Title Companies Can Proceed to Close Loans in Michigan With MERS as Mortgagee

May 3, 2011

False reports about a recent decision by the Michigan Court of Appeals have caused several title companies to refuse closing any transactions where MERS was the mortgagee.

The decision from the Michigan Court of Appeals in Residential Funding Corporation v. Saurman/Bank of New York v. Messner, upholds the legal right of Mortgage Electronic Registration Systems, Inc. (MERS) as the mortgagee of the security instrument and nominee of the lender and lender’s successors and assigns. The court recognizes that MERS may exercise its interests in the mortgage by assigning the mortgage to the note holder so that the note holder may avail itself of the foreclosure by advertisement process.

MERS issued a release indicating title companies should not have any concerns about closing loans with MERS as the mortgagee.

In a 2-to-1 decision, the court held that MERS does not meet the requirements under Michigan statute to foreclose by advertisement (although the opinion does not preclude MERS from pursuing a judicial foreclosure) because the court holds that MERS is not an owner of an interest in the indebtedness. Judge Wilder, in a dissenting opinion, finds MERS to be a contractual owner of an interest in the notes with the right to foreclose by advertisement. MERS is reviewing the decision as to the next steps.

Earlier this year, MERS published a proposed membership rule change and MERS will no longer foreclose in its name, requiring members to obtain an assignment from MERS. So on a going forward basis, this decision does not impact the MERS business model or the ability of its members to foreclose on mortgages held by MERS as the mortgagee.


Contact ALTA at 202-296-3671 or communications@alta.org.

SoftPro is the nation's leading provider of real estate closing and title insurance software. With more than 14,000 customer sites and over 60,000 users nationwide, this award-winning software offers a suite of products designed to increase your volume and revenue by reducing the time it takes to do closings. SoftPro has been recognized by the American Business Awards every year since 2007 - winning awards for Superior Customer Service, Support and Product Development. North American Title Insurance Company (NATIC) is a seasoned title insurance underwriter, helping title agents to achieve their individual business goals for more than 50 years. Today, the company conducts real estate settlement services in 39 states and the District of Columbia through a network of experienced, independent agents.