lawsuit asserted that the Mers System has effectively eliminated homeowners' and the public's ability to track property transfers through the traditional public records system. "Instead, this information is now stored only in a private database - which is plagued with inaccuracies and errors - over which Mers and its financial institution members exercise sole control," states the Attorney General's office.

Despite settling, none of the banks admitted nor denied the Mers allegations, while Attorney General Eric Schneiderman intends to pursue several other parts of the suit not resolved.

"We intend to aggressively litigate this case to finally prohibit the widespread illegal and deceptive practices of the banks set forth in our complaint. The significant sum of $25 million obtained by this office does absolutely nothing to limit the aggressive posture we will continue to take to protect homeowners and borrowers," Schneiderman spokesman Danny Kanner told Reuters.