LANSING, Mich. (Legal Newsline) -- A three-judge panel of the Michigan Court of Appeals recently affirmed a lower court's decision in favor of the national mortgage registry known as MERS and three other defendants.
The appeals court, in its unpublished decision Jan. 29, dismissed a five-count wrongful foreclosure complaint against the Virginia-based company, PHH Mortgage Corporation, Trott & Trott PC and the Federal National Mortgage Association, aka Fannie Mae.
In Mitchell v. PHH Mortgage Corp., judges Jane M. Beckering, Kirsten F. Kelley and Joel P. Hoekstra concluded "that the foreclosure in this case satisfied the [four-part] requirements..." of Michigan Compiled Law Section 600.3201(1).
Read the appeals court's full decision here.
Plaintiffs Mark D. and Carol Mitchell, who defaulted on their mortgage, argued that the Oakland Circuit Court erred by granting summary disposition in favor of the defendants because the foreclosure sale, they say, was invalid for several reasons.
The appeals court disagreed.
"The parties agree that plaintiffs defaulted on their mortgage obligation and that the power of sale became operative. There is no evidence that an action or proceeding was instituted at law to recover the debt secured by the mortgage. The mortgage was recorded on Sept. 5, 2006, and plaintiffs do not assert that it was improperly recorded," the court wrote in its six-page decision. "Finally, PHH, the party foreclosing on the mortgage, is both the owner of an interest in the indebtedness secured by the mortgage and the servicing agent of the mortgage."
In particular, the plaintiffs argued that the foreclosure sale was invalid because they did not consent to the "MERS securitization process."
The appeals court shot down that argument.
"Plaintiffs expressly agreed in the mortgage that MERS was both the mortgagee and Merrill Lynch's nominee," it wrote. "A mortgagee of record is entitled to foreclose by advertisement under MCL 600.3204(1)(d).
"Furthermore, the mortgage states that MERS had the right to foreclose. MERS was free to assign its interest as mortgagee to PHH."
The plaintiffs also contended that the foreclosure sale was invalid because MERS' only interest in the case was its interest as mortgagee; the right to a mortgage note does not pass by transfer of a mortgage; MERS' assignment of the mortgage to PHH was a nullity because MERS could not transfer the mortgage separately from the underlying note; and the mortgage note in the case was improperly severed from the mortgage.
The court also rejected those arguments.
"In Residential Funding Co. v. Saurman, our Supreme Court held that MERS could foreclose by advertisement because it was the owner of an interest in the indebtedness -- even though MERS' status did 'not equate to an ownership interest in the note,'" it wrote.
MERS said in a statement this week that it should be "no surprise" that the appeals court affirmed the circuit court's ruling in favor of the defendants.
"The judges themselves cited established Michigan Supreme Court case law validating MERS' role and authority," MERSCORP Holdings' Director for Corporate Communications Jason Lobo said Monday.
MERSCORP and Mortgage Electronic Registration Systems Inc. were formed in 1995 to facilitate the growing mortgage finance market.
The privately-held electronic registry is designed to track servicing rights and ownership of mortgage loans in the United States.
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