Servicers for Fannie Mae and Freddie Mac will redo the foreclosure process on 1,250 real estate owned properties in Michigan, the result of an appeals court ruling in April that deemed Mortgage Electronic Registration Systems Inc. ineligible to use the state’s nonjudicial foreclosure process.
“Fannie Mae and Freddie Mac are both re-filing foreclosures on properties, however, the number is limited and pertains to Michigan alone,” a spokesperson for the Federal Housing Finance Agency said in an email response to National Mortgage News’ request for comment. “FHFA continues to work with the Enterprises to monitor issues related to MERS and respond appropriately.”
The FHFA would not break down the total number of affected properties held in each of the government-sponsored enterprises’ respective REO portfolios, nor would the GSEs’ federal conservator disclose any information about the total number of REO properties in Michigan to support its position that the number of reforeclosures is limited. Likewise, representatives from Freddie Mac and Fannie Mae confirmed the reforeclosure action, but declined to comment on the number of properties involved.
“No, we’re not getting into that,” Freddie Mac spokesperson Brad German told NMN. “No reason to.”
The court’s ruling—
The GSEs’ directives follow a similar move by the Department of Housing and Urban Development, which instructed its mortgagees to reforeclose on all REO properties where the original nonjudicial foreclosure was conducted in MERS’ name.
Like the GSEs and FHFA, HUD has only provided limited information about the reforeclosures
At the end of May, HUD had 3,600 REO properties in Michigan. On Wednesday, a spokesperson for HUD said 400 properties being reconveyed to lenders to clear up the title issues.
HUD barred the media from listening to a mortgagee conference call, originally scheduled for June 1 and later postponed to June 7. The HUD spokesperson would not provide any details about what mortgagees were told during the call, other than saying it “was routine and nothing new came out of it.”
The only published information on the HUD directive is a document outlining the process for the reforeclosures posted on the website of Michaelson, Connor & Boul, a third-party vendor that serves as HUD’s mortgagee compliance manager.
In addition to the REO properties already through the foreclosure process and the still-pending foreclosures (Michigan’s redemption period can last up to a year in some cases), previously foreclosed homeowners have up to five years to contest their nonjudicial foreclosure—though if a previous homeowner was successful in overturning their foreclosure, the servicer or investor could redo the foreclosure.
One projection put the number of Michigan mortgages in the MERS System that were foreclosed on during the past five years at approximately 78,000—though again, the estimate is inflated because it also includes mortgages where MERS was not the mortgagee when the foreclosure was initiated.
Meanwhile, the Residential Capital and Bank of New York, plaintiffs in the case that set off this flurry of activity, have appealed the court’s ruling to the Michigan Supreme Court.
In December 2006, Fannie Mae implemented a policy requiring servicers to assign mortgages out of MERS’ name prior to initiating a judicial foreclosure. But it wasn’t until March 2010 when that policy was expanded to also include nonjudicial foreclosures. In March 2011, Freddie Mac implemented a similar policy that did not differentiate between judicial and nonjudicial foreclosures.
Likewise, Merscorp Inc., parent company of MERS, proposed a rule change to prevent any of its members from foreclosing in its name.
