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The Foreclosure Process in Michigan

November 3rd, 2007 by
Categories: Finance, Ken Mascia on Mortgages and Finance

There has been so much talk this year about foreclosures and it seems like most people really don’t understand the foreclosure process. There is also an alarming mindset right now in that a lot of people seem to be willing to just throw up there hands and say “I’ll just give it back to the bank.” The thing here is that the bank never bought the house. So, it’s not “giving it back.” You bought the house and agreed to pay the bank loan back over time. It’s more like not living up to your obligations. I guess that’s a whole different issue (oops, seems like my banker side is showing a bit).

Anyway, foreclosure is a very serious issue. You want to avoid being foreclosed on at all costs because of the severe damage to your credit history and credit score. A foreclosure can stay on your credit report for up to 10 years and can lower your credit score by 100 points and more. Your credit score is used by credit card companies, auto lenders, insurance companies and many others to determine the rates you’ll be required to pay. So, a low credit score is going to cost you money in many other areas of your life for a long time to come. Of course, you’re going to be unable to get new mortgage money for a minimum of 2 years (and only then if the rest of your credit is perfect) and generally not for at least 4 years. Probably the most important reason is that being foreclosed on, and losing the house, is a terrible experience for a family to go through.

In Michigan there are two ways to foreclose: by lawsuit or by advertisement. The standard mortgage document used by lenders in Michigan contains a “Power of Sale” clause that allows foreclosure if there is a breach in the terms of the loan and this clause makes foreclosure by advertisement possible. This is easier than filing a lawsuit, so almost all foreclosures in Michigan are by advertisement and that’s what we’ll cover here. The basic process goes like this:

Homeowner is 90 days past due on their mortgage payments. Any time you’re late on your mortgage payment it’s technically a default, but generally a lender would not foreclose until you are at least 90 days late.
Notice of Foreclosure Sale is published. The notice must be published once a week for 4 weeks in a newspaper that circulates in the county where the property is located. The notice must also be conspicuously posted at the property and the lender has a right to enter the mortgaged premises for this purpose. The sale is typically 30 days after the notice is given to borrower.
Homeowner’s Rights at this Point. The borrower can cure the default and keep the existing financing prior to the sale if they pay all of the payments that are past due prior to the sale date. They could also sell the house and pay the loan off in full (or ask for a “Short Sale” – another topic for another discussion).
Sheriff’s Sale. The sale is handled by the circuit court and is called a sheriff’s sale. It’s an auction and the house is sold to the highest bidder. The lender will buy the property at this time unless an outside bidder offers more than what is owed on the house. This is unlikely and in most cases the bank owns the house.
Sheriff’s Deed is recorded. A deed is recorded transferring the title to the bank. The amount of the sale is typically the principal balance of the loan plus interest, late charges and legal and court costs.
Redemption Period. The rules can vary, but in most cases the redemption period is 6 months (this can be reduced by the court to as little as 30 days if the property is abandoned). During this time the homeowner may continue to occupy the home (no payments are made) and has a right to redeem the property by paying the full amount of the sheriff’s sale plus interest at the rate of the original mortgage. This could be done by getting a new mortgage (not likely in today’s mortgage world) or by selling the home for at least the amount needed to pay off the sheriff’s deed and interest due.

Ken Mascia It’s a long and arduous process which puts a lot of stress on the homeowner. If you are having trouble making your house payments the best thing to do is to be honest about it with your lender. Call them and be prepared to explain your situation in detail. The bank does not want to foreclose so they are generally willing to try to create a workout plan. If you’re having trouble making your house payment the best thing to do is to face up to it early and you can probably work things out!

Editors Note: This article was originally published in 2007. We have more articles on short sales and foreclosure and that might be of interest, whether you are looking to invest in them or are facing financial difficulties yourself. Certainly today’s economy has put a strain on too many people who want to keep their homes.

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andrew said at March 13th, 2008 at 8:35 am
Really , we have to know the complete details about the foreclosure that helps us in taking a wrong step that leads to loss of home in foreclosure.
Linda said at April 28th, 2008 at 7:50 am
You say the bank doesn’t want the house? Really. I had unfortunate situations arise and my home is currently in foreclosure. I knew that this could more than likely happen and contacted my lender immediately telling them of the situaion. I provided them with every bit of information they requested and they still denied any loan modification, payment plan, etc. And now, there is a sheriff’s sale set and the lender still isn’t willing to work with me. My opinion…they really don’t care about buyer situations, they just want their money. Well, they can have the house. I’m not a bum, I busted my butt to keep bills current and I’m a victim of the economy in MI. So, people can think whatever they want. I’m a firm believer that all things happen for a reason.
Ken Mascia said at April 28th, 2008 at 9:59 am
Linda, I am truly sorry about your financial problems. These cases are all handled by banks on an individual basis so the outcomes of every case are different. Good luck to you.
William said at July 9th, 2008 at 12:10 pm
I agree with Linda,
Banks could care less and I’m done jumping through hoops to keep my house.
William
Russ said at August 20th, 2008 at 4:51 pm
Ken,

I am looking at buying the house across the street from me. The Notice of Foreclosure went on the door and the mortgage says it’s for $112,000. I have been in contact witht the realtor and the asking price is down to $59,000. My problem is that I don’t think this property will continue to appraise at even that level as it has fallen into a terrible state of disrepair, needs a furnace, appliances, etc. It is a house that would really only qualify as a renter – 2 bdrm, 1 bath, no basement or garage. Here’s my question:

Should I go to the Sherrif’s auction and make a bid or should I wait until it’s an REO and deal with the bank? Someone needs to realize this place is a dump and needs at least $20,000 of fixing up even to rent. I was going to go and make a bid of $500 to start, but I am guessing that until the bank owns it, they are going to protect it. Is that right?
Ken Mascia said at August 20th, 2008 at 5:15 pm
Russ,
All of these deals are unique so there is no way to know exactly what the bank may do. Typically, the bank will buy the house at the sheriffs auction unless there is a bid that is high enough to get them out of the property with a loss that they find acceptable. It’s impossible to say what that amount may be, however, I think we can be fairly certain that $500 is not going to be that number. Can’t hurt to attend the sale, throw out an offer, and see what happens though. Good luck with it
Steve S said at September 23rd, 2008 at 4:57 pm
Ken,

I’m currently living in my late mother’s home.
I moved back to Michigan when my mother fell ill.
Her reverse mortgage lender is due to start
foreclosure proceedings on 10/11.
With her prior credit cards bills and now her medical bills, the value of the house is not enough to try
and go through probate. The house appraised for
$90k she owes $87k on the motgage and another $20k-$25
in unpaid credit card debt and unpaid medical bills.
I guess my question is, how long can I stay in the house? Do to my own financial situation, moving,
up to now, has not been an option.
Thank you.
Joe said at September 30th, 2008 at 11:10 pm
I have bought a new house that I have just moved into. My brother was suppossed to be moving to Michigan and renting my old house for the amont of my mortgage payment. Now he is not and will not be able to make the payment for my old house after purchasing a new one. What do I do? What are my options?
Ken Mascia said at October 1st, 2008 at 11:21 am
Steve S – sorry I did not get notification of your question. Unfortunately, your question is beyond my ability to provide an answer. You’ll need to consult an attorney.

Joe – my recommendation is that you hire a real estate agent to find you a qualified tenant to rent out your home.
Tim said at October 11th, 2008 at 12:29 am
My son and his family are relocating back to Oakland County after 4 years in the military. Their financial situation is fairly strong. They have a serious interest in a house listed as a short sale. The listed price for the home is about half the price of other listings in the neighborhood. The house is only 3 years old but has not been well maintained and needs some work. The question: How long can a home linger in a short sale status before it moves to the Sheriff’s Sale and ultimately foreclosure? It seems like a short sale is kind of in a twilight zone….neither here nor there. The home is currently occupied by the homeowners. Thanks, Tim
Ken Mascia said at October 13th, 2008 at 9:50 am
Hi Tim,
The house can be listed as a short sale indefinetely. As long as the homeowner continues to make the house payment the house may never go into foreclosure. It’s a matter of opinion, but, you may be better off buying the house before it goes into foreclosure. The foreclosure process takes a long time (over 6 months) and the house will not be listed for sale by the bank until the process is complete. You could be waiting a long time. Maybe you should consider making an offer on it and see what happens?
Maureen Francis said at October 13th, 2008 at 10:11 am
Tim,

I put up a blog with another response for you.

http://mioaklandcounty.com/blog/2008/10/13/from-the-mailbag-a-short-sale-question/
EMR said at October 22nd, 2008 at 7:47 am
We are also victims of the economy in Michigan. We just received notice of foreclosure proceedings. We have contacted the bank on numerous occasions to work out a modification and they are simply not interested. Our property values have plumetted. We are currently trying to short sell for more than 50% of what the house was appraised at 3 years ago and still nothing! My question is once it goes to sheriff sale, obviously it will sell for less than the mortgage amount. What happens to the balance of the mortgage? Is it considered a write off or will we be sued for that? If so, are there options? We have nothing.
Ken Mascia said at October 22nd, 2008 at 9:23 am
Dear EMR,
Very sorry to hear of your financial ills. It really is a tough time for everyone. The answer to your question is that from a technical perspective the bank may have recourse to try and collect the shortfall but they generally don’t. The bank writes off the loss. For you it is a major hit to your credit. Good luck. In time things will improve for you.
Sarah said at October 27th, 2008 at 3:58 pm
We are in the process of foreclosure and were waiting to hear when we would have to be out of our home. Today we received a posting on our home that says it will be auctioned off this friday. That is in 5 days! Do we have to be out by then or do we still have time to find somewhere else to live. We are soon to be homeless.
Ken Mascia said at October 27th, 2008 at 4:27 pm
Hi Sarah,
This is what’s known as the Sheriffs Sale. After the sale you will be given a redemption period (set by the court – typically 6 months) and during this time you can occupy the house. I suggest that you make some plans on where you are going to go though because unless you buy the house out of redemption you will be moving in the next few months. Good news is you don’t have to move out right now!
Mary said at November 28th, 2008 at 11:09 pm
I also agree with Linda..I bought my first home as a single parent, with 3 kids, and I also had 3 jobs to pay for the mortgage..9 yrs later , remarried, and still in the same house, Never ever late on my mortgage payment and the bank wouldn’t do a modification. I sat down and wrote that hardship letter, and that was very hard emotionally for me to do. I’m the type that doesn’t ask for help, I do what i gotta do , but I did ask for help for once and they didn’t even care! …Now you hear about all theses banks that are in trouble..guess what…Who Cares!!!!!!
Tom said at December 11th, 2008 at 6:56 pm
A couple of comments. I was told by an individual in the Oakland County Sheriff’s Department that to bid at a Sheriff’s Sale you need a certified check for the full amount of the bid. I asked how would I know in advance the price and she said the bid starts at the value set by the lender and only goes up from that price. You indicated the lender might be willing to take less but I presume that is after the Sheriff’s Sale in complete.

I also read that after the 6 month period following sale, if the former owner does not vacate, the lender has to file suit for eviction and this could take 10 to 20 days.

Lastly, I believe notes are recourse or non recourse. I think, but am not sure, that most are non recourse, thus the only option for the lender is to take back the property secured by the mortgage.
Maureen Francis said at December 12th, 2008 at 4:55 pm
Tom,

Most people do not buy at the Sheriff’s auction. Yes, you have to out bid whatever is owed the bank (assuming the bank bids, which the usually do) and then you have to hold it for the redemption period. May as well wait until the bank has taken it back and evicted.
Tom said at December 14th, 2008 at 2:36 pm
Maureen,

Agreed, one never knows what the condition of the property will be after six months and if necessary, a court ordered eviction. I am trying to help out a co-worker but it makes no sense to bid at the amount owed given the current market value of the home.

Another way to potentially slow down the sheriff’s sale or auction is to object to the notice and to require the mortgagee or servicer to supply specific informaton. For instance, provide proof of payments and request documentation of the sale, if any, from the original mortgagee to the current holder and or servicer.
shar said at December 28th, 2008 at 10:49 pm
WE ARE IN FORECLOSURE COURT DATE JAN 8,09.WE HAVE BEEN WORKING WITH THE BANK AND HAVE NOT HEARD A THING I CALL EVERYDAY BUT THEY SAY THEY ARE 60 DAYS BEHIND,I DO NOT HAVE ANY IDEA WHAT IS GOING TO HAPPEN COME THE 8.IN THE MEAN TIME I AM LOOKING FOR A APARTMENT BEFORE THIS HITS OUR CREDIT REPORT BUT WE ALSO HAVE BEEN SCREWED OVER BY WASHINGTON MUTUAL.WHAT IN THE WORLD DO WE DO?
Maureen Francis said at December 29th, 2008 at 7:26 am
Shar,

Is that the date of the Sheriff’s sale? Keep calling the bank.
Barb said at December 29th, 2008 at 12:29 pm
What is the process for the renter of a home that is foreclosed and the redemption period was up on Dec. 17. What notice will the renter get and how will it be delivered? How long before they have to move out. Is there a hearing and would it do any good to go to the hearing to get to live there a little longer?

Thank you,
Barb
Ken Mascia said at December 29th, 2008 at 1:16 pm
Hi Barb,
This is a legal issue and you would be best advised to talk to an attorney about your rights. We do not hold ourselves out as legal counsel or legal advisors. In a general sense, typically your rights as a tenant end when the landlord no longer owns the house. So, when the redemption period ends you could be evicted. You may want to start looking for a new place to live or open a dialogue with the lender to see if you can work something out to stay in the home. Don’t wait and then be surprised by an immediate need to depart!
Maureen Francis said at December 29th, 2008 at 6:33 pm
Barb,

If a house is sold in Michigan, the lease remains in force, unless the home is lost to foreclosure or the tenant agrees to terminate the lease. Unfortunately, your situation is too common these days.

The bank will have to actually evict you, so there will be a court date for that. They might offer you “cash for keys” for leaving before they have to evict you. Fannie Mae just announced that they will work with tenants and allow them to stay and pay rent until the house is closed. Hard to say if your landlord had a Fannie Mae mortgage. This program begins in January.

As Ken said, I would begin looking for housing alternatives, and contact a lawyer.
Heather said at December 31st, 2008 at 2:42 pm
I am currently renting a house and received a notice on the door today that it is being foreclosed on and will be sold at a Sheriff’s Auction on January 27th, 2009. Will we be able to stay in the house for the duration of the 6 month redemption period? If so should we be sending the rent checks to our landlord, who will technically no longer own the house, or should we set up an escrow account and put our rent payments in there?
Short Sale Help Might Be On The Way — miOaklandCounty.com said at January 10th, 2009 at 2:54 pm
[...] The Foreclosure Process in Michigan [...]
Karen said at January 26th, 2009 at 10:56 am
Hi-
EMR what ever happened to your situation?
Karen
Sara said at January 28th, 2009 at 12:49 am
The tone of this article is so condescending, it sickens me. You should be ashamed. Really.
Pat said at January 28th, 2009 at 8:18 am
Ken,

I haven’t seen an answer regarding what happens to the balance of the mortgage due after the foreclosure.

Quite frankly, it is hard to stay current on a Mortgage when both of us have lost our jobs due to “economic hardship” and we do not even have unemployment benefits to help pay the bills.

We do have a “Short Sale” agreement, but the mortgage lender says it will hold us to the rest of the loan amount. Does this mean that we will have to also go through Bankrupcy to clear the mortgage?
Ken Mascia said at January 28th, 2009 at 1:17 pm
Hi Pat,
Typically, after a foreclosure the bank takes the loss and the homeowner is not responsible for the difference (loan documents control this so have an attorney reveiw your mortgage and note). In the event of a shortale, the bank may try to make you agree to pay the difference, but this is up to you. You don’t have to agree but then a foreclosure would ensue if you can’t keep up your house payments. Good luck with it and remember – in time things will look a lot better!
Paul said at March 6th, 2009 at 11:00 am
Ken,

I have a few questions. My home went to sheriffs sale on Sept 16, 2008. Lasalle is the bank that purchased the house. I have called them to see if they would be willing to work with me so I can keep the house but they dont have me in their system. My original loan company was First Franklin and they went under 2 years ago and Loan Services took over the servicing of the loan. I found out recently that they never processed my application for Modification which I have been attempting to do since the whole thing started. I also tried to become current before the sheriffs sale and they would not take the money. Now that my redemption period is almost over, is there anything I can do to keep the home? Do you know of any lenders that might work with me? also, After the redemption period how long does the Bank usually take before filing the eviction papers? Can the original loan company come back on me for the difference if I can find a loan for the payoff amount of the sheriffs sale? Do you know how cash for keys works?
I have been doing everything that I have been told to do to keep the house and not getting anywhere really. I am just trying to find someone to help me keep the home.

Sincerely,

Paul
Marty said at March 20th, 2009 at 6:55 pm
Hi! i stumbled across this article while trying to find some answers on the internet. It seems no one wants to help me over the phone. Here’s my situation. I built a house in the country and when i went to close the construction loan, they said my house was no longer worth what I paid to build it! It wasn’t that my house wasn’t worth it, but they could not find any comparable houses for the appraisal, which brought the cost of my home down.

I went to a mortgage dealer in my area and they were able to find someone to take on my loan, at 9.9%!! The company that took my mortgage was Option One. A quick search of the internet and I see they are involved in many lawsuits and shady dealings, and they finally went under and changed thier name. Now they are AHMSI (American Home Mortgage), but still the same company. We were told if we paid the hihg rates and just sucked it up for a while then we could refi down the road. So we did it, and when we tried to get our house appraised again, it was even lower than before!! Finally we got to the point where we couldn’t make the payments anymore, so we went right to the company for help. We went throught the normal rigomoral with filing hardship papers etc. They told us they would not work with us because we were not late any payments. So we started missing payments and they still wouldnt work with us.

Finally, we called their lawyers and they informed us that a modification agreement was pending. So we just hung on a few more months waiting for it. We stopped paying in Oct, and by Jan we finally got an agreement on Jan 18th. The paperwork said we had until Feb 13th to agree to the modification. My wife talked it over for a few weeks and she called them on Feb 8th to say we would agree to the modification. However, when she called they told us the house had already been foreclosed on Jan 29th! After many long conversations on the phone, we were told that the paperwork meant nothing and we should have disregarded the date and someone known that the house would be sold.

Bottom line, we were told there is now nothing to be done since the house is foreclosed. We can short sale it, or refi, but either way we will lose the house, and have ruined credit. We know a refi is not an option, from previous appraisals. What a crock! The whole system is crooked and the banks are getting bailouts while the rest of us are trying to get by. Just don’t know what to do anymore………..

Sorry for the novel
Ken Mascia said at March 23rd, 2009 at 9:39 am
Hi Marty,
That’s a horrifying story. There are certainly some less than ethical people in the mortgage business. Sounds like the main culprit of your problem was the overall drop in real estate values that we are all suffering from. I am sorry that you guys lost a great house but I’m sure you’ll be able to pick up the pieces and move on. Best of luck
Guy who needs Help! said at June 1st, 2009 at 3:46 pm
Hello,

I have a problem. I was divorced in December (thank god!). In the divorce decree it stated that my ex wife get the house. The mortgage is in my name, she didn’t work at all during the marriage. The judgment stated that she make the payments on the mortgage and the HELOC loans. Both are in my name. The judgment also stated that if she was late more than 4 times that the house would be forced to go up for sale. Well she was late on the payments and in fact missed two payments all together. I took her back to court and the Oakland County court referee said the house should be put up for sale. The referee also stated that I should foreclose on the house. I am trying to work with the lenders to work out something. I can’t afford to make any of the back payments. The judgment stated that I stop making support payments to her and pay the loans. Well the house payments are more than what the support payments are.

She basically gave the “poor me” for the referee and said she had no money to make payments. So now I am stuck with making the payments while she lives there with my children, ex-mother-in-law and boyfriend. Any advice?
Ken Mascia said at June 1st, 2009 at 4:09 pm
Hi GWNH,
This is way beyond my area of expertise. Sounds like you may need an attorney. One thing is for sure, since the loans are in your name any late payments, foreclosure or short sale will impact your credit so be careful how you move forward. Good luck!
Tony said at June 24th, 2009 at 2:54 pm
I have been working with my mortgage company since 10/08 trying to get out of my variable rate and finally they are putting me in Obamba’s plan reducing my payment $140.00 a month.
My complaint is the house appraised at $78,000 and I owe $138,000
The sev is at 67,000 when is should be $39,000 I am being ripped off on my property tax and a negative equity of $58,000
In my situation I fell I should just throw in the towel and give my house to the mortgage company.
I didn’t create the bad economy so why should it cost me.
I fell I won’t see a penny of equity until some time to come so why even bother.
Ken Mascia said at June 24th, 2009 at 3:07 pm
Tony, sorry to be so blunt, but, this is exactly the attitude that got us all into this mess. The more people that “throw in the towel” the worse it gets for everybody else. If you purchase a car and it goes down in value do you expect your bank to pay for the difference between what the car is worth now and what you owe on it?
Tony said at June 24th, 2009 at 3:25 pm
I am not looking at a few thousand dollars I am looking at tens of thousands of dollars.
Who is looking out for me no one, So whatever ever I decide will be in my best interest.
You say that throwing in the towel makes it worse for everybody else.
Is everybody else looking out for me No?
My house should have appreciated over $45,000 in the last 5 years resulting in a negative equity of $103,000
Would you keep a business open if you have lost $103,000 I think not, See my point and put yourself in my shoes.
If you don’t agree sell my house for $191,000 and we will both be happy.
Thank You
Tony said at June 24th, 2009 at 3:28 pm
Would you keep a business open if you have lost $103,000
Tony said at June 24th, 2009 at 3:41 pm
You can’t compare purchasing a car and losing a few thousand dollars.
I am talking about ten of thousands of dollars.
From what my negative equity is and the money lost from what the equity should have went up I am losing $103,000
If I had a business and lost $103,000 I would close the doors.
If I don’t look out for me no else will.
Sell my house for $191,000 and we will both be happy.
Thanks for letting me vent.
Tony
Ken Mascia said at June 24th, 2009 at 4:04 pm
Tony, your bank has just agreed to reduce your house payment by almost $2,000 a year. If you simply hold onto your house for a few years, which I’m sure was your intention to begin with, the real estate market will stabilize and things will look a lot brighter. Your situation is no different than mine and every other homeowner on the planet. The more people that do the right thing and keep paying their bills the faster things will improve.
Tony said at June 24th, 2009 at 4:39 pm
With inflation and no salary increase I am still paying more than I was 5 years ago.
I didn’t create the financial mess that we’re in big oil raised the price of gas to $4.00 a gallon resulting in no sales for the car companies that were only selling gas hogs like the suv’s and pickups, resulting in layoffs then the mortgage companies say hey where is my mortgage payment in turn they foreclose on their home sending it to auction and auctioning it way below value just to get rid of the home and kicking these people out in the street and depreciating the value of my home.
A major mortgage company gave big salaries to the employees of their company today because they couldn’t take bail out money and then give themselves a big bonus.
They should be using this money to help people with their mortgage with the times we are facing.
Again I am looking out for myself.
Tony

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