In an opinion that will likely preserve the validity of hundreds, if not thousands, of mortgage foreclosures across the state, the Michigan Supreme Court recently confirmed the ability of Mortgage Electronic Registration System (MERS) to perform non-judicial foreclosures by advertisement (as opposed to a court-supervised foreclosure). In doing so, the Court reversed the contrary holding of the Michigan Court of Appeals. The case is Residential Funding Co, LLC v Saurman, ___ Mich ___ (Docket No. 143178, November 16, 2011).
As the Court of Appeals explained, “MERS was developed as a mechanism to provide for the faster and lower cost buying and selling of mortgage debt.” Although the lender retains ownership of the loan (i.e., the “note”), MERS typically is designated as the mortgagee and given rights of foreclosure in the event of a default on the loan. By operating through MERS, lenders can “buy and sell loans without having to record a mortgage transfer for each transaction because the named mortgagee would never change; it would always be MERS even though the loans were changing hands.” MERS tracks those transactions in its system so that in the event of a default, MERS can foreclose on the property and then quit claim the property to “whatever lender own[s] the loan at the time of foreclosure.”
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