Foreclosure Collection Process in Michigan
A Michigan foreclosure can occur either in the court or out of the court. Although both judicial and nonjudicial foreclosure are permitted, most are nonjudicial. Unlike some states, a foreclosure sale in Michigan is not necessarily the end of the foreclosure process. Lenders also have the right to collect even after the home is foreclosed.
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Nonjudicial Foreclosure
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If the mortgage contains a power-of-sale clause, the lender can sell the home without having to go through the court to foreclosure. Homeowners can review their mortgage documents to check for a power-of-sale clause granting an attorney the power to foreclose the home and sell in a public auction to satisfy the loan balance. A nonjudicial foreclosure that is not contested can take as little as 60 days. Homeowners can delay foreclosure by contesting or filing bankruptcy.
Judicial Foreclosure
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Mortgages that do not contain a power-of-sale clause must be foreclosed judicially. In a judicial foreclosure, the lender files a lawsuit against the homeowner to obtain permission from the court to foreclose. The foreclosure process begins when the lender files a complaint at the courthouse in the county where the property is located. Along with the foreclosure complaint, the lender files a lis pendens, which is a recorded document providing notice of the pending foreclosure to the public. Homeowners must respond to the complaint or the judge may automatically issue a final judgment of foreclosure. After receiving the homeowner's response, the court may schedule a hearing to allow both parties the opportunity to present their sides. The judge will determine whether or not the homeowner is in default. If the complaint is valid, the judge rules in favor of the lender and orders the sale.
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Foreclosure Sale
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Michigan foreclosure law requires the lender to publish a notice of sale date for four consecutive weeks in the county's local newspaper. Within 15 days of the first publication of the sale notice, a notice must be posted on the property itself. The notice states the property address, names of the mortgagor and mortgagee, balance remaining on the loan and a legal description of the property. Michigan law does not require the lender to send the homeowner a default notice in a nonjudicial foreclosure. Foreclosure sales must take place between 9 a.m. and 4 p.m. as part of a public auction.
Redemption Rights and Deficiency Judgements
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Michigan has a statutory redemption period. The redemption right allows homeowners the chance to purchase back their homes after a foreclosure sale occurs. The homeowner must pay the entire balance remaining on the mortgage loan, plus all fees and costs. If the property is abandoned, the period is only 30 days. If the balance remaining on the mortgage is more than 66 2/3 percent of the original loan, the redemption period is six months. If the mortgage debt is less than 66 2/3 percent of the original loan, the homeowner has one year to redeem the home. If the home is not redeemed, the lender can file a deficiency judgment against the homeowner for the difference between the sale price and debt owed. If you are facing foreclosure, consider a short sale or deed in lieu of foreclosure to avoid the risk of a judgment.
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