Michigan To Join Massachusetts As Real Estate Resale Market Quagmire After Recent State Appeals Court 'Anti-MERS' Ruling?

The Detroit Free Press reports:

• Local Realtors say title companies are canceling closings on some bank-owned homes after a recent Michigan Court of Appeals decision made it more risky to insure them. Late last month, the court ruled the Mortgage Electronic Registration System lacks authority to foreclose by advertisement in Michigan.(1) The system is an electronic record-keeper of mortgages.

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• Raymond DeBates, president of Colonial Title in St. Clair Shores, said that he has not had to cancel any closings yet, but he has put some files aside and is waiting for underwriters to indicate whether the deals can close or not. "This invalidates every foreclosure where MERS was involved," DeBates said. "They could set aside all these MERS transactions. It would be a catastrophe. And that's what we have."

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• Joan Downing, broker/owner of Re/Max in the Hills in Bloomfield Hills, said the ruling's impact started becoming apparent late last week with panicky calls from agents saying deals were unraveling at the closing table as title companies withdrew insurance on the titles.
• "Some of these people have sold their other homes and now they are in limbo," Downing said. "What impact is it going to have on people who have already closed and have put money into the homes? Title companies are also saying they aren't sure they want to get involved in refinances of homes that were foreclosed by MERS."
• And Marshall Mandell, a foreclosure specialist with Re/Max Classic in Farmington Hills, said many buyers will be affected including moving delays, lost fees paid for appraisals, inspections and financing as well.
• "We are having closings canceled to a meaningful extent, which is scary because we're losing essential closings and we can't yet tell how deeply or how long this will affect us," Mandell said. "So far it seems to be about 20% of my personal inventory, but it's too early to know for sure."(2)

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• Terry Cramer, a Troy attorney whose firm Orlans Associates represents Bank of New York Trust, said the lender had not made a decision about whether to appeal to the Michigan Supreme Court. "The fact that there was a dissenting opinion indicates there is a little room there to interpret it a number of different ways," Cramer said.(3)

For the story, see Closings canceled on some bank-owned homes after court rules against MERS.

For an earlier post, see MI Appeals Court: MERS' Screw-Up Makes F'closure Proceedings Void Ab Initio (Does State Now Have 'Ibanez' Problem w/ Respect To Future Titleholders?).

(1) For the Michigan appeals court 11-page majority ruling, see Residential Funding Co, LLC v Saurman, ___ Mich App ___, ___ NW2d ___ (April 21, 2011) (for publication).

(2) The Commonwealth of Massachusetts has already been going through the 'quagmire' problem in its real estate resale market as a result of the 'Ibanez' court ruling. See:

• Massachusetts Court Ruling Gums Up Resales Of Foreclosed Homes Across State; Title Insurance Unavailable For Clouded Ownership Due To Faulty Paperwork,
• Sloppy Bay State Banks Resort To Foreclosure "Do-Overs" As Title Insurers Refuse To Insure Crappy Titles; Opportunities Open Up For Booted Homeowners,
• Post-'Ibanez' Fallout Begins; Mass. High Court Takes Case Of Unwitting 3rd Party Buyer Left Holding The Bag w/ Void Title On Improperly F'closed Home.

(3) Go here for Judge Kurtis T. Wilder's 6-page dissent.

An appeals court judge's vigorous dissent, in which he/she carefully lays out the reasons why he/she believes the majority ruling is in error, can reasonably be interpreted as an implicit 'invitation' by the dissenting judge to the losing party to either:

• Request an en banc rehearing of the case (before the entire appellate court), or alternatively,
• File an appeal with the state's highest court (in this case, the Michigan Supreme Court).