The United States Court of Appeals for the Sixth Circuit affirmed
a lower court's decision dismissing plaintiff's action to
set aside a foreclosure sale based on alleged violations of the
non-judicial foreclosure process in Michigan. After plaintiff
defaulted on his mortgage loan,his property was foreclosed upon and
sold at a sheriff's sale through Michigan's non-judicial
foreclosure process, which provides for a six-month redemption
period. Plaintiff subsequently initiated an action seeking to set
aside the non-judicial foreclosure asserting that the mortgagee
could not foreclose on him because the mortgagee was not the
note-holder, mortgage holder, or servicer as required by Michigan
law. Plaintiff's claim was based on the assertions that the
mortgage assignment was either forged or "robo-signed"
and MERS had no authority to assign the mortgage to the foreclosing
Since the six-month redemption period had expired, under
Michigan law, plaintiff was required to meet a heightened standard
by making a "'clear showing of fraud, or irregularly'
. . . 'related to the foreclosure procedure itself.'"
Relying on Kim v. JP Morgan Chase Bank, NA, 825 N.W.2d 329 (Mich.
2012) and Davenport v. HSBC Bank USA, U739 N.W.2d 383 (Mich. Ct.
App. 2007), the Court determined that any violation of the
foreclosure law is only actionable when there is a showing of
prejudice. Since plaintiff would not be subject to additional
liability, would not have been in a better position if defendant
was the owner of the indebtedness or the owner an interest in the
indebtedness, and did not show he was prejudiced in any other way,
the Court determined plaintiff's claim was not actionable and
affirmed the lower court's dismissal. Such theories are
commonly advanced by defaulted borrower plaintiffs in an effort to
invalidate the foreclosure. Numerous state and federal courts
around the country have rejected such claims on a host of grounds
and this case presents yet another example that contributes to this
weight of authority.
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Brattle Principal Lisa Cameron, Academic Advisors Professor Greg Allenby and Professor Peter E. Rossi, and Brattle Senior Research Analyst Yikang Li recently co-authored an article for BNA about fundamental economic errors in approaches to damages in recent product mislabeling cases.
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