Over the course of the recent real estate collapse, many homeowners have become familiar with Mortgage Electronic Registration Systems, Inc. (MERS) – a company developed by the mortgage industry to keep track of the servicing rights on home loans. It was designed as a paperless property registry to facilitate the transfer of mortgages.
Simply put, MERS allows properties to change hands without the necessity of recording each transfer.
As banks bundled mortgages together and resold them, it became increasingly difficult to prove who actually owned the MERS-related properties the mortgages were attached to.
When the real estate bubble burst and home values plummeted, the foreclosure rate skyrocketed.
As people dug in to fight to keep their homes, many began questioning who actually owned those properties and the legality of foreclosing without proof of ownership.
Last spring, the Michigan Court of Appeals ruled that MERS did not meet the requirements under state statute to foreclose by advertisement.
That decision meant that banks could still foreclose on your home, but they would now have to do it judicially – through the courts.
Prior to that decision, your lender could foreclose by advertisement: meaning the lender must post a notice over four consecutive weeks in a newspaper that covers the county in which the property sits. Within 15 days of the first publication, the lender must also post a copy of the advertisement on the premises.
As is often the case, many people saw the headlines, but didn’t read the content. They assumed that as long as their mortgage was somehow connected to MERS, they couldn’t be foreclosed on. Unfortunately, they were wrong.
Now, it seems like foreclosures by advertisement can resume.
On Wednesday, the Michigan Supreme Court overturned the lower courts decision, allowing the MERS to resume foreclosures non-judicially, taking us back to where we started. In a 4-3 decision, the prevailing judges wrote that the electronic mortgage database is a valid record holder.
Still, there are other suits in Michigan that have been brought against MERS – and different angles to the argument that haven’t been approached, so the issue isn’t over yet.
What does this all mean to you?
It means that uncertainty around MERS and how they can foreclosure might continue for the time being, but I wouldn’t sit around and wait for a conclusion. It’s still in your best interest to work with your bank on the various loss mitigation options available (loan mod, short sale, etc.), as opposed to just assuming they can’t foreclose. They can, and they certainly will try…
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