Panel Affirms U.S. District Court’s Dismissal of Wrongful Foreclosure Complaint
FOR IMMEDIATE RELEASE
CONTACT: Jason Lobo
Reston, Virginia, July 13, 2012 – MERSCORP Holdings, Inc. today announced that a three-judge panel of the United States Court of Appeals for the Sixth Circuit affirmed a June 13, 2011, decision by U.S. District Court Judge Sean F. Cox for the Eastern District of Michigan that dismissed a legal challenge to Wells Fargo’s authority to foreclose by advertisement under Michigan law. The Sixth Circuit Court of Appeals includes Kentucky, Ohio, Michigan and Tennessee.
In Hargrow v. Wells Fargo Bank N.A., the Sixth Circuit panel rejected the plaintiffs’ claims that, among other things, Wells Fargo, as an assignee of MERS, was not entitled to foreclose because it did not own an interest in the indebtedness; and, that the mortgage assignment by MERS to Wells Fargo was invalid because the mortgage could not be assigned without a corresponding assignment of the underlying debt.
“The Hargrows’ sole argument is that the foreclosure by advertisement initiated by Wells Fargo was void because Wells Fargo failed to comply with Michigan Compiled Laws §§ 600.3204(1)(d) and (3),” the panel wrote. The court held that the plaintiffs’ argument “is now foreclosed…,” citing an intervening Michigan Supreme Court decision, Residential Funding Co., LLC v. Saurman, which rejected the validity of this argument. The Sixth Circuit further noted that “The Michigan Supreme Court held that MERS, ‘as record-holder of the mortgage,’ owned an ‘interest in the indebtedness… [that] authorized MERS to foreclose by advertisement under MCL 600.3204(1)(d)’ despite not owning the underlying debt.”
In rejecting claims of a broken chain of title, the Court wrote that the “Hargrows granted MERS the power to assign the Mortgage, and MERS used that power to assign the Mortgage to Wells Fargo. The assignment was recorded in the Washtenaw County Clerk’s Office, creating a clear record chain of title for the Mortgage.” As a result, the Circuit Court of Appeals concluded that “since the chain of title of the mortgage was properly recorded, Wells Fargo as the owner of an interest in the indebtedness had the power to foreclose by advertisement” under the Michigan statute.
Sixth Circuit Judges Karen Nelson Moore, Helene N. White and Carlos F. Lucero, Circuit Judge for the U.S. Court of Appeals for the Tenth Circuit, sitting by designation, joined in the opinion.
“We have seen numerous appellate court decisions over the course of the last several months that affirm lower court rulings in MERS’ favor,” said Janis Smith, MERSCORP’s Vice President for Corporate Communications. “As this panel has made clear, MERS has legal authority to act on behalf of the lender – including the right to execute the assignment or foreclose – and this authority is granted by plain language in the mortgage document signed at closing by the borrower.”
For descriptions of cases and other materials pertaining to MERS' business model and role in U.S. housing, please visit www.mersinc.org.
MERSCORP Holdings, Inc. is a privately held corporation that owns and manages the MERS® System and all other MERS® products. It is a member-based organization made up of approximately 3,000 lenders, servicers, sub-servicers, investors and government institutions. Mortgage Electronic Registration Systems, Inc. (MERS) serves as the mortgagee in the land records for loans registered on the MERS® System, and is a nominee (or agent) for the owner(s) of the promissory note. The MERS® System is a national electronic database that tracks changes in mortgage servicing and beneficial ownership interests in residential mortgage loans on behalf of its members.