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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.
- 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.
- 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
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