Transcript Michigan: An In-depth Look at Mortgage Foreclosures

Michigan: An In-depth Look at
Mortgage Foreclosures
Presented by:
Douglas G. Smith
Associate Sr. Underwriter &
Michigan State Counsel
FORECLOSURE PROCEDURES
Requirements for Advertisement Foreclosure
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Default in a condition of the mortgage. Sec. 3204(1)(a)
No action or proceeding instituted in a court of law.
Sec. 3204 (1)(b)
Power of sale in the mortgage. Sec. 3204 (1)(c)
Party foreclosing the mortgage is the owner of the
indebtedness or the servicing agent. Sec 3204 (1)(d)
If the party foreclosing is not the original mortgagee, a record
chain of title shall exist prior to the date of sale under section
3216. Sec. 3204 (3) / Davenport v. HSBC.
Satisfaction of the provisions of section 3205 (notice to the
mortgagor of the ability to seek a loan modification).
Requirements for Notice to Borrower
of Opportunity to Modify Mortgage
Foreclosing party shall serve a written notice on borrower of opportunity to seek a
loan modification. Sec. 3205a
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Foreclosing party must provide a series of information to the borrower to enable
them the opportunity to fairly negotiate a loan modification including a list of
housing consultants. Sec. 3205a, 3205b and 3205c
[Affidavit of MCL 600.3205 Notice or Affidavit of Compliance]
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Failure to provide notice to borrower enables borrower to bring an action in circuit
court to enjoin the foreclosure. Sec. 3205a (5)
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The Company requires the use of the following requirement when issuing a lender
a mortgage foreclosure commitment or when issuing a Michigan Mortgage
Foreclosure Guarantee and Commitment:
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Submit evidence satisfactory to the Company that any borrower entitled to receive notice
of foreclosure under MCL 600.3204(4) has been served notice, as required, and that all
the provisions of MCL 600.3205a, 600.3205b and 600.3205c have been complied with, if
applicable. Stewart Bulletin MI2009002
The provisions of these sections: 3205a, b, c and d automatically expire July 5,
2011. Sec 3205e
Notice requirements for publication
and posting Sec. 3208
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Notice shall be given by publishing for 4 consecutive weeks, at
least one in each week, in a newspaper published in the county
where the premises are located. [Affidavit of Publication]
If no newspaper is published in the county, the notice shall be
published in a newspaper published in an adjacent county.
A true copy shall be posted in a conspicuous place upon any part
of the premises described in the notice. [Affidavit of Posting]
Contents of notice: Sec. 3212
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Names of the mortgagor, the original mortgagee and foreclosing
assignee, if any.
The date of the mortgage and the date the mortgage was recorded.
The amount to be due on the mortgage on the date of notice.
A description of the mortgaged premises that substantially conforms
with the description contained in the mortgage.
The length of the redemption period.
THE FORECLOSURE SALE
The Foreclosure Sale
Sale shall be a public sale at the county circuit court building and shall
be made by the sheriff, undersheriff, or deputy sheriff of the county to
the highest bidder. Sec. 3216
[Affidavit of Auctioneer and Certificate of Redemption Period]
 The mortgagee, or its successor or assigns, may purchase the
premises at such sale. [Note: the mortgagee simply bids in the amount
of the indebtedness without actually paying the money to the deputy
sheriff in exchange for the deed.] Sec. 3228
 The officer executes, acknowledges and delivers to the purchaser at
sale the property bid off by him and shall endorse upon each deed the
time and when the deed will become operative in the event the
premises are not redeemed. Sec. 3232
[Affidavit of Auctioneer and Certificate of Redemption Period]
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The Foreclosure Sale
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The sheriff’s deed must be recorded within 20 days
of the sale or the redemption period will begin to run
at the date of recording and not the date of sale.
Sec. 3232/Title Standard 16.28
Unless the premises are redeemed within the time
prescribed by law, the deed shall become operative
and vest title in the grantee, but will be subject to any
lien dated prior to the date of the mortgage
foreclosed. Sec. 3236
REDEMPTION OF PREMISES
Redemption of Premises
The purchaser’s deed (Sheriff’s Deed) is void if the mortgagor,
the mortgagor’s heirs, executors/administrators, or any party
lawfully claiming under the mortgagor, redeems the property.
Sec. 3240 (1)
 The Register of Deeds shall not determine the amount necessary
for redemption. Sec. 3240 (2)
 The purchaser shall attach an affidavit with the deed that states
the exact amount required to redeem, including any per diem
amounts, and the date by which the property must be redeemed.
The purchaser may include in the affidavit the name of their
designee and the purchaser must accept the amount computed
by the designee. Sec. 3240 (2)
[Affidavit of Purchaser (Designee Affidavit)]
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Redemption of Premises
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If the purchaser at Sheriff’s sale (lender) pays taxes, amounts
necessary to redeem senior liens, condominium or association
assessments, insurance premiums, redemption shall be made
only upon payment of the deficiency, the per diem and any
sums paid under this section if evidence of the sums paid under
this section are filed with the Register of Deeds. Thus, if you
are redeeming at the Register of Deeds office, you must have
them check for evidence of payments made under this section.
If you are redeeming with the lender or their designee, it is to be
presumed that such sums are calculated in the payoff amount
in the payoff letter. Sec. 3204 (4)
REDEMPTION OF PREMISES
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Redemption periods:
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Mortgage executed on or after 1/1/65 on commercial,
industrial or more than 1-4 family residential in excess of 4
units – 6 months. Sec. 3240 (7)
Mortgage executed on or after 1/1/65 on residential not
exceeding 4 units and not more than 3 acres in size and the
amount claimed is more than 66 2/3rds of the original
indebtedness – 6 months. Sec. 3240 (8)
Mortgage on residential not exceeding 4 units and
abandoned under section 3241 the redemption period is 1
month unless less than 66 2/3rds of the indebtedness is still
owed in which case – 3 months. Sec. 3240 (9) (10)
In all other cases – one year. Sec. 3240 (12)
ABANDONMENT OF PREMISES
Abandonment of Premises
There are two sections in the Act addressing
abandonment of foreclosed property: Section 3241
and Section 3241a. These sections shorten the
redemption period after foreclosure to allow the
lender to expedite the REO sale out.
[Affidavit of Abandonment]
 Section 3241, by inference may be used for
residential or commercial properties. Section 3241a
is strictly for residential properties.
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Section 3241 provisions
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If within 30 days before commencement of foreclosure (start of
advertisement) mortgagee mails, by certified mail, notice of default and
intent to foreclose, abandonment of the premises is conclusively
presumed if the mortgagee executes and causes to be recorded an
affidavit that states:
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That the mortgage has mailed to the last known address of the mortgagor a
notice of default and intention to foreclose and the mortgagor has not
responded to the notice.
That the mortgagee has made a personal inspection of the premises and the
inspection does not reveal that the mortgagor or persons claiming under him
are presently occupying or intend to occupy the premises.
That the mortgagee mailed by certified mail a copy of the affidavit to the
mortgagor at his last known address before commencement of the
foreclosure proceedings.
That the mortgagor, or any party claiming by or through the mortgagor has
not provided, before the expiration of the redemption period, a written
affidavit to the mortgagee stating the premises have not been vacated.
Section 3241a provisions
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If foreclosure proceedings have been commenced against
residential property not exceeding 4 units, abandonment is
conclusively presumed if the following are met:
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That the mortgagee has made a personal inspection and the
inspection does not reveal that the mortgagor or parties claiming
under him are presently occupying or will occupy the premises.
That the mortgagee has posted notice and has mailed, by certified
mail, notice that the mortgagee considers the property abandoned
and mortgagor will lose all rights ownership in 30 days.
That within 15 days after the notice, the mortgagor, or parties
claiming through the mortgagor have not provided the mortgagee
written notice stating that the premises are not abandoned.
This section is the procedure used most often by lenders as
abandonment is usually determined after advertisement has
begun.
NON-MILITARY SERVICE
AFFIDAVIT
Non-Military Service Affidavit
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Both the State of Michigan and the United States
government have restrictions on the ability of a
mortgagee to foreclose on a borrower who is serving
in the military and the tolling of the redemption
period while actively serving. Sec. 3285 and The
Servicemembers Civil Relief Act (SCRA)
The mortgagee shall record a Non-Military Affidavit
averring that the borrower is not serving in the
Military.
WRITTEN NOTICE OF
FORECLOSURE RECIPIENTS
Federal Government
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Foreclosure of property that is encumbered by a
junior federal tax lien will extinguish the tax lien if:
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No notice of the federal tax lien was filed for record and
indexed more than 30 days before the foreclosure sale.
Proper notice of the sale (in writing sent by registered or
certified mail or by personal service) was given to the
United States not less than 25 days before the sale.
26 USC 7425(c)(1)/Affidavit of Mailing to the United
States
The United States consents to the sale free of the lien.
Condominium Associations
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The mortgagee of a first mortgage as to a
condominium unit shall give notice of the
commencement of foreclosure of the mortgage by
serving a copy of the published notice upon the
Association of co-owners by certified mail addressed
to the Resident agent. Failure does not invalidate
the foreclosure but allows the Association legal
recourse. Sec. 559.208(9) of the Condominium
Act/Affidavit of Mailing to Condominium
Association
DOCUMENTATION CHECKLIST FOR
ADVERTISEMENT FORECLOSURES
Documentation Checklist for
Advertisement Foreclosures
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Sheriff’s Deed
Affidavit of Auctioneer (Certificate of Redemption Period)
Non-Military Affidavit
Affidavit of Publication
Affidavit of Posting
Affidavit of MCL 600.3205 Notice (Affidavit of Compliance)
Affidavit of Purchaser (Designee Affidavit)
Affidavit of Mailing to United States, if applicable
Affidavit of Mailing to Condominium Association, if applicable
Affidavit of Abandonment, if applicable.
MORTGAGE FORECLOSURES AND
CONDOMINIUM ASSOCIATION LIENS
Mortgage Foreclosures and
Condominium Association Liens
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As the result of a case entitled: Oakbrook Condominium Association v.
Hubbell and Midfirst Bank, it was determined by a Michigan Circuit
Court that a foreclosure initiated by an assignee of a mortgage created
their priority position at the moment of the recording of the assignment
and not the date of the recording of the original mortgage.
The condominium association was able to establish priority for their
lien which was recorded after the original mortgage was recorded but
before the recording of the assignment.
As a result, we would instruct you to take exception to all condominium
association liens which are of record prior to the assignment of a
mortgage when the assignee is foreclosing.
This holding only applies to condominium liens and not to any other
junior interest recorded after the recording of the original mortgage.
Stewart Bulletin MI2009008
REO SALES FROM THE
FORECLOSING LENDER TO NEW
PURCHASERS
REO Sales From the Foreclosing
Lender to New Purchasers
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Because there have been serious questions raised
as to the validity of many judicial foreclosures
around the country involving large national lending
institutions, the Company has established a
number of steps that must be reviewed before
insuring a sale out from a lender after foreclosure.
Stewart Bulletin SLS2010023
REO Sales From the Foreclosing
Lender to New Purchasers
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Before insuring such a sale, follow the identified
steps of the Bulletin which, in Michigan, are:
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Verify that all foreclosure requirements under state law and
our guidelines have been met [check list]
Verify that the mortgagor or tenants are not in possession of
the property [an affidavit or broker confirmation to that effect
is sufficient]
Make sure the right of redemption has expired
Determine that the amount owed on the foreclosed
mortgage exceeds the current resale price
Require, at a minimum, a covenant deed on the sale by the
foreclosing lender which obligates the lender to defend if
there is a challenge to the validity of the foreclosure
INSURING SHORT SALES
DURING REDEMPTION
Insuring Short Sales During
Redemption
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In the event that the borrower is attempting to sell the property during the
redemption period on a short sale, it is preferable that you redeem with
the Designee identified on the Affidavit of Purchaser/Designee Affidavit.
Under section 3240(2), the Purchaser is obligated to accept the
redemption amount calculated by the Designee, even if incorrect.
[There is no such assurance redeeming directly with the lender.]
The designee is also much more likely to record the Redemption
Certificate creating a clean title.
If you redeem with the Register of Deeds make sure to ascertain from
the Register any amounts paid under section 3240(4) in the calculation
of the redemption amount.
If you are unable to close until after the redemption period has expired,
secure a deed from the lender instead of a redemption certificate as title
has passed. Contact the legal department for approval of any other
option.
Thank you for attending!
Questions?
Please call Doug Smith at
248-368-9900 or email at
[email protected]
A recording of this webinar can be found
on www.stewart.com/michigan