February 6, 2015
by Bradley P. Jones
Wilson Adams & Edens – USFN Member (Mississippi)
Until July 1, 1999, Mississippi law did not mandate that mobile homes be titled. That changed with the passage of MCA § 63-21-9 (1972), as amended, which requires that mobile homes manufactured or assembled after July 1, 1999 (or which are the subject of first sale for use after July 1, 1999) be titled. Under this statute, a certificate of title (COT) is to be issued for mobile homes just as though they were any other motor vehicle.
Although, prior to July 1999, Mississippi did not require certificates of titles for mobile homes, certificates were often issued on those manufactured outside the state. Prior to the passage of MCA § 63-21-9, a second statute, MCA § 63-21-30 (1972), as amended (and which was not abrogated by the passage of MCA § 63-21-9) provided for the “cancellation” or “retirement” of the certificate of title; provided, of course, the mobile home has been classified as real property under MCA § 27-53-15. The former practice being: where a mobile home was permanently affixed to the property and certified as real property, it was considered part and parcel of the real property, and ownership could be transferred by deed alone.
The Mississippi statute pertaining to the certification of mobile homes as “real property” (MCA § 27-53-15 (1972)), contains wording that significantly “muddied the water” as to exactly what actions would be required for a lender to perfect a security interest in a permanently attached mobile home. Specifically, § 27-53-15 states that “[r]egardless of whether a manufactured or mobile home for which a certificate of title was required or issued pursuant to the provisions of Chapter 21, Title 63, Mississippi Code of 1972, is classified as real property or is classified as personal property, the perfection of a security interest therein shall be governed by the provisions of Chapter 21, Title 63, Mississippi Code of 1972).”
In a nutshell, a fair reading of § 63-21-30 and § 27-53-15 establishes that, with regard to mobile homes made or sold after July 1, 1999, the perfection of a security interest is to be accomplished under Mississippi’s motor vehicles laws. Thus, a COT with the lender/lienholder listed on the face of the certificate is the proper method of perfecting a security interest in such a mobile home. This, however, appears to be in direct contradiction to the Mississippi Department of Revenue’s longstanding reading and interpretation of § 63-21-30, in that once the title is submitted for retirement or cancellation, that department would purge the mobile home from its system, and would then treat the mobile home as real property rather than personal property.
As a result of the confusion and impasse that arose over the facially apparent conflict with the referenced statute, a number of foreclosure firms and HUD representatives met with the Department of Revenue in 2008. They sought the development of a consistent and uniform process for ensuring that servicers, following foreclosure, could obtain clear and marketable title to the land and permanently-attached mobile home. The agreed-upon procedure involves the post-foreclosure filing of a complaint naming the former borrowers, the Mississippi Department of Revenue, and any and all interested parties as defendants, seeking a judgment requiring the Mississippi Department of Revenue to issue a new certificate of title in the name of the foreclosing entity.
Such a lawsuit would not be required in a situation where an original COT has actually been issued, where the foreclosing entity is listed as lienholder on the title, and the original or replacement title is available. Under these circumstances (following the foreclosure), submission of the appropriate documentation (i.e., the original title or an application for replacement title signed by power of attorney, the necessary assignment of lien document, the affidavit of repossessed mobile home, substituted trustee’s deed, etc.) to the Mississippi Department of Revenue will result in the issuance of a COT in the name of the foreclosing entity.
On the other hand, a post-foreclosure mobile home lawsuit will need to be filed post-sale in the following instances: (1) where there was no original title issued; (2) where a COT was issued, but the lienholder listed thereon is one other than the current holder of the note and deed of trust, and where the current holder does not have possession of, and/or cannot obtain, an assignment of lien from the entity listed on the COT; and (3) where the mobile home has never been certified as real property.
Such post-foreclosure mobile home actions have become routine and commonplace in Mississippi, with chancery courts regularly entering judgment throughout the state. The only negatives are the additional costs to servicers for attorneys’ fees and costs, as well as the further time added to the standard foreclosure timeline.
Unfortunately, a sizeable setback occurred in 2012, when the court refused to enter a default judgment in a routine post-foreclosure mobile home action because the mobile home in question was not described in the foreclosed deed of trust. The servicer appealed the chancery court’s ruling to the Mississippi Court of Appeals. See Deutsche Bank National Trust Company v. Brechtel, 81 So. 3d 277 (Miss. Ct. App. 2012). While the appeal was ultimately dismissed for lack of jurisdiction (and, therefore, had no precedential effect on the merits), the case was widely discussed among the state’s judiciary. The chancery court ruling has had the practical effect of establishing the need for pre-foreclosure reformation action, where the mobile home is not described or referenced in the underlying deed of trust.
Mobile home lien perfection issues can easily be addressed at loan origination. Unfortunately, if the issues are not properly addressed then, servicers will continue to experience difficulty in handling mobile home foreclosures in Mississippi. Under certain circumstances, it is extremely foreseeable that both pre-foreclosure and post-foreclosure mobile home judicial actions will be required.
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