A mortgagee cannot validly foreclose a mortgage by advertisement unless the mortgage and all assignments of that mortgage (except those assignments effected by operation of law) are entitled to be, and have been, recorded.  In a foreclosure of a mortgage by advertisement, an assignee who holds the mortgage at the time the foreclosure proceedings commence must be named in the published notice of sale.  If a foreclosing mortgagee or assignee does not have a recorded interest on the date the foreclosure by advertisement commences, the notice given by advertisement does not satisfy the statutory requirements for publication and may be the basis for asserting that the mortgage has not been validly foreclosed. 

Opinion No. 7147 

 January 9, 2004 

Honorable Michael D. Bishop
State Senator
The Capitol
Lansing, MI  48909 

You have asked:  a) whether a mortgagee initiating foreclosure of a mortgage by advertisement must have a duly recorded and complete chain of title to the mortgage being foreclosed before the mortgagee commences advertising the sale; and b) if a foreclosing mortgagee does not have a recorded interest as of the date on which foreclosure by advertisement commences, whether this omission renders any subsequent sale voidable by the mortgagor or a party claiming through the mortgagor. 

The foreclosure of a mortgage by advertisement is governed by Chapter 32 of the Revised Judicature Act (RJA), MCL 600.3201 through 600.3280.  MCL 600.3204 provides in pertinent part:

(1)  A party may foreclose by advertisement if all of the following circumstances exist: 

(a)  A default in a condition of the mortgage has occurred, by which the power to sell became operative. 

(b)  A suit or proceeding has not been instituted, at law, to recover the debt then remaining secured by the mortgage, or any part of the mortgage; or if a suit or proceeding has been instituted, the suit or proceeding has been discontinued; or an execution upon the judgment rendered in a suit or proceeding has been returned unsatisfied, in whole or in part. 

(c)  The mortgage containing the power of sale has been properly recorded and, if the party foreclosing is not the original mortgagee, a record chain of title exists evidencing the assignment of the mortgage to the party foreclosing the mortgage. 

(d)  The party foreclosing the mortgage is either the owner of the indebtedness or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage.  [Emphasis added.] 

MCL 600.3208 provides:

            Notice that the mortgage will be foreclosed by a sale of the mortgaged premises, or some part of them, shall be given by publishing the same for 4 successive weeks at least once in each week, in a newspaper published in the county where the premises included in the mortgage and intended to be sold, or some part of them, are situated.  If no newspaper is published in the county, the notice shall be published in a newspaper published in an adjacent county.  In every case within 15 days after the first publication of the notice, a true copy shall be posted in a conspicuous place upon any part of the premises described in the notice. 

            The Michigan Land Title Standards (5^th Edition) published by the Land Title Standards Committee of the Real Property Law Section of the State Bar of Michigan is an authoritative source that has been relied upon by property law practitioners in Michigan for nearly 50 years.  Michigan Land Title Standard 16.12 relates to your question and recites:

STANDARD:  A MORTGAGE CANNOT BE VALIDLY FORECLOSED BY ADVERTISEMENT UNLESS THE MORTGAGE AND ALL ASSIGNMENTS THEREOF, EXCEPT SUCH ASSIGNMENTS AS HAVE BEEN EFFECTED BY OPERATION OF LAW, ARE ENTITLED TO BE, AND HAVE BEEN RECORDED. 

            The committee then illustrates how the standard applies by setting forth the following hypothetical problem, an answer to that problem, and the legal authority that supports that answer:

Problem A:  Robert Brown mortgaged Blackacre to Edward Lane.  Lane assigned the mortgage to Arthur Mills.  The assignment was either unrecorded or, although actually recorded, was not entitled to be recorded.  Mills foreclosed the mortgage by advertisement and a sheriff�s deed purporting to convey Blackacre was recorded.  Was the foreclosure valid? 

Answer:  No.  To foreclose a mortgage by advertisement validly, the mortgage and all assignments thereof must be entitled to record and be recorded. 

            The standard cites MCL 600.3204(3) and Dohm v Haskin, 88 Mich 144; 50 NW 108 (1891), as support for its answer. 

            As the Michigan Supreme Court in Dohm explained, "the right to foreclose by advertisement is conferred solely by the statute, and its provisions must be strictly complied with.  Under this statute, the mortgage and assignment must not only be recorded, but they must be executed in such a manner as to entitle them to record."  88 Mich at 147. 

            In the Dohm case, the assignment of the mortgage was executed in Kansas.  It had only one witness.  It purported to be acknowledged before a notary public.  No certificate of a clerk or proper certifying officer of a court of record was attached as required by the then effective statutes.  How. Stat. � 5660.  As the Court indicated, the instrument "was therefore not entitled to record, and the register of deeds should have refused to record it."  Id. 

            Another relevant provision of the RJA is MCL 600.3212, which states:

            Every notice of foreclosure by advertisement shall include all of the following: 

            (a)  The names of the mortgagor, the mortgagee, and the foreclosing assignee of a recorded assignment of the mortgage. 

            (b)  The date of the mortgage and the date the mortgage was recorded. 

            (c)  The amount claimed to be due on the mortgage on the date of the notice. 

            (d)  A description of the mortgaged premises that substantially conforms with the description contained in the mortgage. 

            (e)  For a mortgage executed on or after January 1, 1965, the length of the redemption period as determined under section 3240.  [Emphasis added.] 

Michigan Land Title Standard 16.18 states:

STANDARD:  IN FORECLOSURE OF A MORTGAGE BY ADVERTISEMENT, AN ASSIGNEE WHO HOLDS THE MORTGAGE AT THE TIME OF FORECLOSURE MUST BE NAMED IN THE PUBLISHED NOTICE OF SALE. 

This standard is explained by the committee with the following problem and answer:

Problem:  A mortgage was assigned of record to Arthur Mills.  Mills foreclosed it by advertisement.  The published notice of sale did not set forth the assignment.  Is the notice sufficient? 

Answer:  No.  The statute requires that the assignee be named in the notice. 

The committee cites MCL 600.3212 as the authority supporting this answer. 

Neither of the quoted land title standards addresses directly the factual scenario where a mortgagee or a mortgagee's assignee initiates foreclosure by advertisement, but the initial published notification either fails to name the assignee, or, while naming the assignee, names an assignee who is not of record.  This scenario raises the question whether a mortgagee or mortgagee's assignee under these circumstances can cure the error by recording the assignment and naming the assignee in subsequent notices published before the sheriff conducts the sale involved.   

            With respect to the attempt to cure the omissions in the first of the successive required publications, a faulty initial publication cannot be offered as satisfying the RJA's publication requirements.  The first correct publication is the first publication that can be relied upon in asserting that publication has been properly accomplished for four successive weeks. 

            With respect to the assignment of a mortgage after the initial publication, it is my understanding that the State Bar Land Title Standards Committee, in editing Michigan Land Title Standard 16.18 for future publication, has added a "Comment C," which will recite: 

The Committee expresses no opinion as to the effect of an assignment of the foreclosing assignee�s interest after the publication of the initial notice of sale.  

            In other words, the Committee's future publication will decline to address this factual scenario in the absence of sufficient statutory or case authority.   

            The State Bar Land Title Standards Committee's comment confirms that this is an area in need of legislative treatment.  Since, as stated in Dohm, the right to foreclose by advertisement "is conferred solely by . . . statute," I must also defer to the legislative process to address this gap in the law.  Indeed, you have indicated in your letter that you are concerned that not all mortgagees are following the same practice in this area and that you plan to deal with this and related problems by proposing appropriate legislation to bring needed clarity to the issue.   

            It is my opinion, therefore, that a mortgagee cannot validly foreclose a mortgage by advertisement unless the mortgage and all assignments of that mortgage (except those assignments effected by operation of law) are entitled to be, and have been, recorded.  In a foreclosure of a mortgage by advertisement, an assignee who holds the mortgage at the time the foreclosure proceedings commence must be named in the published notice of sale.  If a foreclosing mortgagee or assignee does not have a recorded interest on the date the foreclosure by advertisement commences, the notice given by advertisement does not satisfy the statutory requirements for publication and may be the basis for asserting that the mortgage has not been validly foreclosed.
 

MIKE COX
Attorney General

Editor's Note: After OAG No 7147 was released, 2004 PA 186 was enacted into law and given immediate effect (July 1, 2004). This act amended MCL 600.3204(3) to provide: "If 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 under section 3216 evidencing the assignment of the mortgage to the party foreclosing the mortgage." Accordingly, OAG No 7147 has been superseded by subsequent legislative action.