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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 (180 days)
to redeem or pay the mortgage in
full.
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 or default, 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
MSHDA. 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
(usually the Legal News) 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
(usually on your door or fencepost).
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 conducts lawsuits. The
sale is to be conducted by the
person appointed for the purpose in
the mortgage, or by the 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
County 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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