Mers Does Not Meet Michigan’s Requirements To Foreclose By Advertisement

Residential Funding Co. v. Saurman (No. 290248 and No. 291443, Ct. of Appeals MI April 21, 2011.) In this consolidation of two appeals, each of the defendants obtained a mortgage loan with MERS named as the mortgagee under the mortgage. Both defendants defaulted and MERS began non-judicial foreclosure by advertisement pursuant to Michigan’s statute. When Plaintiff began eviction the defendants challenged the foreclosures as invalid because MERS did not have authority under law to foreclose by advertisement. The district courts rejected the defendants’ challenge and the respective circuit courts affirmed on appeal. In reversing these decisions, the majority court of appeals began its analysis by finding that MERS only has an interest in the security instrument, i.e., the mortgage, and it does not have any ownership interest in the note itself. The court then proceeded to analyze the pertinent statutory language and found that only the owner of the note, the owner of an interest in the note, or servicing agent of the mortgage are allowed to foreclose by advertisement. Because MERS status did not fall within any of these three categories it lacked authority to foreclose by advertisement and the proceedings in both cases were void ab initio. The court of appeals also rejected Plaintiff’s argument that MERS can foreclose by advertisement because it was an agent or nominee of the lender, i.e., an agent of the owner of the note. The court found that the statutory language only allowed the servicing agent of the mortgage to foreclose by advertisement; not any agent of the owner of the note. The court observed, however, that while Michigan law limited foreclosure by advertisement to those parties that were entitled to enforce the note, because MERS has an interest in the mortgage it can still foreclose using Michigan’s judicial foreclosure process.

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