Merger Applies to Mortgagee Who Acquires Property from Condominium

In another case involving mortgagees, condominiums, and unpaid assessments, the Michigan Court of Appeals held that FNMA could not argue that its mortgage was not merged with its acquisition of fee title to the property.  In FNMA v Hsiung, the condominium association foreclosed its condominium lien.  After a dispute arose between FNMA and the condominium association regarding priority, FNMA redeemed from the condominium lien foreclosure and the association executed a quit claim deed to FNMA.

FNMA failed to pay subsequent assessments. The association recorded a new lien and again foreclosed it.  Trademark Properties purchased the property at the sale, late selling it to Hsiung.  FNMA then foreclosed its mortgage and filed suit seeking declaratory relief and quiet title.

The court held that none of the factors which would indicate that the mortgage was not intended to be merged with the quit claim deed were present, and the rights of third parties would be affected if the mortgage were not merged and extinguished.

Although the court kept open the possibility that, given the right circumstances, the mortgage would not have been merged, in this case merger had occurred and FNMA, by not redeeming from the second lien foreclosure, lost all title to the property.

© Steve Sowell 2018