Michigan Foreclosure Laws

Learn about the foreclosure laws in Michigan. Research the foreclosure process in Michigan to understand how it works and the various stages of default. How long does foreclosure take in Michigan? What are the foreclosure consequences in Michigan? Is Michigan a judicial or non-judicial foreclosure law state? Find out the answers to these questions and many more with the foreclosure information and foreclosure laws in Michigan below.


Questions
How are mortgage liens treated in Michigan?
How are Michigan mortgages foreclosed?
What are the legal instruments that establish a Michigan mortgage?
How long does it take to foreclose a property in Michigan?
Is there a right of redemption in Michigan?
Are deficiency judgments permitted in Michigan?
What statutes govern Michigan foreclosures?

Answers

How are mortgage liens treated in Michigan?

Michigan is known as atitle theory state where the property title remains in trust until payment in full occurs for the underlying loan. The document that secures the title is usually called adeed of trust but in Michigan this is also referred to as a trust mortgage.

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How are Michigan mortgages foreclosed?

The primary method of foreclosure in Michigan involves what is known asnon-judicial foreclosure.  This type of foreclosure does not involve court action but requires notice commonly calledforeclosure by advertisement. When themortgage is initially signed it will usually contain a provision called apower of sale clause which upon default allows an attorney to foreclose on the property in order to satisfy the underlying defaulted loan which is sometimes referred to as abond. The attorney acts as a representative of the lender to effectuate the sale which typically occurs in the form of an auction. Auctions are conducted by the Sheriff. Because this is a non-judicial remedy there are very stringent notice requirements and the legal documents are required to contain thepower of sale language in order to use this type of foreclosure method.


Power of Sale Notice Requirements:

  1. Prior to initiating a foreclosure the lender must publish a notice of sale date for four (4) consecutive weeks in a newspaper of general circulation in the county in which the property is located. Within 15 days of the first publication of the notice a further notice must be posted at the property to be foreclosed. Although there is no default notice requirement under Michigan law the mortgage document will govern such notice provisions and if contained in the trust mortgage they must be adhered to.
  2. Notice of foreclosure as described above must contain certain information including the name of the mortgagor the name of the mortgagee the name of any party or assignee, the date of the mortgage and it's recordation, the delinquent amount, a legal description of the property, the length of any applicable redemption period and the place and date of foreclosure sale.
  3. Foreclosure sales must take place between 9AM and 4PM as part of a public auction. The trustee orsheriff will auction the property to the highest bidder including the lender. The foreclosure sale may be postponed by posting a notice of postponement at the same location the sale was originally going to occur at. Postponements more than one week must be re-published in accordance with the original sale notice procedure.

In Michigan, the lenders can also go to court in what is known as ajudicial foreclosure proceeding where the court must issue a final judgment of foreclosure. If the deed of trust does not contain thepower of sale language the lender must seek judicial foreclosure. The property is then sold as part of a publicly noticed sale. A complaint is filed in court along with what is known alis pendens. A lis pendens is a recorded document that provides public notice that the property is being foreclosed upon.

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What are the legal instruments that establish a Michigan mortgage?

The documents are known as the trust mortgage ordeed of trust,note/bond, and in a commercial transaction, asecurity agreement. Sometimes the mortgage document is combined with the security agreement.  Alternatively, amortgage is filed to evidence the underlying debt and terms of repayment, which is set forth in thenote.

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How long does it take to foreclose a property in Michigan?

Depending on the timing of the various required notices, it usually takes approximately 60 days to effectuate an uncontested non-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and adjournments of sales, or files forbankruptcy.

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Is there a right of redemption in Michigan?

Michigan has astatutory right of redemption, which would allow a party whose property has been foreclosed to reclaim that property by making payment in full of the sum of the unpaid loan plus costs. The redemption period varies but adeed issued as part of a foreclosure only effectuates a transfer after the expiration of the redemption period.


Power of Sale Notice Requirements:

  1. If the property is residential and does not exceed four (4) units and is not more than 3 acres, if the defaulted amount at the date of the notice of foreclosure is more than 2/3 of the original face amount of the debt secured by the mortgage, the redemption period is six (6) months.
  2. If the property is abandoned based on either a personal inspection conducted by the lender or a statutory mailed notice asserting abandonment which has not been responded to by borrower, the redemption period is shortened to thirty (30) days.
  3. In all other cases the redemption period is one (1) year. The redemption payoff includes the amount of the bid at the time of the foreclosure sale, interest at the note rate for the mortgage, and any taxes or hazard insurance paid with respect to the property after the foreclosure sale up until the date of redemption.
  4. Mortgagors who do not redeem but remain upon the foreclosed property after foreclosure sale can be evicted through a summary proceeding in district court which usually takes thirty (30) days
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Are deficiency judgments permitted in Michigan?

Yes. Foreclosure is the sole remedy against a property unless there is a separate legal document which obligates a borrower to a specific amount of money. This is usually in the form of anote andguaranty. Adeficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount which the underlying mortgage secures.  The borrower can claim that the foreclosure sale was not forfair market value of the property as adefense.

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What statutes govern Michigan foreclosures?

The laws that govern Michigan foreclosures are found in Chapter 451 of Michigan Compiled Laws.

http://www.legislature.mi.gov


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