A ruling by the Michigan Supreme Court Wednesday overturned an lower court's decision that suspended thousands of foreclosures in the state. The new decision allows Mortgage Electronic Registration Systems (MERS), a third-party record-holding agency that acts on behalf of lenders to foreclose on homes.
"The Supreme Court's decision affirms MERS business model and will allow the Michigan real estate industry to get back to business as usual," said Bill Beckmann, president and CEO of Merscorp, the parent company of MERS in a story reported by DSNews, a mortgage industry news site.
MERS is an privately held company that runs a database tracking the ownership of mortgage loans. It claims to own titles to nearly half the country's mortgages, The New York Times reports.
Critics say the speed and ease of a MERS transaction make it hard to determine who owns a property, making contesting foreclosures far more difficult.
In April, the Michigan Court of Appeals, responding to a suit by homeowners in Kent and Jackson Counties, decided that MERS could not legally initiate homes repossessions, MLive reports.
The Court said MERS could not foreclose on homeowners because the agency had not made any loans.
Mark Brewer, Chairman of the Michigan Democratic Party, called the 4-3 Supreme Court ruling a "pro-special interest, pro-big bank decision" that reflected the $450,000 worth of campaign donations the Michigan Association of Realtors contributed to friendly candidates in 2010.
"These Republican Justices repeatedly side with the special interests who fill their campaign coffers during election season," Brewer said in a release. "Siding with big banks over the victims of illegal foreclosure is inexcusable."
Although the state's Supreme Court is officially non-partisan, justices are widely considered to take sides along party lines.
The three dissenting justices wanted to keep the case alive and hear more argument, MLive reports.
A report released Thursday by the Center for Responsible lending found 3.6 million households nationwide are at "immediate, serious risk" of losing their homes.
In Michigan, where real estate prices were already low before the market collapsed, lower-income borrowers are most likely to lose their homes to foreclosure, the report found.