The Department of Housing and Urban Development will reforeclose on all its real estate owned properties in Michigan where the original foreclosure was conducted in the name of MERS using the state's nonjudicial process.
In late April, the Michigan Court of Appeals ruled that Mortgage Electronic Registration Systems Inc. is ineligible to use the state's nonjudicial foreclosure process because MERS does not meet the requirements to foreclose by advertisement and should have filed the foreclosures through the state's judicial process. That ruling vacated the 2009 foreclosures of two borrowers.
In an email message to HUD mortgagees, the agency said that most of the major title insurance company underwriters have ceased issuing title insurance for properties where MERS foreclosed by advertisement.
"As a result, any Michigan REO properties in HUD's inventory that cannot close due to an inability to obtain title insurance must be re-foreclosed in accordance with the Michigan Court of Appeals opinion," the email said.
In the two cases before the Michigan court, MERS was the mortgagee in county property records and was the named entity initiating the foreclosure. The court ruled MERS could have remained the mortgagee and filed a valid judicial foreclosure or the investors could have obtained assignment of the mortgage from MERS and initiated the nonjudicial foreclosure.
A HUD representative said the department will not dictate to mortgagees which method to use in the reforeclosures, adding that mortgagees are responsible for ensuring HUD receives good and marketable title to REO properties in compliance with state laws.
The policy applies to all Michigan REO properties in HUD's inventory where MERS executed the initial nonjudicial foreclosure.
