If you're a homeowner in Michigan facing the scary prospect of losing your home to foreclosure, don’t be caught off guard. Read on to find out each step in a Michigan foreclosure from missing your first payment all the way to eviction. (For more articles on foreclosure in Michigan, including the state program to assist struggling homeowners, visit our Michigan Foreclosure Law Center.)
When you take out a loan to purchase residential property in Michigan, you typically sign a promissory note and a mortgage. A promissory note is basically an IOU that contains the promise to repay the loan, as well as the terms for repayment. The mortgage provides security for the loan that is evidenced by a promissory note. (Find out more in our article What’s the Difference Between a Mortgage and a Promissory Note?)
If you miss a payment, most loans include a grace period of ten or fifteen days after which time the mortgage servicer will assess a late fee. (Mortgage servicers collect and process payments from homeowners, as well as handle loss mitigation applications and foreclosures for defaulted loans. Learn more about how mortgage servicing works.)
The late fee is generally 5% of the overdue payment of principal and interest. To find out the late charge amount and grace period for your loan, look at the promissory note that you signed. This information can also be found on your monthly mortgage statement. (Learn more about fees that the lender can charge if you’re late on mortgage payments.)
If you miss a few mortgage payments, your mortgage servicer will probably send a letter or two reminding you to get caught up, as well as call you to try to collect the payments. Don’t ignore the phone calls and letters. This is a good opportunity to discuss loss mitigation options and attempt to work out an agreement—like a loan modification, forbearance agreement, and payment plan—so you can avoid foreclosure.
Michigan mortgages often contain a clause that requires the lender to send a notice, commonly called a breach letter or demand letter, informing you that your loan is in default before it can accelerate the loan. (The acceleration clause in the mortgage permits the lender to demand that the entire balance of the loan be repaid if the borrower defaults on the loan.)
The letter must specify:
The breach letter will also often contain a Servicemembers Civil Relief Act Notice. (To learn about the protections available for servicemembers facing foreclosure, see Legal Protections for America's Military: The Servicemembers' Civil Relief Act.)
Under federal mortgage servicing rules that went into effect January 10, 2014, the mortgage servicer must generally wait until you are more than 120 days delinquent on payments before making the first official notice or filing for any judicial or nonjudicial foreclosure. This is to give you sufficient time to explore loss mitigation opportunities. (Learn more about when a foreclosure can begin.)
In Michigan, most residential foreclosures are by advertisement—that is, nonjudicial. This means the lender can foreclose without going to court so long as the mortgage contains a power of sale clause. (Learn more about power of sale clauses.)
But before the foreclosure can begin, you are entitled to certain notice depending on whether the property is your principal residence and the terms of your mortgage contract.
In Michigan, notice of the sale must be published and posted.
To begin the foreclosure, the lender’s attorney will publish notice of the sale once a week for four successive weeks in a newspaper published in the county in which the property is located. If there is no newspaper published in the county, the notice must be published in an adjacent county.
The notice must include, among other things:
Within 15 days after the first publication of the notice, a copy of the notice must be posted in a conspicuous place on the property.
If the foreclosing party is not the original lender, a record chain of title evidencing all assignments, up to the party foreclosing the mortgage, must exist prior to the foreclosure sale date.
There is no statutory right to reinstate the loan prior to the sale in Michigan. But most mortgage forms, like the conventional FNMA/FHLMC mortgage forms, provide the borrower the right to cure the default after acceleration and reinstate the loan, usually at any time prior to five days before the foreclosure sale.
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.
The property will be:
When a lender forecloses on a mortgage, the total debt owed by the borrower to the lender frequently exceeds the foreclosure sale price. The difference between the sale price and the total debt is called a “deficiency.” 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 from the borrower.
In Michigan, the lender may obtain a deficiency judgment following a nonjudicial foreclosure, but the borrower can contest the amount of the deficiency if:
(Find out more about Deficiency Judgments After Foreclosure in Michigan.)
A redemption period is the legal right of a mortgage borrower to pay off the total debt, including the principal balance, plus certain additional costs and interest (or reimburse the purchaser for the price paid at the foreclosure sale) in order to reclaim the property after the foreclosure sale.
For most residential foreclosures in Michigan, the redemption period is six months if:
If the amount owed is less (or is agricultural), the redemption period is one year. If the property is abandoned, the redemption period is 30 days after the sale or until the required fifteen-day notice that the lender considers the premises abandoned expires, whichever is later.
In Michigan, the foreclosed homeowner generally gets the right to live in the home during the redemption period. However, Michigan law allows the purchaser who bought the property at the foreclosure sale to inspect the interior and exterior of the home during this time. If an inspection is refused or certain damage is found or is imminent, the purchaser can start proceedings to evict the former homeowner and take over the property.
The purchaser must give an initial notice and a second notice 72 hours before inspecting the interior of the home. It also limits the number of interior reviews that the purchaser may conduct. The law also requires that the foreclosed homeowners tell the purchaser when they are moving out, if the purchaser has provided such notice, and they plan to vacate the property before the redemption period expires. Otherwise, the foreclosed homeowners are at risk of liability for damage to the property after the move-out date.
If you don’t vacate the property following the redemption period expiration, the new owner might:
If you need help understanding the law or have specific questions about your particular circumstances, consider contacting a local foreclosure attorney. If you can’t afford an attorney, consider talking to a HUD-approved housing counselor. To find a counselor, call the HOPE Hotline at 888-995-HOPE.