A complaint by some borrowers that they can't learn who owns their mortgages turned into a full-blown effort to halt a substantial share of Hennepin County's foreclosures on Friday.

A Legal Aid lawsuit contends some pending and recent foreclosures don't meet requirements of state law.

The challenge pits statutory requirements that date back to the 19th century against a 21st century database that keeps track of who owns a mortgage or rights to its income.

Although Hennepin County Sheriff Rich Stanek is named as a defendant for his office's role in selling foreclosed property, the real target is a national mortgage registry formed by lenders and known as Mortgage Electronic Registration Systems (MERS).

The lawsuit contends the registry hides who really owns a mortgage, creating difficulties for borrowers or their advocates trying to negotiate with lenders.

Some county commissioners share similar concerns, and the County Board unanimously passed a resolution last fall favoring disclosure of all parties who have been involved in real estate facing foreclosure.

"We're sympathetic with this lawsuit and the goals they are seeking," said Commissioner Gail Dorfman. Neither the sheriff nor the registry commented on the challenge, which comes as the number of foreclosures in the county has nearly tripled between 2005 and 2007.

For a fee of $4.50, MERS keeps track of who owns a mortgage after it is signed by a borrower. It can be resold among lenders or investors who buy the rights to the borrower's principal or interest payments. Traditionally, county courthouses recorded that chain of ownership, charging $46 for a change of ownership filing, known as an assignment.

According to the lawsuit, MERS represents the lender in about 40 percent of metro- area foreclosures. In Hennepin County, the registry is listed as the mortgage holder on at least half of new mortgage filings, according to county Recorder Mike Cunniff.

If successful, the lawsuit would set a legal precedent across Minnesota. But some lawyers dispute the suit's argument.

The action seeks to block foreclosure sales initiated by the registry when changes of mortgage ownership haven't been recorded and aren't listed in the foreclosure notice. State law governing foreclosures requires those actions, according to the suit.

A 2004 change by the Legislature was intended to make clear that the registry could legally be listed as the holder of mortgages filed in courthouses. But the registry also needs to file assignment of the mortgage to new owners, said Amber Hawkins, lead attorney for the lawsuit.

Attorney Kevin Dunlevy, a real estate lawyer with a background in foreclosure law, disagreed. Registry mortgages aren't assigned because there's only an electronic transfer of interest as a mortgage is traded on the secondary mortgage market, he said, so no assignments need be filed.

Rick Little, a former deputy examiner of titles for the county, agreed. He called MERS "an off-record system which the statute didn't contemplate."

Besides pending foreclosures, the suit also seeks to void recent Sheriff's Office sales in which the registry has initiated foreclosure. That measure would apply if the borrower is still living in the house up to six months after foreclosure, as permitted by state law. It asks damages for those who already have lost a home in a foreclosure brought by the registry.

"MERS has been sued by other people around the country for a variety of people and causes," Hawkins said "Our challenge is different from any challenge that has been filed so far."

Advocates for MERS say it's an adaptation for keeping track of who owns what in an era when mortgages usually are aggregated into pools of securities sold on Wall Street. MERS doesn't own mortgages but keeps track of who does. It is listed on the mortgage but says it's a stand-in for the real owner.

MERS said each mortgage contains an identification number that allows a borrower to contact it and find out who is handling the mortgage payments.

MERS claims a market share of 60 percent of new loans. It is owned by 26 shareholding financial institutions.

Steve Brandt • 612-673-4438