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Transfer of the underlying note necessarily includes the transfer of a beneficial interest in the mortgage

Holding that the defendant did not show that she had a meritorious defense as required under MCR 2.603(D)(1), the court affirmed the trial court's denial of her motion to set aside the default entered against her in this foreclosure action. The plaintiff-bank is the trustee of a mortgage pass-through trust. As trustee, it held a promissory note that defendant executed in 2005. The note she executed "was negotiable and endorsed in blank; it was apparently transferred to the entity that established the trust." She also granted a mortgage to secure repayment on the note to MERS. Defendant defaulted and in 2011, MERS assigned the mortgage to plaintiff. After the assignment was recorded, plaintiff sued to foreclose. On appeal, defendant argued that she had a meritorious defense to the foreclosure - that there was a question of fact as to whether plaintiff had the right to foreclose the mortgage on the trust's behalf because there was evidence that the trust did not acquire the mortgage until after the cut-off date provided in the trust. She relied on an affidavit in which "the affiant averred that the loan number did not appear in a list of loans assigned to the trust" and on the transfer of the mortgage from MERS to plaintiff. "However, the cut-off date in the trust applied to notes and did not prohibit the trust from making or receiving transfers of the mortgages that secured the underlying notes after the cut-off date - that is, nothing in the trust prevented MERS from transferring legal title to the mortgage securing the note at issue back to its beneficial owner." Thus, "the assignment was not on its face invalid and was not evidence that the trust did not own the note." Further, the affidavit did not allow "an inference that the trust did not acquire the note until after the cut-off date. The affiant did not aver that he had a complete list of all the notes included in the trust" before that date or that "the number assigned to the note at issue corresponded to the numbering scheme used in the list submitted with the affidavit." Thus, the affidavit was not evidence that the trust did not hold title to the note. Plaintiff "alleged and presented evidence that it held the actual note on the trust's behalf, which had been endorsed in blank." Similarly, defendant "could not defend against her obligation under the note by arguing that its transfer was invalid."

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