Bloomberg News

MERS Wins Appeal of Decision Limiting Michigan Foreclosures

November 17, 2011

(Updates with excerpt from ruling in fourth paragraph.)

Nov. 16 (Bloomberg) -- Mortgage Electronic Registration Systems Inc. won reversal of a lower court decision that limited the company’s right to foreclose on residences in Michigan when it doesn’t own a debt.

The Michigan Supreme Court today reversed an April decision voiding two property seizures. The Michigan Court of Appeals had ruled that MERS didn’t have the right to use non-judicial foreclose by advertisement, the state’s method for seizing homes in default, when it didn’t own or have an interest in the underlying debt.

State law didn’t permit non-judicial foreclosure in the name of an agent or nominee, the lower court said. The Michigan Supreme Court disagreed in a two-page ruling.

The April ruling “is inconsistent with established legal principles governing Michigan’s real property law, and specifically foreclosure by advertising,” the Michigan high court said. Michigan law allows such foreclosure by parties acting as servicing agents, the court said.

The lower court decision was cited in multiple lawsuits in Michigan courts since April seeking to prevent or void foreclosures. The suits in federal court had been put on hold pending the Supreme Court decision.

‘Business as Usual’

Today’s ruling “affirms MERS business model and will allow the Michigan real estate industry to get back to business as usual,” Bill Beckmann, MERSCorp.’s president and chief executive officer, said in an e-mailed statement. “The Saurman ruling caused considerable confusion, delayed property transactions, and triggered unnecessary litigation.”

The reversal of the earlier ruling “is an embarrassment to those of us who care about the property records of this state, and more importantly the citizens who are affected by these foreclosures,” Curtis Hertel, Ingham County Register of Deeds, said in an e-mail.

“MERS created a shadow registry system that makes it impossible for individual citizens and their government officials to track who owns a mortgage,” Hertel said.

Hertel has filed a class action against MERS on behalf of Ingham County and other counties in Michigan seeking unpaid transfer fees. The state capital, Lansing, is in Ingham County.

The homeowners suits are Residential Funding Co. v. Saurman, 143178, and Bank of New York Trust Co. v. Messner, 143179, Michigan Supreme Court (Lansing).

--Editors: Fred Strasser, Mary Romano

To contact the reporter on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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