Michigan Foreclosure Laws
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Michigan works as title theory state in which a property’s title stays as security on loan in question until it is paid off in full. The security is placed on the title through a document referred to as a deed of trust or a trust mortgage.
Massachusetts mainly follows the non-judicial foreclosure process to foreclose on properties. No court-action is needed in this process but a foreclosure by advertisement notice is needed. At the initial signing of the mortgage, a power of sale clause is generally added in the document, through which a property can be foreclosed upon by an attorney if the borrower defaults on the loan, thereby allowing the lender to take care of the unpaid loan; this, at times, is called a bond.
Auctions, which a sheriff conducts, are the most common way for the properties to be sold and lenders generally have attorneys acting as their representatives to bring about the sale. Being a non-judicial process, some very austere requirements for notices exist in Michigan and a power of sale clause has to be present in the legal loan document for this procedure to be pursued.
Before a foreclosure can be initialized, a notice with the date of the sale needs to appear in a general circulation newspaper within the county where the property is situated for a period of four successive weeks. Another notice has to be put up on the foreclosure property within fifteen days of the notice being first published. Despite there being no requirements for a notice of default in Michigan, if the trust mortgage contains such a provision, it has to be followed.
The foreclosure notice as mentioned above, has to have information which would include the mortgagor’s name, the mortgagee’s name, any other assignee’s name, the mortgage’s recordation and date, the delinquency amount, the property’s legal description, the duration of any valid redemption period and the date and place of the scheduled sale.
The foreclosure sale usually takes place in between 09:00 and 16:00 hrs at a public foreclosure auction. The auction is conducted by a sheriff or trustee and the property goes to the highest bid holder; this could be the lender too. The sale can be postponed if a notice announcing the postponement is put up at the place the auction was originally scheduled to take place.
If a postponement in excess of one week is sought, then the procedure for the notices involved in the original sale needs to be followed again.
A judicial foreclosure route through a court, where the foreclosure’s final verdict is announced by the court, can also be opted for by lenders in Michigan. In the non-existence of a power of sale clause in the deed of trust, the lender has the option to seek judicial foreclosure. A lis pendens, which is a document that is used to make known publicly the foreclosure on the property, with a complaint, needs to be filed in the court.
The legal documents used are called the trust mortgage or deed of trust or note/bond; or a security agreement the cases of commercial transactions. On occasion, the security agreement is merged with the mortgage document. A mortgage can also be filed to validate the debt in question and the repayment terms, which are incorporated in the note
It normally takes around 60 days to bring into effect a foreclosure that is not contested; this depends on the time the various notices would require. If the process is contested by the borrower, and if a delay or an adjournment of the sale is sought; or if bankruptcy is filed for, the process can be stalled.
A statutory right for redemption exists in Michigan where, if a borrower can take care of the loan amount that needs to be paid and the costs, the property can be reclaimed. This period of redemption is varied; however, the deed that is issued is effectually transferred only at the end of the period of redemption.
The period of redemption is six months when the property in question is residential, does not have more than four units and is in less than three acres; and if on the date when the foreclosure noticed was issued, the amount on default exceeded two thirds of the original amount on the loan.
If a lender personally conducts an inspection and finds that the property has been abandoned, or if a statutory notice that has been mailed to assert whether the property has been abandoned hasn’t been replied to, the period of redemption is cut-short to thirty days.
The period of redemption is otherwise one year. The amount that would need to be paid to redeem the property would include the bid amount at the sale, the note rate’s interest on the mortgage, and any insurance or tax paid on the property after it was sold and up to the point of redemption.
In cases where borrowers do not file for redemption or are unable to redeem, but continue to live at the property that has been through the foreclosure sale, summary proceedings through district courts can be used to evict them, and this process generally takes about thirty days.
Unless there exists legal paperwork that has the borrower obligated to pay a fixed sum of money, foreclosure is the only method used by lenders to redeem on the property. This generally happens through a guaranty and note. If the property sells for lesser than the amount on the loan secured by the mortgage in question, the lender can obtain a deficiency judgment. In defense, a claim can be made by the borrower that the sale of the foreclosure wasn’t for the same amount as the property’s fair market value.
Foreclosures in Michigan are governed by laws that are part of Michigan Compiled Laws - Chapter 451.
