In early 2021, President Joe Biden signed the American Rescue Plan Act into law. This law created a Homeowner Assistance Fund, a federal program, to give $10 billion to the states to help households that are behind on their mortgages and other housing expenses due to COVID-19.
Eligible homeowners in Michigan who’ve experienced a financial hardship because of COVID-19 can get a portion of the approximately $242 million allocated to the state—up to $25,000 per household—from the Michigan Homeowner Assistance Fund (MIHAF) program. This program uses federal money to help homeowners make mortgage payments and pay other home-related costs.
The MIHAF program offers funds to pay the following kinds of housing costs for eligible homeowners:
To qualify for relief from this program, you must have suffered a financial hardship (a material reduction in income or an increase in living expenses) after January 21, 2020, because of COVID-19. A financial hardship due to COVID-19 that began before January 21, 2020, but continued after that date qualifies. In addition, you have to meet some other guidelines:
Assistance from the MIHAF program is prioritized for households with incomes equal to or less than 100% of AMI and those identified as socially disadvantaged individuals, such as those that have been the victim of racial or ethnic prejudice or cultural bias.
Assistance is structured as a grant that you don’t have to repay. Only in cases of fraud or wrongful misrepresentation would an applicant have to repay the funds. Payments go directly to the loan servicer or other eligible third party, not to homeowners.
To apply for help from this program, go to the MIHAF website. You’ll have to provide some documentation with your application, like mortgage statements or statements for your other housing-related costs, proof of income (such as pay stubs and tax returns), and a government-issued ID (like a driver’s license). Click here to get a complete list of the documents you’ll need.
You can also watch videos about starting your application and how to complete it, as well as get the status of your application on the website.
If you get an unsolicited offer by phone, in the U.S. mail, through email, or by text message offering mortgage relief or foreclosure rescue services, be wary.
Scammers sometimes target homeowners who’ve been affected by COVID-19. The MIHAF program is free. If anyone asks you to pay a fee to get housing counseling or foreclosure prevention services from this program, it’s a scam.
If you have questions or need more information, call 844-756-4423, email MSHDA-HO-HAF-Program@michigan.gov, or review the MIHAF program FAQs or Term Sheet. If you need help with your application, contact a HUD-approved housing counselor who will assist you at no cost.
To find a counselor near you, go to HUD's website or view this list from the Michigan State Housing Development Authority.
]]>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.
In a Michigan foreclosure, you’ll most likely get the right to:
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.
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.
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.
If you default on your mortgage payments in Michigan, the lender may foreclose using a judicial or nonjudicial method.
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.
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.
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.
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:
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).
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.
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.)
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.
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:
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)).
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.
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).
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.
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
A foreclosure could result in serious consequences, like lower credit scores, a deficiency judgment (as discussed above), or tax consequences.
For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.
Get tips on what to do—and what not to do—if you're facing a foreclosure.
Learn about last-minute strategies to stop foreclosure.
Find out if foreclosures are on the rise.
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.
]]>My house in Michigan was sold at a foreclosure sale last week. But I still live in the home and am wondering if I am supposed to vacate it now.
Also, if possible, I’d really like to keep the property. Is there some way for me to get the house back even though the foreclosure sale has already happened?
You don't have to leave the home yet and it is possible for you to get it back. Under Michigan law, foreclosed homeowners get a certain amount of time to repurchase or “redeem” the home after a foreclosure sale. Depending on your situation, you’ll get a one-month, six-month, or one-year redemption period during which you can live in the home. This is explained in more detail below.
To redeem, you would have to find another source of financing and reimburse the purchaser—the person or entity who bought the home at the foreclosure sale—for the full price paid at the sale, plus various other costs.
The majority of residential foreclosures in Michigan are nonjudicial, which means the foreclosure takes place without court supervision. Following the foreclosure sale, the redemption period for the home is:
If you abandon (leave) 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).)
In order to redeem, you must reimburse the purchaser for the full amount paid at the sale, plus interest and various costs that the purchaser paid after the sale, such as:
To find out how long the redemption period is in your particular case, check the notice of sale. (Mich. Comp. Laws § 600.3212.) (This is the notice that was published in the newspaper and posted on your property as part of the foreclosure process. To learn more about foreclosure laws and procedures in Michigan, visit Nolo’s Michigan Foreclosure Law Center.)
If you don’t redeem the home within the allocated redemption period, you won’t have another opportunity to get your house back this way. (Learn more general information about the right of redemption.)
You can live in the property during the redemption period. However, under Michigan law, you must allow the purchaser who bought the house at the foreclosure sale to inspect both the interior and exterior of the home during this time. (Mich. Comp. Laws § 600.3238.)
The purchaser of the home may begin eviction proceedings if you:
The purchaser from the foreclosure sale must give you an initial notice with certain information, such as the purchaser's identity, and a notice 72 hours before inspecting the interior of the home. The law also limits the number of interior reviews that the purchaser can do. If you get such notice and plan to vacate the property before the redemption period expires, you must tell the purchaser when you are moving out.
If you decide you don’t want to keep the home, you can try to sell it during the redemption period. If you sell it for more than the redemption price owed, you keep the difference.
To find the statutes that discuss your right to redeem the home in Michigan, go to Chapter 600, Act 236 of 1961 (236-1961-32) of the Michigan Compiled Laws.
]]>But, under specific circumstances, you can challenge the deficiency.
When the foreclosure sale price doesn't cover the borrower's mortgage debt balance, the difference between the total debt and the sale price is called a "deficiency."
If you default on your mortgage loan, the lender can go through a legal process called "foreclosure" to sell your home to repay the outstanding debt. After the lender fulfills all the legal requirements for foreclosure, the final step in a judicial or nonjudicial foreclosure is the foreclosure sale, where the home is sold to a new owner at a public auction.
The foreclosing lender submits the first bid at the sale, a "credit bid." With a credit bid, the lender gets a credit in the amount of the borrower's debt. Most of the time, the lender makes the highest bid at the sale and becomes the new owner of the property because no one else bids. The lender can bid up to the total amount of the debt, including foreclosure fees and costs, or it might bid less. Lenders regularly bid less than the total amount of a borrower's mortgage debt at foreclosure sales.
Again, the difference between the total debt and a lesser bid is the deficiency. For example, if your total mortgage debt is $500,000, but the home sells to the lender at a foreclosure sale for a credit bid of $450,000, the deficiency is $50,000.
Most foreclosures in Michigan are nonjudicial, which means the bank does not have to go through court. Judicial foreclosures are allowed, too. In a judicial foreclosure, the bank forecloses through the state court system.
In Michigan, the foreclosing bank may get a deficiency judgment following a nonjudicial foreclosure by filing a lawsuit.
At the foreclosure sale, an auction, the foreclosing bank will usually make a "credit bid." With a credit bid, the bank bids the debt that the borrower owes. Basically, the bank gets a credit for this amount. The bank can bid the full amount of the debt, including foreclosure fees and costs, or it might bid less. If the bank is the highest bidder at the sale, it becomes the property's new owner.
The borrower can contest the deficiency if the bank was the purchaser at the foreclosure sale and
If you can prove to the court that one of these circumstances applies, you can reduce or eliminate your liability for the deficiency.
If the bank chooses to pursue a judicial foreclosure, it may obtain a deficiency judgment as part of the judicial foreclosure process. (Mich. Comp. Laws § 600.3150). As part of the foreclosure, that court may fix a minimum sale price that a buyer must bid for the property. (Mich. Comp. Laws § 600.3155).
A "short sale" is when you sell your home for less than the total debt you owe, and the sale proceeds pay off a portion of the balance. A "deed in lieu of foreclosure" (deed in lieu) is when a bank agrees to accept a deed to the property instead of foreclosing. (With a deed in lieu, the deficiency amount is the difference between the total debt and the property's fair market value.)
The bank may get a deficiency judgment in Michigan after a short sale or deed in lieu. The agreement must expressly state that the bank waives its right to the deficiency to avoid a deficiency judgment with either of these transactions. The bank may sue for a deficiency judgment if the contract doesn't contain this waiver. However, you might have tax consequences if the bank forgives the deficiency.
If you’re facing a foreclosure in Michigan and want to learn more about the process, including whether you have any defenses to the action, consider consulting with a foreclosure attorney. A foreclosure attorney can also explain various options that might be available to prevent a foreclosure.
Talking to a HUD-approved housing counselor about different loss mitigation options is also good. You can use the Consumer Financial Protection Bureau's Find a Counselor tool to get a list of HUD-approved housing counseling agencies in your area.
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