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 Court of Appeals found that MERS fit none of those descriptions. In a 4-3 decision, divided along party lines, the Supreme Court defined MERS role as “an owner of an interest in the indebtedness” because of contractual obligations to the lender.

The Supreme Court’s reasoning is somewhat unclear. After conceding that an “owner of an interest in indebtedness” is not the same as an “ownership interest in the note,” they say that because MERS is the record-holder of the mortgage, this security lien “contingent” on satisfaction of the indebtedness allows MERS to foreclose by advertisement.

The Supreme Court’s ruling will be controlling in Michigan.

Therefore, for now, MERS can use the foreclosure by advertisement process. This may have a significant impact on individuals in danger of foreclosure. If you are a homeowner facing foreclosure and want to learn more about how the Supreme Court’s recent decision may impact you or want more information on how to stop foreclosure and save your home, speak with a Michigan bankruptcy attorney. An attorney can assess your situation and describe your options, including how bankruptcy could allow you to remain in your home.

Source: Bloomberg Businessweek, “MERS Wins Appeal of Decision Limiting Michigan Foreclosures,” Margaret Cronin Fisk, 11/17/11.