 Michigan Loan Modification Guidelines
When you develop a definite plan of action with well-timed, well-informed
steps, you can stop the foreclosure process and save your home. We have
outlined the foreclosure process for the state of Michigan.
The Process
Michigan uses two forms of foreclosure: foreclosure by court action and
foreclosure by advertisement. A mortgage may be foreclosed by filing a
lawsuit in the Michigan circuit court. The court may order the property
sold six months after the initial filing of the lawsuit. The property will
be sold by the circuit court commissioner or any other person who is appointed
by the court to conduct the sale. After the sale, the borrower has six
months to redeem.
Foreclosure by Advertisement
If the mortgage contains a power of sale clause and there has been a breach
of the terms of the mortgage, such as nonpayment of the loan, then the
property may be foreclosed on through a non-judicial foreclosure by advertisement,
unless the mortgage is held by the Michigan state housing development authority.
Nonpayment of any installment of a mortgage constitutes a separate act
which justifies foreclosure.
The notice of a foreclosure sale must be published once a week for four
weeks in a newspaper of general circulation in the county where the land
is situated. Within 15 days after the first publication, a true copy of
the foreclosure notice must be posted in a conspicuous place on the premises
described in the foreclosure notice. The lender or the lender's agents
have a right to enter the mortgaged premises to post or deliver foreclosure
notices.
The sale must be a public sale, conducted between the hours of 9 o'clock "in
the forenoon" and 4 o'clock in the afternoon. The sale must be at
the courthouse or place where the circuit court for the county tries lawsuits.
The sale is to be conducted by the person appointed for the purpose in
the mortgage, or by the sheriff, under sheriff or deputy sheriff. The sale
must be made by auction to the highest bidder. The sale may be adjourned
from time to time by posting a notice of such adjournment at the time and
place where the sale would otherwise have been made. Any adjournment for
more than a week must also be published in the same newspaper as the original
notice, within 10 days from the date the sale was adjourned, and again
once per week for each week the sale is adjourned.
The officer or person conducting the sale will execute, acknowledge and
deliver a deed to the premises to the high bidder at the foreclosure sale.
The deed must specify the last date by which the borrower can redeem the
property. The deed must be recorded within 20 days after the sale. The
register who records the deed shall endorse the time the deed was received.
If the property is ever redeemed, the register will destroy the deed and
record the word redeemed on the face of the special book for foreclosure
deeds. The deed and the foreclosure do not wipe out liens or claims that
existed prior to the date of the original mortgage.
Redemption
The borrower may redeem by paying the lender the sum for which the property
was sold at foreclosure, plus interest at the same rate as the mortgage.
If the foreclosure buyer recorded an affidavit staling how much in taxes
and insurance the foreclosure buyer paid, following the foreclosure sale,
then the borrower must repay that amount as part of the redemption process.
If a property is over four units or three acres and has not been abandoned,
then the time period for redemption is one year from the date of the foreclosure
sale. If the property has been abandoned, and if the balance is over two-thirds
of the original loan, then the redemption period is one month. If the balance
is two-thirds or less of the original loan, use one year. If the property
is four units or less and does not exceed three acres in size, then two
different redemption time periods apply.
1. If the mortgage was originated after 1965, and if the amount
that remains unpaid on the loan is more than two-thirds of the original
debt, then the borrower still has six months to redeem.
2. If the unpaid balance on a mortgage is less than two-thirds of the
original debt, then the borrower has only three months to redeem if the
property has been abandoned.
Abandonment
For residential property of four units or less, or three acres or less,
abandonment shall be presumed in the following circumstances:
Personal Inspection
The lender has made a personal inspection of the premises and the inspection
does not reveal anyone who is presently occupying or about to occupy the
premises.
Borrower Fails to Respond to Proper Notice
The lender has posted a notice at the time the personal inspection was
made, and mailed it by certified mail, return receipt requested, to the
borrower's last known address. The notice must state that the lender considers
the premises to be abandoned, and that the redemption period in such event
will be only 30 days. If the borrower does not respond to these notices
within 15 days by mailing to the lender (first class mail) a letter staling
the premises are not abandoned, then the premises are considered to be
abandoned. Obviously, a borrower who wants to preserve his or her rights
should get busy and write the lender to show the premises are not abandoned
or else the borrower will lose most of the benefits of the right of redemption.
Deficiency
A lender is restricted to foreclosing against the property as the sole
remedy, unless the lender has a separate document that obligates the borrower
to pay a sum certain, such as a promissory note, or the borrower has otherwise
agreed to pay a sum in a specific amount stated in the mortgage document.
In order to recover a deficiency amount, which would be the balance due
on the mortgage minus the sum collected at the foreclosure sale (or credited
if the lender bids by canceling out some of the borrower's obligation),
the lender must file a lawsuit. The borrower can defend by showing the
foreclosure sale price was less than the true value of the property at
the time and place of the sale. If the sale was for substantially less
than the true value, the deficiency sum the lender can recover may be either
defeated or reduced by crediting the property's fair value against the
unpaid loan balance at the time of the foreclosure. However, these defenses
do not apply if the lender forecloses by court action rather than by foreclosure
by advertisement.
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