Successor Interests: Record your Assignments

In Kim v JP Morgan Chase Bank, the Michigan Supreme Court reversed the lower court's decision and found a sheriff's sale to be void for lack of record chain of title linking the mortgage interest to JP Morgan Chase.

The Kims took out a loan with Washington Mutual, who recorded a mortgage on the property securing the loan. Washington Mutual went under, and the FDIC appointed JP Morgan Chase as the receiver, acquiring all of Washington Mutual's loans and loan commitments. When the Kims defaulted on the loan, JP Morgan Chase foreclosed on the property.

The Kims filed a complaint to set aside the sheriff's sale because JP Morgan Chase failed to record an assignment of the mortgage from Washington Mutual. The trial court dismissed the case, ruling that since JP Morgan Chase acquired the interest in the mortgage by operation of law, it was not necessary to record its interest.

The Michigan Supreme Court pointed out that MCL 500.3204(d)(3) requires a record chain of title to exist prior to the date of the sale if the party foreclosing is not the original mortgagee. JP Morgan was not the original mortgagee. The assignment of the mortgage interest was not recorded. There is no exception for interests acquired by operation of law. Moreover, it was the FDIC that acquired the interest by operation of law; JP Morgan Chase simply purchased the loans from the FDIC. Because JP Morgan Chase had not recorded an assignment of interest, it lacked standing to foreclose, leaving the sheriff's sale void.

Lesson: Make sure there is a record chain of title before foreclosing.

Categories: Real Estate Law