Bulletin: MI2012003

Date:
March 12, 2012
To:
All Michigan Issuing Offices
RE:
Mortgage Foreclosure by Advertisement/ Assignments Chain of Title

Dear Associates:

Please be advised that the State of Michigan Court of Appeals rendered a recent decision in the matter of Kim v. JP Morgan Chase Bank which upheld the statutory provision [MCL 600.3204(1)d] and the Davenport v. HSBC Bank USA case which provides that, if the foreclosing lender is not the original mortgagee, there must be a record chain of title for the assignments of mortgages before the assignee lender can foreclose the mortgage. The Court held in this action that JP Morgan Chase failed to satisfy this provision in foreclosing the plaintiff’s mortgage, thereby rendering their foreclosure invalid.

The plaintiff/borrower’s original bank, Washington Mutual, failed and on September 25, 2008, the United States Department of Treasury appointed the FDIC receiver and closed the Bank. Ultimately, the FDIC transferred all of Washington Mutual’s loans and loan commitments, by way of a Purchase and Assumption Agreement, to JP Morgan. JP Morgan declared a default on the plaintiff’s mortgage and initiated a foreclosure by advertisement. The plaintiff homeowner challenged the ability of JP Morgan to foreclose the mortgage on their property due to JP Morgan’s failure to record a chain of title to the mortgage.

JP Morgan argued they didn’t have to record a chain of title for assignments as they acquired the mortgage interests by operation of law. The Court disagreed holding, first, that JP Morgan paid consideration under the Agreement and, therefore, did not acquire their interest by way of operation of law and, secondly, the plain language of the statute makes no exception for mortgages acquired by operation of law. This would seem to indicate that, while the FDIC may acquire their interest by operation of law, mortgages conveyed into and out of the FDIC need to be reflected in a "chain of title prior to the date of sale under section 3216 evidencing the assignment of the mortgage to the party foreclosing the mortgage".

To insure a mortgage foreclosure by a party other than the original mortgagee or their servicer, you must assure that there is a record chain of title to the assignment(s) of the mortgage by the recording of all the assignments or by the recording of some sort of affidavit which purports to establish a chain of title to the assignments.

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THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
MI000021 Mortgage Foreclosure by Advertisement - Notice of Assignments of Mortgage Required
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None