Michigan Foreclosure Laws and Procedures

What are the foreclosure laws in Michigan? Find out here.

By , Attorney · University of Denver Sturm College of Law

Before the foreclosure crisis, federal and state laws regulating mortgage servicers and foreclosure procedures were relatively limited and tended to favor foreclosing lenders. However, many federal and state laws now give protections to borrowers. Servicers generally must provide borrowers with loss mitigation opportunities, account for each foreclosure step, and carefully comply with foreclosure laws.

Also, most people who take out a loan to buy a residential property in Michigan sign a promissory note and mortgage. These documents give homeowners some contractual rights in addition to federal and state legal protections.

So, don't get caught off guard if you're a homeowner behind in mortgage payments. Learn about Michigan foreclosure laws and how the foreclosure process in Michigan works, from missing your first payment to a foreclosure sale.

What Are My Rights During Foreclosure in Michigan?

In a Michigan foreclosure, you'll most likely get the right to:

  • a preforeclosure breach letter
  • apply for loss mitigation
  • get current on the loan and stop the foreclosure sale
  • receive special protections if you're in the military
  • pay off the loan to prevent a sale
  • redeem the property after the sale
  • file for bankruptcy, and
  • get any excess money after a foreclosure sale.

Once you understand the Michigan foreclosure process and your rights, you can make the most of your situation and, hopefully, work out a way to save your home or at least get through the process with as little anxiety as possible.

What Is Preforeclosure?

The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the "preforeclosure" stage. (Sometimes, people refer to the period before a foreclosure sale happens as "preforeclosure," too.)

During the preforeclosure period, the servicer can charge you various fees. Also, in most cases, federal law requires the servicer to let you know how to avoid foreclosure, and most mortgage contracts require the servicer to send you a breach letter.

When Can Foreclosure Start?

Under federal law, the servicer usually can't officially begin a foreclosure until you're more than 120 days past due on payments, subject to a few exceptions. (12 C.F.R. § 1024.41). This 120-day period provides most homeowners with ample opportunity to submit a loss mitigation application to the servicer.

What Are the Different Types of Foreclosures in Michigan?

If you default on your mortgage payments in Michigan, the lender may foreclose using a judicial or nonjudicial method.

How Judicial Foreclosures Work

A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. If you don't respond with a written answer, the lender will automatically win the case.

But if you choose to defend the foreclosure lawsuit, the court will review the evidence and determine the winner. If the lender wins, the judge will enter a judgment and order your home sold at auction.

How Nonjudicial Foreclosures Work

If the lender chooses a nonjudicial foreclosure, it must complete the out-of-court procedures described in the state statutes. After completing the required steps, the lender can sell the home at a foreclosure sale.

Most lenders opt to use the nonjudicial process because it's quicker and cheaper than litigating the matter in court.

What Are the Steps Involved in the Nonjudicial Foreclosure Process in Michigan?

Again, most residential foreclosures in Michigan are nonjudicial. But Michigan law doesn't require the lender to notify the homeowner personally as part of the process. Instead, notice of the foreclosure sale must be published and posted.

Publication of the Notice of Sale

To begin the foreclosure, the lender's attorney publishes a notice of sale once a week for four successive weeks in a newspaper published in the county in which the property is located. If no newspaper is published in the county, the notice must be published in an adjacent county. (Mich. Comp. Laws § 600.3208).

The notice must include, among other things:

  • the names of the borrowers
  • the date of the mortgage and when it was recorded
  • the amount due
  • a description of the property in foreclosure
  • the property address
  • the length of the redemption period (see below)
  • a statement that if the home is sold at a foreclosure sale, the borrower is responsible for any damage to the property that happens during the redemption period
  • the name, address, and telephone number of the attorney for the party foreclosing the mortgage
  • information about the sale, and
  • a notice to military servicemembers. (Mich. Comp. Laws § 600.3212).

Posting of the Notice of Sale

Within 15 days after the first publication of the notice of sale, a copy must be posted in a conspicuous place on the property. (Mich. Comp. Laws § 600.3208).

How Do Foreclosure Sales Work in Michigan?

Foreclosure sales are held between 9:00 a.m. and 4:00 p.m. at the courthouse in the county where the property is located. (Mich. Comp. Laws § 600.3216). The sale is an auction, which is open to the public.

At the sale, the lender usually makes a credit bid. The lender can bid up to the total amount owed, including fees and costs, or it may bid less. In some states, including Michigan, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower, subject to some limitations (see below). If the lender is the highest bidder, the property becomes what's called "Real Estate Owned" (REO).

But if a bidder, say a third party, is the highest bidder and offers more than you owe, and the sale results in excess proceeds—that is, money over and above what's needed to pay off all the liens on your property—you're entitled to that surplus money.

What Are the Options Available for Borrowers During Foreclosure in Michigan?

A few potential ways to stop a foreclosure and keep your home include reinstating the loan, redeeming the property before or after the sale, or filing for bankruptcy. Working out a loss mitigation option, like a loan modification, will also stop a foreclosure.

Or you might be able to work out a short sale or deed in lieu of foreclosure and avoid foreclosure. (But you'll have to give up your home with a short sale or deed in lieu of foreclosure transaction.)

Reinstating the Loan

Michigan law doesn't provide a statutory right to reinstate the loan before the sale. But many mortgages, like the uniform Fannie Mae/Freddie Mac mortgage, provide the borrower the right to cure the default after acceleration and reinstate the loan. Check your loan documents to find out if you get a reinstatement right and, if so, the deadline to complete one.

What Is the Redemption Period for Foreclosure in Michigan?

One way to stop a foreclosure is by "redeeming" the property. To redeem, you have to pay off the full amount of the loan before the foreclosure sale.

Some states also provide foreclosed borrowers with a redemption period after the foreclosure sale, during which they can buy back the home. In Michigan, the length of the redemption period depends on how much of the loan the borrower has paid off when the foreclosure took place, as well as the occupancy status of the home.

You'll receive:

  • six months, if you owed more than 66 and 2/3rd% of the original loan amount, or
  • one year, if you owed less than 66 and 2/3rd% of the original loan amount. (Mich. Comp. Laws § 600.3240(8),(12)).

If you abandon the home, the redemption period is 30 days after the sale or until the required notice that the lender considers the premises abandoned expires, whichever is later. (Mich. Comp. Laws § 600.3240(10)).

Filing for Bankruptcy

If you're facing a foreclosure, filing for bankruptcy might help. In fact, if a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy. Once you file for bankruptcy, something called an "automatic stay" goes into effect. The stay functions as an injunction, which prohibits the lender from foreclosing on your home or otherwise trying to collect its debt, at least temporarily.

In many cases, filing for Chapter 7 bankruptcy can delay the foreclosure by a matter of months. Or, if you want to save your home, filing for Chapter 13 bankruptcy might be the answer. To find out about the options available to you, speak with a local bankruptcy attorney.

Foreclosure Protections and Military Servicemembers

The federal Servicemembers Civil Relief Act provides legal protections to military personnel in foreclosure.

Michigan law provides special protections against foreclosure to certain military servicemembers, including members of the Michigan National Guard. So long as either the mortgagor entered into the mortgage before becoming a servicemember or the mortgagor is deployed in overseas service, the lender can't foreclose nonjudicially during the servicemember's period of military service (or within six months thereafter) unless a court ordered the sale or foreclosure. (Mich. Comp. Laws § 600.3285).

Are Deficiency Judgments Allowed in Michigan?

In a foreclosure, the borrower's total mortgage debt frequently exceeds the foreclosure sale price. The difference between the total debt and the sale price is called a "deficiency." For example, say the total debt owed is $300,000, but the home sells for $250,000 at the foreclosure sale. The deficiency is $50,000.

In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount—in our example, $50,000—from the borrower.

Michigan law allows deficiency judgments.

Michigan Deficiency Judgment Laws

In Michigan, the lender may obtain a deficiency judgment following a nonjudicial foreclosure. But the borrower can contest the amount of the deficiency if the lender was the purchaser at the foreclosure sale, and

  • the property was fairly worth the amount of the debt at the time of the sale, or
  • the foreclosure sale price was substantially less than the fair market value of the property. (Mich. Comp. Laws § 600.3280).

What Are the Potential Consequences of Foreclosure?

A foreclosure could result in serious consequences, like lower credit scores, a deficiency judgment (as discussed above), or tax consequences.

More Foreclosure Information

For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.

Read More Articles

Get tips on what to do—and what not to do—if you're facing a foreclosure.

Find out if foreclosures are on the rise.

Getting Help

If you have questions about Michigan's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney. Talking to a HUD-approved housing counselor about different loss mitigation options is also a good idea.

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