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In Michigan: Facing the Music of MERS Failed Foreclosures

05 May

Closings canceled on some bank-owned homes after court rules against MERS

 

Local Realtors say title companies are canceling closings on some bank-owned homes after a recent Michigan Court of Appeals decision made it more risky to insure them.

Late last month, the court ruled the Mortgage Electronic Registration System lacks authority to foreclose by advertisement in Michigan. The system is an electronic record-keeper of mortgages.

Foreclosures on two homeowners in Grandville and Jackson are on hold because of the ruling. The ruling could also impact thousands of foreclosures that have already been sold to other buyers, industry experts say.

Raymond DeBates, president of Colonial Title in St. Clair Shores, said that he has not had to cancel any closings yet, but he has put some files aside and is waiting for underwriters to indicate whether the deals can close or not.

“This invalidates every foreclosure where MERS was involved,” DeBates said. “They could set aside all these MERS transactions. It would be a catastrophe. And that’s what we have.”

Some homeowners fighting back after foreclosures

Some homeowners who were foreclosed on by the Mortgage Electronic Registration System are fighting back.

Heather Boser, 36, lost her 1,700-square-foot home in Warren in 2007 and is now living at her parents’ house with her four kids.

She had a $203,000 adjustable-rate mortgage. The payments started at $1,200 a month and then moved up to $3,000 a month.

The sheriff’s sale of her home was initiated by MERS, which the Michigan Court of Appeals ruled on April 21 lacks legal authority to do so in Michigan.

The ruling has spawned a couple of budding class-action lawsuits in metro Detroit — and threatens to undo certain foreclosures done by MERS in the past — including one filed Tuesday by Bingham Farms attorney Ken Gross. He’s representing Boser.

‘Now they are in limbo’

“We are still tabulating the numbers but it appears to us … from 2008 to 2010, there were thousands in Michigan with MERS as the foreclosing entity,” Gross said.

In Oakland County, he counted 1,400 foreclosures in 2009 involving MERS and 555 in 2010.

Gross’s client Boser, who owns a tree service company in Warren, said she doesn’t want the house back, which was sold in late 2008 for $110,000.

“I have joined the lawsuit I guess just for restitution for the fact that the paperwork was done incorrectly,” Boser said. “I would like some kind of compensation for everything I have gone through.”

Foreclosures on two homeowners in Grandville and Jackson are on hold because of the ruling.

The homeowners defaulted on their mortgages, but they have challenged their evictions saying MERS, a clearinghouse for mortgage loans, lacked the authority to foreclose by advertisement under state law.

The ruling could also impact thousands of foreclosures that have already been sold to other buyers, industry experts say.

 

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