The Michigan Court of Appeals has once again created upheaval in the Michigan foreclosure crisis by ruling that a mortgagee (lender or assignee of a note) may not foreclose upon a property unless it as recorded its interest with the county in which the property is located "prior to" the sheriff's sale taking place.http://www.icle.org/Modules/MLO/Cases/Display.aspx?filePath=/mlo/michapp/slip/O-302528.xml Kim v JP Morgan Chase Bank Michigan Court of Appeals No 302528 (01/12/12). This case may throw chain of title to Michigan's foreclosed property into limbo just as the Sauerman case from last Spring did until it was overturned by the Michigan Supreme Court in November 2011. The Sauerman case was based on whether or not MERS (the Mortgage Electronic Registration System) was a proper party to initiate a foreclosure by advertisement action against a borrower in default. In November, the Court held that it was a proper party.
The Appeals Court in this case, relying on case law which states that "When language is clear and unambiguous, we must apply the terms of the statute to the circumstances of the case, and judicial construction is unnecessary" Michigan Dep’t of Transp v Tomkins,481 Mich 184, 191; 749 NW2d 716 (2008) the court then applied M.C.L. 600.3204, which reads in part:
(3) If the party foreclosing a mortgage by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date of sale under section 3216 evidencing the assignment of the mortgage to the party foreclosing the mortgage. [Emphasis added.] the court held that the statute is clear and unambiguous in its requirements and that the foreclosing party must comply with the statute. The Court rebuffed an Attorney General opinion offered by Chase as non-binding on the court and also as not applicable to this set of case facts. Chase claimed it need not record its assignment since it obtained its interest in the note by operation of law.
The Appeals Court clarified its decision on Chase's argument that the chain of title transferred by operation of law and they were therefore not bound by the statute, by stating that Chases's interests did not, in fact, transfer by operation of law by rather were assigned from another party, The FDIC, who had acquired the interest by operation of law when it took over Washington Mutual.
Now that the foreclosure of this property has been declared void ab initio, just as it was in Sauerman, how many other cases will appear to have similar facts and standing to sue? It may be only that foreclosures by advertisement will merely be delayed a month or two in order to record the property assignment in the local Register of Deeds office. It may be that this takes longer, possibly much longer to record the proper assignments. Sadly, it may be that we in Michigan have more houses left vacant-abandoned by borrowers who have defaulted and chosen to walk away, while we all wait on mortgagees who are more reluctant to foreclose until all the documents, which they should have already recorded, are securely in place.
