January 9, 2015
by Jennifer Sayegh
Trott Law, P.C. – USFN Member (Michigan)
On October 15, 2014, the Michigan Legislature enacted three bills (HB 4638, HB 4639, & HB 4640), effective October 17, 2014, known as the Neal Case Fix Bills. These bills were introduced as a direct response to the U.S. Bankruptcy Court decision In re Neal, 2009 Bankr. LEXIS 2027 (Bankr. E.D. Mich. June 18, 2009). That case held that an affidavit accompanying a copy of an original instrument does not satisfy the requirements for recording a real estate conveyance, since it does not contain an original signature.
In the Neal opinion, the bankruptcy court concluded that: (1) the affidavit attached to a copy of the mortgage did not, in and of itself, convey an interest in property; (2) MCL 565.451 does not allow the filing of an affidavit of lost mortgage as a substitute for the original mortgage; and (3) if the Michigan Legislature had intended the filing of an affidavit of lost mortgage to act as a substitute for the original mortgage, the language would have specifically stated that provision.
House Bill 4638 clarifies the conditions necessary for the execution and recording of instruments with the register of deeds, by amending MCL 565.201(1)(a). Specifically, (6) states “If a mortgage meets all requirements for recording under this act and a copy of the mortgage is affixed to an affidavit that is recordable under section 1a(g) of 1915 PA 123, MCL 565.451a, then the affidavit with the accompanying copy of the mortgage shall be received for record by the register of deeds, and the mortgage is duly recorded under this act and under section 29 of 1846 RS 65, MCL 565.29, as of the date of recording of the affidavit.” More importantly, (6) directly responds to the court’s opinion in Neal, that if the Michigan Legislature had intended the filing of an affidavit of lost mortgage to act as a substitute for the original mortgage, the language would have specifically stated as much. The statutory text of MCL 565.201(6) now includes: “To the extent that the mortgage validly creates a lien, the lien is perfected as of the date of recording of the affidavit.” Finally, the language is retroactive and applies to all copies of mortgages verified by an affidavit.
House Bill 4640 amends MCL 565.451a by addressing the use and recording of affidavits affecting real property. The bankruptcy court in Neal concluded that “the language of M.C.L.A. § 565.451a simply does not allow a party to file an affidavit of lost mortgage as a substitute for the original,” and that “[n]othing in the language expressly permits the filing of an affidavit of lost mortgage.” Id at 5. In response, MCL 565.451a(g) specifically provides that an affidavit stating facts relating to matters affecting title to real property may be recorded by a person with knowledge of the unrecorded mortgage, “if the affidavit recites the names of the parties to the unrecorded mortgage and is accompanied by a copy of the unrecorded mortgage.”
The passing of the Neal Case Fix Bills now allows for the recording and perfecting of a mortgage lien, via an affidavit executed by a person with knowledge to the unrecorded mortgage, when accompanied by a copy of the original mortgage, and if the affidavit is in compliance with Michigan’s recording requirements.
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