Michigan’s 6th Circuit Court ruling on Conlin v. Mortgage Electronic Registration Systems establishes a precedent insiders see as a small victory for lenders and servicers.
The court rejected claims of robo-signing and a forged assignment by MERS, in another example of
Tom Schehr of Dykema who represented the servicer, told this publication this precedential case confirms, at least under Michigan’s Foreclosure by Advertisement law, “that a borrower cannot bring a claim challenging a foreclosure following the expiration of a redemption period unless the borrower meets a very high standard.”
Michael Conlin first contested the foreclosure sale of his property in Ann Arbor, Mich., based on alleged defects in the assignment of the mortgage from MERS to U.S. Bank with the district court, which rejected the plaintiff’s consumer finance litigation arguments.
The Michigan Court of Appeals ruling affirmed that decision to dismiss the case arguing that the plaintiff “lacked standing to challenge” both the foreclosure after the redemption period expired and the assignment of a MERS mortgage.
“It’s a big win for lenders and servicers,” Schehr says because the 6th Circuit decision to reject at the pleading stage may serve as precedent for the dismissal of other borrower claims “that are commonly asserted by defaulting borrowers to stave off foreclosure and eviction.”
Michigan is one of a few states that allow foreclosure by advertisement, meaning lenders and servicers can choose to start foreclosure processing on a property by advertising the foreclosure sale rather than filing a lawsuit, which tends to be cheaper and quicker for the bank than foreclosure by action.
Homeowners facing foreclosure often are concerned that proceeds after the foreclosure sale may not cover the remaining mortgage debt plus other foreclosure sale expenses. In other words, even after the foreclosure sale, there may not be enough money from the proceeds of the sale to cover the amount of the mortgage plus the expenses in fault with the foreclosure sale.
It is worth noting, however, that foreclosure by advertisement entails a major benefit for homeowners: Borrowers are not liable for foreclosure deficiency if the amount of mortgage debt to the lender/servicer is higher than the proceeds from the foreclosure sale, which is the case if the deficiency results from foreclosure by action.
Since foreclosure by advertisement is quite different from foreclosure by judicial process, Schehr says, this Court of Appeals decision “makes it even harder for a borrower to challenge foreclosure by advertisement in Michigan,” and the few other states that have implemented a similar law.
