The Michigan Court of Appeals recently upheld a statute which holds that a mortgage can be foreclosed upon even if the mortgagee is not in possession of the original note.

On June 19, the Court issued an opinion in Clyde Sallie v. Fifth Third Bank and Foreclosure Management Company, allowing the Bank to foreclose a mortgage by advertisement even though the bank couldn't locate the underlying note at the time it started the foreclosure. At issue was a mortgage made in August 2000 between the plaintiff and Old Kent Bank, which merged with defendant Fifth Third Bank in 2001.

Although the bank was not in possession of the original note, the bank was able to show the mortgagor's payment history, default, and the amount outstanding on the debt, and the mortgagor even admitted that he stopped making payments on the debt.

The court pointed out that the bank had complied with the Michigan statutory requirements for foreclosing a mortgage by advertisement, and that Michigan law does not require a mortgagee to produce the underlying note in order to foreclose a mortgage by advertisement.

The court's decision may have been different if the mortgagor had raised questions about the terms or execution of the mortgage, but the plaintiff focused only on the bank's inability to produce the mortgage. The court may also have reached a different result if the bank was trying to enforce the note, instead of foreclosing the mortgage.