Changes to Michigan’s Foreclosure Law Take Effect July 5, 2009
Under Michigan law, when homeowners are behind in their mortgage (in default), the mortgage lender basically has two options insofar as foreclosure is concerned. By law, all mortgages in the State of Michigan can be foreclosed by judicial action. Foreclosure by judicial action is a court proceeding that is both time consuming and expensive. As a result, foreclosure by judicial action of mortgages involving residential property is rare. The other option is foreclosure by advertisement. Foreclosure by advertisement does not involve the courts, is cheaper and quicker (generally, six weeks from the beginning of the process to the sheriff’s sale of the property, as opposed to upwards of six months for a judicial foreclosure.) Foreclosure by advertisement is only available to the mortgage lender if allowed by the terms of the mortgage. Provisions allowing foreclosure by advertisement are found in most, if not all, mortgages for residential property.
On May 20, 2009, Governor Granholm signed into law a series of three bills that amend Michigan law pertaining to foreclosures by advertisement. These new laws take effect on July 5, 2009. What these new laws seek to do is slow down the process of foreclosure by advertisement and provide the opportunity for negotiation and modification of the terms of the mortgage, all with a view to avoiding the foreclosure and allowing homeowners to remain in their homes. Under these new laws, a lender wishing to foreclose a mortgage by advertisement must first provide the homeowner with written notice designating a contact person who has authority on behalf of the lender to modify the mortgage. The lender must also provide a list of state approved “housing counselors” that homeowners may request become involved on their behalf to help negotiate a modification of the mortgage. These laws go on to specify a criteria to be applied in determining whether or not the homeowner qualifies for modification of the mortgage, allow for court involvement, and impose notice requirements and time parameters within which all of this is to take place. Stated simply, these new laws contain detailed provisions affording new and additional rights to the homeowner facing foreclosure by advertisement and imposing new and additional obligations on the mortgage lender.
From the standpoint of the mortgage lender, foreclosure by advertisement will become much more complicated on July 5, 2009. But, for the homeowner who pays close attention to the notices received and takes advantage of the opportunity for re-negotiation and modification of the mortgage, these laws greatly enhance the possibility that foreclosure may be avoided altogether.
Duane L. Reynolds