Two counties sue MERS for transfer taxes

The Lansing State Journal reports this morning that Ingham and Branch counties have sued Mortgage Electronic Registration Systems Inc., and a number of banks and mortgage companies, for unpaid transfer taxes on properties MERS purchased at foreclosure sales and later transferred to financial institutions.

According to Ingham County Register of Deeds Curtis Hertel Jr., although MERS buys the properties, when it later transfers ownership, it claims a transfer tax exemption for tranactions valued less than $100. Hetel believes that the county and state are owed “millions of dollars” in unpaid transfer taxes over the past decade.

From the LSJ:

Just what, exactly, MERS owns and the rights that ownership gives it have become contested questions as the foreclosure crisis has continued.

The company may claim to hold title to tens of millions of U.S. mortgages, but it invests no money in those loans and holds no interest in the debt underlying them.

For that reason, Michigan’s Court of Appeals ruled earlier this year that the company could not foreclose by advertisement, that is, could not foreclose without taking the case before a judge.

“There are some really profound contradictions built into the DNA of the MERS system,” said Christopher Peterson, a professor at the University of Utah’s S.J. Quinney College of Law, who has written on MERS.

“When the financial institutions try to use MERS as a tool to foreclose on your house, they will commonly represent that MERS has an ownership stake that justifies allowing them to do that,” he said, “but when they talk to the county register of deeds offices about whether or not they have to pay fees or taxes, they claim not to have the ownership interest.”

The LSJ reports that counties in six other states have filed similar suits.

HB 4651: Judges would review most foreclosures

Hot on the heels of yesterday’s State Court Administrative Office recommendation to cut 49 trial and appellate judgeships comes news of legislation that would require judicial review of most foreclosures on residential properties.

The Lansing State Journal reports that HB 4651

introduced in May by [Rep. Jim] Ananich, a Flint Democrat, and seven other Democratic state representatives, would require a judge to review all foreclosures on owner-occupied residential properties.

Ananich and Ingham County Register of Deeds Curtis Hertel Jr. are touting the legislation. Said Hertel, as quoted by The LSJ:

We need something to make sure banks play by the rules in these foreclosures and also put in an incentive to give people reasonable modifications.

He acknowledged that the bill, if enacted, would bring additional pressure to the court system.

Treasury official: Report shows homeowners need quicker help

“Less than 1% of the homeowners eligible for foreclosure help under President Barack Obama’s Making Home Affordable plan have received permanent loan modifications from their lenders, raising doubts about the program’s results to date and putting more pressure on the administration to get tough with mortgage companies who promised to help struggling borrowers,” reports the Detroit Free Press.

“Michigan, meanwhile, continues to be a leader in terms of the number of modifications made under the president’s Making Home Affordable plan, with nearly 25,000 so far. But in its report today, the Treasury Department did not reveal how many of those are only trial modifications instead of permanent ones or what percentage of eligible homes in the state that number represents.”

Lawsuit claims Wayne County foreclosures were illegal

The Detroit News is reporting, “Tens of thousands of Wayne County foreclosures — and potentially hundreds of thousands across the state — are unlawful because sheriffs did not follow state law when they conducted foreclosure auctions, an attorney said Wednesday.

“On Tuesday, Bloomfield Hills attorney Paul Nicoletti filed a proposed class-action suit in federal court seeking to set aside the Wayne County foreclosures of 46 plaintiffs and potentially hundreds of thousands of others in similar circumstances.”