Update: As of April 23, 2020, under an agreement with Governor Gretchen Witmer and the Department of Insurance and Financial Services, many credit unions and banks have agreed to provide homeowners in Michigan with a 60-day foreclosure moratorium and 90-day mortgage-payment relief during the coronavirus (COVID-19) outbreak.
Homeowners in Michigan usually get some time to breathe before facing a foreclosure after falling behind on mortgage payments. Under federal law, a servicer generally has to hold off on starting a foreclosure for 120 days. This period ensures that the borrower has sufficient opportunity to reinstate the loan (bring it current) or work out a foreclosure alternative, like a mortgage modification.
Although federal law typically provides homeowners a 120-day preforeclosure waiting period, all the foreclosing bank must do after it passes is:
Once completed, the bank is free to sell the home at auction. If the home sells for less than you owe, the bank can pursue you for the difference, called a deficiency. But after the sale, foreclosed homeowners get the right to buy the home back during the redemption period (and live in the property during this time) by paying the purchase price, plus certain costs and interest, to the new owner.
Under federal law, in most cases, a loan servicer can't officially start a foreclosure until the borrower is over 120 days' delinquent. (12 C.F.R. § 1024.41). This 120-day period is a good time to submit an application to your servicer asking for an alternative to foreclosure. You might be able to keep your home by entering into a repayment plan or getting a loan modification, for example. Or you might be able to give up the home without going through a foreclosure in a short sale or deed in lieu of foreclosure.
Federal mortgage servicing laws also impose other requirements on servicers. For example, the servicer has to try to contact you to discuss loss mitigation (foreclosure avoidance) options no later than 36 days after you miss a payment and again within 36 days after each missed payment—even if the servicer previously contacted you.
If you haven’t worked out a solution after the preforeclosure period ends, the bank can foreclose by suing you in court (a judicial foreclosure) or by following a series of legal steps outside of the court system (a nonjudicial foreclosure). Most banks opt to use the nonjudicial process because it’s quicker and costs less than litigating a lawsuit. So, this article focuses on that process.
To officially begin the foreclosure, the foreclosing bank publishes a notice of sale in a newspaper for four successive weeks at least once per week. Within 15 days after the first publication, a copy of the notice must be posted in a conspicuous place on the property. (Mich. Comp. Laws § 600.3208).
Michigan law doesn't require the bank to mail notice of the foreclosure to the borrower. But most mortgages in Michigan require the bank to send a 30-day notice of default to the borrower before starting foreclosure proceedings.
"Reinstating" is when the borrower pays the missed payments, plus fees and costs, to stop a foreclosure. While there is no statutory right to reinstate before the sale in Michigan, most mortgages give the borrower the right to reinstate the loan. Check your loan documents for details. Or the foreclosing party might allow a reinstatement.
In some states, including Michigan, the foreclosed homeowner may redeem the home after the foreclosure. In Michigan, the redemption period is:
Under Michigan law, foreclosed homeowners get the right to live in the property during the redemption period.
Generally, the new owner must wait until the redemption period expires to begin eviction proceedings. But the former owners must allow the new owner to inspect both the interior and exterior of the home during this time. The new owner of the home may begin eviction proceedings before the redemption period expires if:
When the borrower's total mortgage debt exceeds the foreclosure sale price, the difference is called a "deficiency." Some states allow the foreclosing bank to seek a personal judgment (called a "deficiency judgment") against the borrower for this amount, while other states prohibit deficiency judgments with what are called anti-deficiency laws.
Michigan doesn't have an anti-deficiency law. The foreclosing party may obtain a deficiency judgment following a nonjudicial foreclosure by filing a lawsuit. The borrower can contest the amount of the deficiency if:
If you have questions about the foreclosure process in Michigan or want to learn about potential defenses to a foreclosure, consider talking to a lawyer. It’s also a good idea to make an appointment to speak to a HUD-approved housing counselor, especially if you want to learn about different loss mitigation options.