The Michigan Supreme Court heard arguments today on whether it should grant an application for leave to appeal from and reverse the Michigan Court of Appeals April 21, 2011 opinion in Residential Funding Co. LLC v. Saurman [“Saurman”] which held that Mortgage Electronic Registration Systems [“MERS”], a “nominee” [agent] of a lender and holder of a mortgage, lacked the legal authority to foreclose upon that mortgage by advertisement under Michigan law. Saurman held that because MERS failed to meet the statutory requirements for foreclosure by advertisement, the MERS foreclosures were void ab initio.
During today’s hearing, some of the Justices persistently questioned legal counsel for both sides as to the nature of MERS legal interest, if any, in the underlying debt and mortgage. Counsel for Residential Funding Co. was especially questioned by the Chief Justice to explain whether MERS was anything other than the lender’s agent. The Chief Justice sought “clarity” from counsel from the parties on this vital issue. From this observer’s perspective, the lender’s side of the argument did not provide an unambiguous and clear answer to this question.
One of the criteria applicable to the Supreme Court’s decision to take the case is whether it involves legal principles of major significance to the state’s jurisprudence. The lender’s side of the argument, and those amici who supported its position, contended that “10s of 1000s” of foreclosures and the resulting legal titles of those properties are at risk. The homeowner’s attorney acknowledged that the case was significant, but stressed that after the April decision in Saurman, MERS stopped foreclosing in its own name. At least one of the Justices questioned whether the market had “self corrected” the MERS problem and if so, whether there was a need for the Supreme Court to address the issue.
The homeowner’s attorney stressed that a Court must strictly enforce the terms of the mortgage by foreclosue statute and that the Court of Appeals had done so. The lender’s side argued that only “substantial compliance” was required. That statement led to spirited colloquy between counsel and the Chief Justice which did not end well for the lender’s lawyer.
The Court took the matter under advisement and will most likely issue its order in the near future. While it may be a close call, this observer thinks that there will not be 4 votes to take the case and the Court will deny the application.