Ann Arbor Bankruptcy Law Blog

The Michigan Supreme Court reversed a Court of Appeals decision that had held the Mortgage Electronic Registration Systems (MERS) could not foreclose by advertising. The Court of Appeals had found that because MERS was not the owner of the note, the statute limited them to judicial foreclosure.

Foreclosure by advertising is cheaper and takes less time than judicial proceedings.

The statute allowing foreclosure by advertising authorizes the owner of the debt, the owner of an interest in the debt secured by the mortgage or the mortgage servicer to foreclose by advertisement.

The collapse of the U.S. real estate market and the ongoing mortgage foreclosure crises continues to impair significant improvement in the economy.

The LA Times reports "Nationally, new single-family homes sold at a seasonally adjusted annual rate of 298,000 in July, putting the industry on pace to post the lowest annual sales since the Commerce Department began keeping data in 1963."

With too much inventory, and a substantial portion of foreclosed properties, 2011 could be the worst year on record for new-home sales. This is driving the fifth year of decline for the new home construction industry.

In these difficult economic times, more and more people are feeling overwhelmed by credit card debt, medical bills and other expenses. As the economy continues to limp along, people in need of extra cash because of burdensome consumer debt are borrowing from their 401(k) accounts or other similar retirement savings accounts. Taking such a loan is a risky financial move, however, and may end up putting the borrower in a much more precarious financial position than he or she was prior to the loan.

Statistics show that 401(k) borrowing is on the rise. According to research the Employee Benefit Research Institute (EBRI) conducted, of 20 million 401(k) participants across the country, 21 percent had taken out loans from their accounts by the end of 2009 - an increase from 18 percent for the previous three years. This was the highest number the EBRI recorded since it began collecting data on this topic in 1996. The Vanguard Group reported similar numbers among the plans the company administers: 18 percent of participants had loans from their 401(k) accounts at the end of 2010, up from 16 percent for the past three years.

Many who take out such loans do so in the face of crushing bills, having few other options for credit. In the poor economy, banks are less willing to lend money and the declining housing market means that people have less equity in their homes against which they can borrow. People believe that they can repay the loan after they pay off their bills.

For many Michigan homeowners facing foreclosure, a Michigan Court of Appeals' ruling has made it more difficult for the Mortgage Electronic Registration System (MERS) to take their homes.

For lenders, MERS provides a valuable service. MERS takes mortgages held by lenders throughout the mortgage industry and groups them into mortgage-backed security products.