Editor: David Reiss
Brooklyn Law School

February 15, 2013

The Michigan District Court holds that Aurora Bank has Standing to Foreclose on Homeowners’ Property

By Robert Huberman

In Horton v. Aurora Bank FSB, 1:12-CV-365, 2012 WL 3307451 (W.D. Mich. Aug. 13, 2012), the Michigan District Court granted Defendants’ motion to dismiss Aaron and Suzanne Hortons’ claims.

In January 2007, the Hortons purchased property and executed a promissory note, with Lehman FSB, in exchange for a $148,000 loan. The Hortons then granted a mortgage to MERS who acted solely as nominee for the lender and the lender’s successors and assigns. The mortgage was recorded on January 31, 2007. MERS later assigned the mortgage to Aurora Loan Services LLC. The Hortons defaulted on their loan on or around August 12, 2010, so Aurora initiated foreclosure by advertisement proceedings on the property. On September 8, 2011, Aurora foreclosed on the property and a Sheriff’s Deed was recorded on September 22, 2011. One day before the redemption period expired, the Hortons filed a lawsuit against Defendants.

The Hortons filed a six-count complaint against eight entities and other unknown defendants. The Hortons alleged 1) wrongful foreclosure for failure to comply with various provisions of Michigan’s foreclosure statute; 2) quiet title; 3) slander of title; 4) unfair deceptive business practices; 5) intentional infliction of emotional distress; and 6) breach of the duty to negotiate in good faith. In response, Defendants filed a motion to dismiss.

First, the Hortons claimed that their mortgage was not properly recorded. But because the Hortons failed to provide a reason why the mortgage was improperly recorded the court dismissed the Hortons’ allegation. Second, the Hortons alleged that neither MERS, Lehman, nor Aurora owned the indebtedness, owned an interest in the indebtedness, or were the servicing agents. The court noted, however, that Aurora had an interest in the indebtedness because Aurora was the record holder of the Hortons’ mortgage. Thus, the court dismissed the Hortons’ second allegation.

Third, the Hortons’ alleged that foreclosure on their mortgage violated M.C.L. § 600.3204(3) which states “[i]f the party foreclosing a mortgage by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date of sale . . . evidencing the assignment of the mortgage to the party foreclosing the mortgage.” Here, MERS assigned the recorded mortgage to Aurora, who recorded the assignment with the Barry County Register of Deeds. Thus, the court held, a record chain of title existed that evidenced the assignment of the mortgage from MERS to Aurora. Thus, Defendants did not violate M.C.L. § 600.3204(3).

Fourth, the Hortons’ alleged that one of the defendants adjourned the originally scheduled Sheriff’s Sale without publishing the required notices. The court dismissed this claim, however, because the Hortons did not support their allegation with any facts. Fifth, the Hortons’ claimed that Defendants did not negotiate in good faith, because Defendants responded to the Hortons’ requests to modify the subject loan with nothing more than cursory responses and flat denials. But the court held that cursory responses do not characterize Defendants’ failure to negotiate in good faith. Sixth, the court dismissed the Hortons’ allegation that Defendants engaged in unfair and deceptive business practices, because the Hortons’ provided no factual support for their claim.

Seventh, the Hortons alleged that one or more Defendants intentionally inflicted emotional distress on the Hortons by violating Michigan’s foreclosure statute. But because the Hortons did not validly claim that any Defendant violated Michigan’s foreclosure statute, the court dismissed the Hortons’ allegation.

Finally, Michigan law does not allow an equitable extension of the period to redeem property from a statutory foreclosure sale, in connection with a mortgage foreclosed on by advertisement, in the absence of a clear showing of fraud or irregularity. Furthermore, filing a lawsuit prior to the expiration of the redemption period is insufficient to toll the redemption period. Accordingly, since the Hortons failed to successfully show fraud or irregularities in the foreclosure process, the court granted Defendants’ motion to dismiss.

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