Michigan Court Issues Favorable Foreclosure Decision for Homeowners

During times of economic uncertainty, a crushing debt load can make future prospects all the less secure, and life far less manageable. From Chapter 7 and Chapter 13 bankruptcy to debt negotiation, individuals and couples can reduce monthly obligations and even fully discharge some debts. For many families, a key goal is preventing foreclosure and holding on to their homes.

Several cases around the country involving Mortgage Electronic Registration Systems (MERS) could have major implications for many American homeowners who are concerned about losing their homes. MERS was created by several large real estate finance companies to facilitate the origination, sale and tracking of mortgage ownership. MERS members contractually agree to allow it to act as common agent for county mortgage registrations, and in such situations MERS is designated as the mortgagee of record in a mortgage instrument.

An April 2011 Michigan Court of Appeals decision reviewed cases from Jackson County and Kent County concerning MERS, and held that the company was not authorized to pursue foreclosures on the homeowners’ properties. The legal process of “foreclosure by advertisement” is limited by Michigan law to “either the owner of the indebtedness or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage.”

The court rejected MERS’s argument that it should be recognized as an “owner” for statutory purposes because it had an interest in the mortgages. The court dismissed this view, focusing on the common meaning of “interest” and admonishing that “the statutory requirement that mortgage transfers be recorded was interfering with mortgage companies’ ability to conduct sales as rapidly as the market demanded.”

Many Michigan foreclosure attorneys expect that the Michigan Supreme Court will review this case, but title insurance companies in Jackson County are reportedly already refusing to insure mortgages involving properties that MERS had foreclosed upon. Based on such fatal defects in documentation and other problems, Wayne County commissioners recently proposed a local ballot measure to declare a one-year moratorium on foreclosures.

Other Cases Involving MERS Mortgages and Foreclosure Record-Keeping Disputes

Several other jurisdictions are currently taking a close look at MERS-related foreclosure issues, including allegations of forged signatures and automated processing of documents without review. The locations underscore MERS’s nationwide presence:

  • In June, New York’s Appellate Division, Second Department, reversed a lower court and dismissed a foreclosure action because MERS was never the lawful holder or assignee of the subject mortgage and therefore had no authority to foreclose
  • A Montana trial court ruled in early July that MERS was a legal beneficiary that could assign foreclosure powers to the bank that owned a particular mortgage
  • In Utah, multiple federal lawsuits have been filed to challenge MERS’s right to foreclose, and some legal experts are looking to the Tenth Circuit Court of Appeals to return a decision that could have legal implications for borrowers across the country

After so many major wins for Wall Street in the aftermath of recent economic struggles, some legal commentators speculate that legal decisions coming out of MERS litigation could provide a major victory for Main Street and a solution to the foreclosure crisis that benefits local interests. MERS may hold as many as 60 million mortgages nationwide and originates approximately 60 percent of all home loans in the country.

Seeking Experienced Debt Relief Advice in Michigan

Home ownership is a keystone of the structure of American communities, and homeowners should fully explore their legal options if they are dedicated to holding on to a family home. Home equity has been particularly hard hit by the economic downturn, and strategies such as foreclosure prevention and temporary foreclosure stoppage via Chapter 7 can provide relief for many.

Stripping a second mortgage is one option available if the home is worth less than the balance on a first mortgage. Under such circumstances, the Chapter 13 bankruptcy can treat a home equity loan as unsecured debt and subject it to the same reorganization as credit card balances and medical bills.

A Michigan home foreclosure lawyer can take a close look at your financial circumstances and advise you about the best way to proceed to protect your interests. By fully asserting your legal rights, you may be able to significantly improve your financial outlook and regain your economic footing.