Foreclosure in Michigan

How a Michigan foreclosure works, step by step

1. Generally, the legal foreclosure process can't start until you're at least 120 days behind.
2. The lender gives notice of the sale by publishing it at least once a week for 4 weeks in a row, in a newspaper published in the county where the home is. The notice must name the borrower and the lender, give the amount claimed to be due, and state how long your redemption period will be. It must also warn that, if the home is sold, you'll be held responsible for damaging it during the redemption period.
3. Within 15 days after the first publication, a copy of the notice must be posted where it can be easily seen on the property.
4. The sale is a public auction to the highest bidder, held between 9 a.m. and 4 p.m. at the place where the county's circuit court is held. It's run by the sheriff, the undersheriff or a deputy, or by the person the mortgage names for that job.
5. Within 20 days after the sale, the deed must be filed with the county register of deeds, and the sheriff's deed lists the last date you can redeem the home.
6. For a home with up to 4 units, the redemption period is 6 months, as long as more than 66-2/3% of the original loan was still claimed to be due when the notice was published. Six months is the most common period.
7. If the home isn't redeemed in time, the sheriff's deed takes effect. If you stay in the home after the redemption period ends, the buyer can go to court for possession, and you'll get a summons to appear in court. After a judgment for possession, the court order to remove you generally can't be issued for 10 days.

These steps don't apply to mortgages held by the Michigan State Housing Development Authority.

Catching up before the sheriff's sale

Between the first missed payment and the sale, you have a chance to reinstate the loan, meaning bring it current, by paying the amount claimed to be due.

Until the sheriff's sale happens, you can still send your servicer an application for help.

Michigan once had state rules for a foreclosure notice and a loan modification process, plus a list of housing counselors. Those sections were repealed, effective June 30, 2013.

If you want to work something out with your lender, my advice is to start early and bring in a housing counselor.

At the sheriff's sale

• Your lender can bid on the home at the sale, as long as it does so fairly and in good faith.
• The sale can be put off, at the lender's request, by posting a notice of the delay at the sale location. If a delay is longer than a week, the notice of it must also be published in the same newspaper.

How long it takes

Foreclosure generally can't legally start until you're at least 120 days behind. Once it starts, how long you have until the sale depends on your state.

For FHA loans, HUD's time frame runs from the first legal action until the lender has clear title to the home and possession of it. In Michigan, that's 9 months, and the first legal action is publishing the notice of sale.

Before the sale, the notice runs in the newspaper for 4 weeks in a row and is posted on the home within 15 days of the first run. After the sale, the redemption period for most homes is 6 months.

These are official markers, not a forecast. Your case can move faster or slower, so don't count on extra time.

After the sale: redemption, shortfalls and extra money

To redeem, you pay the winning bid, interest from the sale date at your mortgage's rate, the sheriff's fee, and a $5 fee if you pay through the register of deeds. During the redemption period, you can live in the home, sell it or buy it back, and you aren't required to make payments. You should keep up the home, the utilities and the insurance.

• If less than 2/3 of the original loan was owed at the date of foreclosure, the redemption period is 12 months.
• For property used for farming, it's 1 year from the sale.
• If you leave the home before the six months are up, the lender can shorten the period to 30 days.
• If the lender posts and mails a notice that it considers the home abandoned, you lose your rights 30 days after the sale or when your time to answer runs out, whichever is later, unless you answer. To answer, mail the lender a written notice by first-class mail within 15 days, saying the home isn't abandoned.

If you unreasonably refuse the buyer's inspection, or the home is damaged or about to be, the buyer can go to court for possession right away, and a judgment for possession ends your right to redeem. If the buyer has sent you the required notice and you plan to move out, you must tell the buyer at least 10 days before you leave, so the home can be secured.

If the lender buys the home at the sale and then sues you for the shortfall, called a deficiency, you can defend by showing the home was worth the debt, or that the bid was well below its true value. If the bid was below fair market value, the shortfall is figured from the fair market value, not from the bid.

If the sale brings in more than the mortgage and the costs, the extra money is paid to you on demand, unless someone with a later mortgage or lien files a sworn written claim to it. If they do, the money goes to the circuit court, and the court holds a hearing to decide who gets it.

If your lender forecloses through the court instead, you can redeem within 6 months after the sale.

In my view, the redemption period is time worth using, whether you plan to redeem, sell or move.

Rescue offers, buyers and land contracts

• Under Michigan's Credit Services Protection Act, most businesses that offer to prevent foreclosure or modify your loan must finish the work before they collect money from you. They also need a written contract listing every service, and must complete the work within 90 days after you sign.
• The Attorney General says to avoid anyone who tells you not to contact your lender, your lawyer or a housing counselor, tells you to sign your deed or title over to them, or encourages you to rent your home so you can buy it back over time.
• In one common scam, someone offers a new loan, but instead the homeowner sells the home and then leases it or buys it back on a land contract. A close read is likely to turn up an unaffordable balloon payment, a large lump sum, due after a short time.
• The Attorney General also warns about cash-for-homes offers, which are often pitched as a quick fix and are commonly for less than the home's market value. Its advice: be careful, and get a second offer.
• Don't deed your property to anyone without talking to a lawyer first.
• On a land contract, after a written notice of forfeiture, the buyer has 15 days to pay what's due and fix other material breaches, unless the contract allows longer. If the seller wins possession in court, the order to remove the buyer can't be issued for 90 days, or for 6 months if at least half the price has been paid. Paying the judgment amount and costs and fixing other material breaches within that time stops the order. A land contract can also be foreclosed in circuit court.
• Under federal rules, the 120-day wait before a first foreclosure notice doesn't apply when the foreclosure is based on breaking a due-on-sale clause.

Several of these touch how I buy. The cash-for-homes warning touches my cash offer. The deed warnings touch any way you'd sign the house over to me: a cash offer, taking over payments or seller financing. The land contract rules touch seller financing, and the due-on-sale rule touches taking over payments, since the loan stays in your name. So get a second offer, take mine to a housing counselor or a lawyer before you sign, and don't stop talking to your lender while you weigh any offer, including mine.

Free help in Michigan

• MSHDA: foreclosure help. If you're behind and facing foreclosure, the state housing agency says the first step is a HUD-certified housing counselor through its Housing Education Program.
• MSHDA: find a housing counselor by county. Pick your county to see counseling agencies near you.
• MSHDA: stages of foreclosure. The state housing agency's timeline, from the first missed payment to eviction.
• Michigan Attorney General: foreclosure and credit assistance. Rescue scam red flags, and how to file a complaint.
• Michigan DIFS: home foreclosure. The state financial regulator's plain overview of the process.
• CFPB: find a housing counselor. Search HUD-approved counseling agencies in Michigan.