Foreclosure Help for Renters in Michigan
The foreclosure rate in Michigan was the sixth highest in the nation in 2009. In some instances, according to the "Detroit Free Press," tenants are affected as adversely as owners. Through no fault of their own, tenants often end up on an eviction notice, causing disruption and upset in their lives. If you are a tenant in a building being foreclosed upon, understanding the process and the laws protecting tenants, such that they are, is your best defense to foreclosure repercussions.
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The Foreclosure Process
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The foreclosure process, which is determined by state law, can be through a judicial process in court, or a non-judicial process, such as an administrative notice. In Michigan, the process is non-judicial. At some point after the borrower fails to make the monthly mortgage payments, the lender advertises the property for sale to recoup at least some of loan balance. Under Michigan law, neither the lender nor the owner are required to notify the tenant. The lender must, however, publish notice of the foreclosure sale in a local legal newspaper for four consecutive weeks and must post a notice on the property within 15 days of advertising the sale. The sale is an auction. If no bidders offer the minimum price set by the lender, the lender takes the title.
Redemption Means More Time
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The foreclosure process in Michigan requires a redemption period. This is a period of time during which the borrower can reclaim his property by repaying the loan balance, plus penalties and foreclosure costs. In Michigan, the redemption period is usually six months. In a circumstance in which the property is worth substantially less than the mortgage, it is unlikely the borrower will redeem the property; however, what is important to tenants is that owners cannot evict during the redemption process. Effectively, the redemption period in Michigan is a stay on an eviction.
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Protecting Tenants at Foreclosure
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The federal Protecting Tenants at Foreclosure Act of 2009 requires foreclosing lenders, or buyers at foreclosure auctions, to honor an existing residential lease and to provide tenants with at least 90 days notice before initiating an eviction action in court. Before this law went into effect, a lease signed after a mortgage was signed would have been wiped out in the foreclosure process. This aspect of the law favors tenants with unexpired fixed-term leases, because they cannot be evicted until the lease ends.
Cash for Keys
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Michigan is without any substantive prevention to foreclosure eviction. However, many foreclosing lenders have developed a program called "Cash for Keys," which trades a cash payment from the lender to the occupant in exchange for the occupant voluntarily moving out. If you receive an eviction notice, call the lender and ask about Cash for Keys. The lender will be motivated to avoid a full-fledged eviction case.
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References
- CNBC: States with the Highest Foreclosure Rates
- "Detroit Free Press"; Renters on the Edge as Landlords Walk Away; Greta Guest; March 2010
- Foreclosure University: Michigan Foreclosure Laws
- Michigan Tenant Counseling Program: How Mortgage Foreclosure Affects Tenants
- Federal Reserve: Protecting Tenants at Foreclosure
