HUD says foreclosures will have to be re-filed on some of its REO homes due to a Michigan court ruling.
In April, the Michigan Court of Appeals issued a judgment stating that Mortgage Electronic Registration Systems, Inc. (MERS) does not meet the requirements under state statute to act as the foreclosing agent in non-judicial proceedings because the company does not own any interest in the debt nor is it the servicer of the mortgage.
In its notice to mortgagees, HUD said most of the major title insurance company underwriters doing business in Michigan have ceased issuing title insurance for any
repossessed properties involving MERS and a non-judicial foreclosure.
""As a result, any Michigan REO properties in HUD's inventory that cannot close due to an inability to obtain title insurance must be re-foreclosed in accordance with the Michigan Court of Appeals opinion,"" HUD said.
The federal agency has directed its mortgagees to identify any affected properties by June 7th and notify HUD's mortgagee compliance manager. The properties will then be re-conveyed by HUD to allow the mortgagee to cure the title defect.
HUD's National Servicing Center is holding a conference call on Tuesday to address questions and concerns regarding the re-conveyance process, and plans to publish additional guidance surrounding the MERS issue following the call.
In February, MERS published a proposed membership rule change, which states that lenders can no longer foreclose in MERS' name but must obtain an assignment from MERS to move forward with a foreclosure action.
DSNews.com's earlier coverage of the Michigan ruling related to MERS' non-judicial foreclosures is available here on the site