Say MERS Has Same Rights As Servicer

 

Michigan Supreme Court Rules MERS has rights

Steve Dibert, MFI-Miami

The Michigan Supreme Court by a vote of 4-3 overturned a decision by the Michigan Court of Appeals in Residential Funding v. Saurman.  In April, the Court of Appeals ruled that MERS lacked the legal authority to foreclose on a home because the lacked any real ownership in the obligation:

Michigan Court of Appeals Rules Against MERS

The four Republican members of the Michigan Supreme Court decided to rule in favor of MERS stating that:

We clarify, however, that MERS’ status as an “owner of an interest in the indebtedness” does not equate to an ownership interest in the note. Rather, as record holder of the mortgage, MERS owned a security lien on the properties, the continued existence of which was contingent upon the satisfaction of the indebtedness. This interest in the indebtedness — i.e., the ownership of legal title to a security lien whose existence is wholly contingent on the satisfaction of the indebtedness — authorized MERS to foreclose by advertisement under MCL 600.3204(1)(d).

The Democratic Justices, Michael Cavanagh, Diane Hathaway and Marilyn Kelly wanted to keep the case alive in order to hear more arguments.

Read the ruling for yourself below:

MI Supreme Ruling -Residential Funding v Saurman

Contrary to what some people may initially think, this is not a devastating defeat for the homeowner.  This ruling actually makes MERS more vulnerable.   MERS’ power according to the Michigan Supreme Court is now limited to being nothing more than an agent for the lender.  This role is dictated in the Pooling and Servicing Agreement (PSA) that governs the Mortgage Backed Security.   In other words, it will force the foreclosure mills into arguments about securities law they do not understand and force them to admit things in court that will damage the credibility of their clients.

The Supreme Court’s ruling will now allow Michigan attorneys to argue New York Trust law in Michigan foreclosures case when the loan was pooled into a mortgage backed security on Wall Street.  This would essentially end a foreclosure mill’s ability argue Livonia Property Holdings, L.L.C., v. 12840-12976 Farmington Road Holdings, L.L.C. A ruling they like to invoke in order to convince a judge the homeowner lacks standing to question assignments.

The ruling also raises a very interesting question. If “pursuant to MCL 600.3204(1)(d), MERS is ‘the owner . . . of an interest in the indebtedness secured by the mortgage,’” then what becomes of MERS’ capacity and legal right to act as mortgagee (in its capacity as nominee for lender and lender’s successors and assigns) under this statute when the only power MERS really ever had per the “law or custom” limitations in the mortgage (with the “law” in play being the PSA), expires or is terminated stated in the PSA or a bankruptcy?

If I seem a bit overjoyed about this ruling, its because the Michigan Supreme Court just made things easier for the homeowner to drag out the foreclosure process and increased the chance of getting their notes dismissed.

Think about this, if “only the record holder of the mortgage has the power to foreclose” then a showing must be made by analyzing the mortgage documents and the PSA to show MERS is not the “undisputed record holder of a mortgage” at the time of the foreclosure and no longer possesses the statutory authority to foreclose.  Basically what the justices did was validate Hendricks v. USBank. 

Hendricks v. USBank

 The Supreme Court has also guaranteed me and my employees  job security over the next 3-5 years.

Apparently, whoever made the decision to appeal this to the Supreme Court didn’t think this through using MFI-Miami math of A+B+C+D+E=O.  Oh well, their stupidity is my clients’ gain.

 

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