Fallout from the Michigan Court of Appeals decision tossing out two foreclosures by MERS is sweeping the state of Michigan.
Had a call yesterday from someone whose closing was canceled at the last minute, because, MERS had done the foreclosure and quit claimed the property to the bank, which had agreed to sell the home to the caller.
My realtor wife advised me title companies across Michigan are backing out of deals and canceling closings.
Because, if a MERS foreclosure is in the chain of title, it is, as they say in the title business, “clouded.”
In my caller’s case, MERS foreclosed, the homeowners left and bought a new house, the redemption period expired, the
bank sold the house.
But, under the Michigan Court of Appeals decision, the former homeowner could sue to get the foreclosure sale set aside, putting the home back into his name.
And he would win.
So, title companies, who issue insurance guaranteeing to the buyer, and the buyer’s mortgage company, that the seller does indeed have good title to the property.
No title policy, no mortgage; no mortgage, no sale.
No telling how far back this can go, what if MERS foreclosed 3, 5, even ten years ago?
Not sure off the top of my head how long they have been around.
I have been blogging about MERS for years.
As filing fees for real estate documents increased, the mortgage companies decided to skip paying those annoying fees every time they bought a mortgage.
They had to pay to have it recorded with the county register of deeds, to put the world on notice that there was a lien on the property.
So, the initial mortgage was recorded in the name of MERS, as “nominee,” whatever that is, for the actual mortgage company.
Then, every time the mortgage was sold or assigned, nothing else was recorded with the county, just on MERS records.
So, MERS had no actual interest in the mortgages, could not collect any money due on them, and, that is why the court threw out the foreclosures last week.
The MERS Decision Story