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Former homeowners must show fraud or irregularity in foreclosure proceeding after they fail to redeem property within statutory period

The court upheld the district court's decision to dismiss the plaintiffs' action to invalidate their home foreclosure because they failed to establish that the foreclosure proceedings violated Michigan's foreclosure-by-advertisement statute. Their negligence claim based on an alleged violation of HAMP and their Fifth Amendment due process violation claim also failed. There was no dispute that they failed to exercise their statutory right to redeem the foreclosed property within the six-month statutory redemption period. Thus, they were required to "allege 'a clear showing of fraud, or irregularity' that 'relate[s] to the foreclosure itself' and allege that they were prejudiced by such fraud or irregularity, that is, they must show that they would have been in a better position to preserve their interests absent the fraud or irregularity." The court rejected their claim that the foreclosing bank lacked standing to foreclose under Michigan's foreclosure-by-advertisement statute. MERS, "the original mortgagee, assigned the mortgage" to the bank and it was duly recorded. Notice of the foreclosure and sheriff's sale was published in the newspaper and a sign was posted on the property before the sale. "In the mortgage they signed, plaintiffs granted MERS the power to assign the mortgage" to the bank. "That assignment was recorded, creating a clear record chain of title. The mortgage also gave MERS, as mortgagee, the power to initiate foreclosure proceedings, and once assigned," the bank also had the power to foreclose. The plaintiffs could not argue that the bank was required to "be the assignee of both the mortgage and the promissory note" to foreclose because Michigan law makes it "lawful for the holder of the mortgage to be different from the holder of the debt." Any "severance of the mortgage from the note-even through securitization-had no bearing" on the bank's right to foreclose. The plaintiffs' negligence claim alleging that defendant-Freddie Mac failed to comply with HAMP procedures failed because they could not show that it "breached a duty owed to them. Plaintiffs have not cited any Michigan case holding that HAMP imposes a legal duty on a lender sufficient to support a claim for common-law negligence." Their due process claim failed because even if Freddie Mac is a government actor, "its compliance with Michigan's foreclosure-by-advertisement procedures satisfied the requirements of the Due Process Clause." Affirmed.

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