This is a side piece to the another Northern Express article By Patrick Sullivan that you can read here about A Client With A Fannie Mae Mortgage

Here is what happened with the Bocardo’s mortgage when they bought their home:

The Bocardos got their loan from Credit Suisse and the mortgage was assigned to Select Portfolio, which serviced the mortgage, meaning they collected the money from the Bocardos and made sure mortgage payments were up-to-date.

The snag in the Bocardo’s case only became apparent after their property was foreclosed.

There are actually two separate legal parts to a mortgage, said Steve Dibert, president of MFI-Miami.

“When you go and do your mortgage on your house, you have two very essential documents that you’re going to sign — one is the mortgage, and one is the note,” Dibert said. “The note is your promise to pay the debt. And the mortgage takes that note and assigns it to the property, securitizes it to the property, so it now becomes a lien on the property. That means if you don’t pay, the holder of the note can come and take your house.”

What happened to the Bocardos is that upon inception of the loan, Fannie Mae claimed ownership of the mortgage note and it was placed into a Fannie Mae Mortgage Backed Security, (Fannie Mae Mortgage) while the mortgage commenced being serviced by Credit Suisse.

NOT RECORDED 

However, none of the transfers of ownership or pseudo assignments discussed above were recorded at the Antrim County Register of Deeds.

So when it was time to foreclose, the GSE had a problem. Since they are a quasi-government entity, they cannot foreclose on a property in Michigan, for complicated Tenth Amendment reasons that have to do with state’s rights.

When it came time to foreclose, Fannie Mae assigned the mortgage to the servicer’s name, Select Portfolio, so that it was them, not Fannie Mae, who foreclosed.

The reason they do that is so they can be compliant with Michigan law, which says you cannot foreclose if you’re not the owner.

After the foreclosure, at the sheriff’s sale, Select Portfolio sold the property back to Fannie Mae, essentially for no money, since Fannie Mae owned the property all along.

What’s at issue in the federal lawsuit, is that Select Portfolio foreclosed on the Borcardos as the owner of the mortgage, when they were not, in fact, the owner, because the GSE owned the mortgage note all along, rendering the foreclosure invalid, attorney Jason Jenkinson has argued in the case.