Michigan Foreclosure Laws and Procedures

Learn about the steps in a Michigan foreclosure.

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.)

Michigan Mortgage Loans

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?)

What Happens When You Miss a Payment

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.)

What Happens When You Fall Behind in a Few 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.

Mortgage Contracts Often Require a Breach Letter

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 default
  • the action required to cure the default
  • a date (usually not less than 30 days from the date the notice is given to the borrower) by which the default must be cured, and
  • that failure to cure the default on or before the date specified in the notice may result in acceleration of the debt and sale of the property.

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.)

Pre-Foreclosure Loss Mitigation Review Period

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.)

Michigan Foreclosures

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.

Foreclosure Publishing and Posting Requirements

In Michigan, notice of the sale must be published and posted.

Publication of the Notice of Sale

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.

Posting of the Notice of Sale

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.

Assignments

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.

Reinstatement Before Sale

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.

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:

  • sold to the highest third-party bidder or
  • revert to the foreclosing lender and become REO.

Deficiency Judgment Following Sale

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:

  • the lender was the purchaser at the foreclosure sale, and
  • the foreclosure sale price was substantially less than the fair market value of the property.
(Find out more about Deficiency Judgments After Foreclosure in Michigan.)

Redemption Period

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:

  • the property does not exceed four units, and
  • more than two-thirds of the original indebtedness is still owed.

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.

Inspections During the Redemption Period

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.

Eviction Following Foreclosure

If you don’t vacate the property following the redemption period expiration, the new owner might:

  • offer you a cash-for-keys deal (where the new owner offers you money in exchange for you agreeing to move out), or
  • go to court to get an eviction order.

Getting Help

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.

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