If you default on your mortgage payments in Michigan, the servicer (on behalf of the loan owner, called the "lender" in this article) will eventually begin the foreclosure process. The method will most likely be nonjudicial (out of court), although judicial foreclosures are also allowed. Michigan law specifies how nonjudicial procedures work, and both federal and state laws give you rights and protections throughout the foreclosure.
If you get a loan to buy residential real estate in Michigan, you'll likely sign two documents: a promissory note and a mortgage. The promissory note is the document that contains your promise to repay the loan along with the repayment terms. The mortgage is the document that gives the lender a security interest in the property and will probably include a power of sale clause. If you fail to make the payments, the power of sale provision gives the lender the right to sell the home nonjudicially so it can recoup the money it loaned you.
If you miss a payment, the servicer can charge a late fee after the grace period expires. Most mortgage loans give a grace period of ten to fifteen days, for example, before you'll incur late charges. To find out the grace period in your situation and the amount of the monthly late fee, review the promissory note or your monthly billing statement.
If you miss a few mortgage payments, the servicer will probably send letters and call you to try to collect. Federal mortgage servicing laws require the servicer to contact you (or attempt to contact you) by phone to discuss foreclosure alternatives—called "loss mitigation" options—no later than 36 days after a missed payment and again within 36 days after each following missed payment. No more than 45 days after a missed payment, the servicer must let you know in writing about loss mitigation options that could be available, and assign personnel to help you. Some exceptions to a few of these requirements exist, like if you file bankruptcy or tell the servicer not to contact you under the Fair Debt Collection Practices Act. (12 C.F.R. § 1024.39).
Many mortgages in Michigan have a provision that requires the lender to send a breach letter if you fall behind in payments. This notice tells you that the loan is in default. If you don't cure the default, the lender can accelerate the loan (call it due) and go ahead with the foreclosure.
Federal law generally requires the servicer to wait until the loan is over 120 days delinquent before officially starting a foreclosure. But in a few situations, like if you violate a due-on-sale clause or if the servicer is joining the foreclosure action of a superior or subordinate lienholder, the foreclosure can begin sooner. (12 C.F.R. § 1024.41).
Again, most Michigan foreclosures are nonjudicial.
To officially begin the foreclosure, the lender 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).
However, Michigan law doesn't require the lender to mail notice of the foreclosure to you.
The sale is an auction, which is open to the public.
Sometimes, when a home sells at a foreclosure sale, the sale doesn't bring in enough money to pay off the full amount owed on the loan. The difference between the sale price and the total debt is called a "deficiency balance." Many states, including Michigan, allow the lender to get a personal judgment, which is called a "deficiency judgment," for this amount against the borrower.
Under Michigan law, the foreclosing party can get a deficiency judgment following a nonjudicial foreclosure by filing a lawsuit. The borrower can contest the amount of the deficiency if the mortgage holder was the purchaser at the foreclosure sale, and:
Some states have a law that gives a foreclosed homeowner time after the foreclosure sale to redeem the property. In Michigan, the redemption period is:
Under Michigan law, foreclosed homeowners get the right to live in the property during the redemption period. But the former owner must allow the new owner to inspect the interior and exterior of the home during this time.
Generally, the new owner must wait until the redemption period expires to begin eviction proceedings. But the new owner of the property may begin eviction proceedings earlier if:
Foreclosure laws are complicated. Servicers and lenders sometimes make errors or forget steps. If you think your servicer or lender failed to complete a required step, made a mistake, or violated state or federal foreclosure laws, you might have a defense that could force a restart to the foreclosure or you might have leverage to work out an alternative.
Consider talking to a local foreclosure attorney or legal aid office immediately to learn about your rights. A lawyer can also tell you about different ways to avoid foreclosure. Likewise, a HUD-approved housing counselor can provide helpful information (at no cost) about various alternatives to foreclosure.