Court ruling gives hope to homeowners facing foreclosure

MERS is used by the lending industry to streamline the packaging and selling of mortgages as securities without recording the deeds at county offices. In that role, MERS also started foreclosure proceedings against homeowners. In Michigan, the usual method is called “foreclosure by advertisement.”


But the Court of Appeals on April 21 put the kibosh on that for MERS, saying state law requires a foreclosing party to own the legal title to the debt, which MERS did not.

Residential Funding Co. LLC and Bank of New York Trust Co., the two lenders involved in the Appeals Court decision, are asking to appeal to the Supreme Court, but the earlier decision already has had a rippling effect.

“It kind of dropped a bomb and wiped everything out without any plans on how to carry forward,” said Brad Ward, director of public policy and legal affairs for the Michigan Association of Realtors. “The court essentially ruled all of those foreclosures done by MERS void from the get-go.”

Cathy Hoppough, broker of Coldwell Banker Weir Manuel Hoppough in Ionia, who lists several foreclosure properties, said she’s had more than a dozen closings canceled as a result of the ruling.

“They take those properties off the market and it goes to legal,” she said. “Some of them have already started the re-foreclosure process, but every bank does it in a different way.”

The Department of Housing and Urban Development has a large inventory of foreclosures in Michigan affected by the ruling.

“It is a complex issue and we are not taking it lightly,” spokeswoman Laura Feldman said. “We have a lot of people working hard to resolve issues and minimize impact.”

Title insurance companies are on alert, too, as the ruling calls into question ownership of properties that were foreclosed by MERS and have already been resold.

Homeowners with concerns are encouraged to call their title insurance company with questions.

“Title insurance agents are working with their underwriters on these files on a case-by-case basis,” said Marcy Lay, spokeswoman for the Michigan Land Title Association.

Read on.