What Is The Homeowner’s Right Of Redemption After The Foreclosure Sale In Michigan?

 

It would seem that a foreclosure is final after the auction, but it is not.  A foreclosure sale occurs when the mortgagee/lender (e.g. the bank) exercises its right to sell the home at auction to protect against a serious loss after the mortgagor/borrower stops making payments.  It may also arise if the lender sued for a judgment of foreclosure after a default and the judge ordered the property sold at auction to pay off the balance.  Either way, the winner of the auction will receive a deed to the property, which will state the last date that the property can be recovered.  The homeowner has a statutory “redemption period” after the sheriff’s sale where he or she can buy the property back and cancel the deed to the new buyer.

There are two types of foreclosure proceedings: judicial foreclosure and foreclosure by advertisement.  The only difference is that judicial foreclosures are processed through the court system and foreclosures by advertisement are not.  However, the right to redemption exists in either foreclosure procedure elected by the lender provided that the mortgagor/borrower acts within the statutory timelines.  Can IV Packard Square LLC v Packard Square LLC, __ Mich App __;__NW2d__ (Docket No. 346218)(2019).

FORECLOSURE BY ADVERTISEMENT

In a foreclosure by advertisement, the sheriff’s deed is void if the mortgagor/borrower, or his or her heirs or personal representatives, or any other person that has a recorded interest in the property can redeem the entire premises by paying the amount required under law to the purchaser, the purchaser’s personal representative or assigns, or to the register of deeds where the sheriff’s deed is recorded for the benefit of the purchaser before the end of the “redemption period”.  MCL 600.3240(1).

• The amount that must be paid for redemption is the amount that was bid for the entire premises sold, interest from the date of the sale at the interest rate provided for in the mortgage, the amount of the sheriff’s fee paid by the purchaser, and an additional $5.00 paid to the register of deeds if they are taking care and custody of the money. MCL 600.3240(2).  The exact amount that must be paid to redeem the premise will be contained in an affidavit recorded with the deed (although the register of deed may calculate this amount under some circumstances).  The amount that must be paid for redemption may also include “taxes assessed against the property, amounts necessary to redeem senior liens from foreclosure, condominium assessments, homeowner association assessments, community association assessments, or premiums on an insurance policy covering any buildings located on the property that under the terms of the mortgage it would have been the duty of the mortgagor to pay if the mortgage had not been foreclosed and that are necessary to keep the policy in force until the expiration of the period of redemption” PLUS any interest of these items from the date of payment to the date of redemption.  MCL 600.3240(4).

• For a mortgage of commercial or industrial property or a multifamily residential property exceeding 4 dwelling units, the redemption period is 6 months from the date of sale. MCL 600.3240(7).

• For a mortgage of residential property not exceeding 4 dwelling units and the amount claimed to be due on the mortgage at the date of the foreclosure notice is more than 2/3 of the original indebtedness secured by the mortgage, the redemption period is 6 months from the date of sale. MCL 600.3240(8).

• For a mortgage of residential property not exceeding 4 dwelling units that is ABANDONED, the redemption period is 1 month from the date of sale. MCL 600.3240(9).  There is a conclusive presumption that the premises have been abandoned if ALL of the following requirements are satisfied before the end of the redemption period:

• • • (1) The mortgagee/lender has made a personal inspection of the mortgaged premises and the inspection does not reveal that the mortgagor/borrower or persons claiming under the mortgagor are presently occupying or will occupy the premises. MCL 600.3241a(a).
      

• • • (2) The mortgagee/lender has posted a notice at the time of making the personal inspection and has mailed by certified mail, return receipt requested, a notice to the mortgagor/borrower at his or her last known address, which notices state that the mortgagee/lender considers the premises abandoned and that the mortgagor/borrower will lose all rights of ownership 30 days after the foreclosure sale or when the time to provide the notice required by law expires, whichever is later, unless the mortgagor/borrower provides the notice stating the premises are not abandoned. MCL 600.3241a(b).
      

• • • (3) Within 15 days after the notice regarding abandonment was posted and mailed, the mortgagor/borrower or person claiming under the mortgagor have not given written notice by first-class mail to the mortgagee/lender at an address provided by the mortgagee in the notices required under law stating that the premises are not abandoned.

• For a mortgage of property that is used for agricultural purposes, the redemption period is 1 year from the date of sale. MCL 600.3240(11).  There is a presumption that the property is used for agricultural purposes if, before the foreclosure sale, the mortgagor/borrower provides the mortgagee/lender any proof that the mortgagor/borrower filed a Schedule F with his federal tax return concerning the premises in the tax year proceeding the year that foreclosure proceedings were commenced.  MCL 600.3240(16).
  

• For any other mortgages of property not covered by this statute, the redemption period is 1 year from the date of sale. MCL 600.3240(12).

• If the purchaser refuses to accept the money, the homeowner must deposit the amount due with the register of deeds before the redemption period expires to preserve his or her claim to the property or else it is barred. Wolf v Homecomings Financial Network Inc, unpublished per curiam opinion of the Court of Appeals decided December 19, 2006 (Docket No. 270169).  A purchaser entitled to receive the redemption money but refuses to accept it can be liable to the homeowner for actual damages plus $100.00.  MCL 600.3248.

• Filing suit in court regarding the foreclosure proceedings does NOT toll or extend the redemption period. Awad v GMAC & Wayne County Board of Commissioner, unpublished per curiam opinion of the Court of Appeals decided April 24, 2012 (Docket No. 302692).

A purchaser at a sheriff’s sale held through a foreclosure by advertisement has the right to an inspection of the property after acquiring title.  “If an inspection under this section is unreasonably refused or if damage to the property is imminent or has occurred, the purchaser may immediately commence summary proceedings for possession of the property… or file an action for any other relief necessary to protect the property from damage.”  MCL 600.3238(6).  The purchaser can name as a party any person who may redeem the property.  If a judgment for possession is entered in favor of the purchaser under this action, the right to redemption is EXTINGUISHED and title to the property vests in the purchaser as to all persons whom judgment was entered.  MCL 600.3238(10).

 

JUDICIAL FORECLOSURE

After a court-ordered sale held pursuant to a judicial foreclosure, the mortgagor/borrower, his or her heirs or personal representative, or any person that has a recorded interest in the property lawfully claiming from the mortgagor may redeem the entire premises sold by paying, within 6 months after the sale, to the purchaser, his or her personal representative or agents, or to the register of deeds office where the deed of sale is deposited, for the benefit of the purchaser, the amount that was bid with interest from the date of the sale at the interest rate provided in the mortgage.  MCL 600.3140(1).

• The exact amount of money needed to redeem must be stated on the purchaser’s affidavit attached to the deed of sale at the register of deeds, which must also include any daily per diem amounts and the date the property must be redeemed. MCL 600.3140(3).  Unlike the foreclosure by advertisement, the register of deeds CANNOT calculate this amount.  In addition, a $5.00 fee must be paid to the register of deeds if they are taking care and custody of the redemption money.  MCL 600.3140(4).

• The court, in its judgment of foreclosure, may add to the amount required for redemption, “any sum or sums paid at any time after the foreclosure and prior to the expiration of the period of redemption, as taxes assessed against the property and/or the portion of the premium of any insurance policy covering any buildings located on the premises as is required to keep the policy in force until the expiration of the period of redemption, if under the terms of the mortgage it would have been the duty of the defendants determined to be personally liable to have paid the taxes or insurance premium had the mortgage not been foreclosed.” MCL 600.3145.

• Unlike foreclosure by advertisement, there is a flat 6 month right of redemption period from the date of sale. There is no statutory right to shorten the redemption period because the property is abandoned, or inspection was unreasonably refused.

 

CONCLUSION

Foreclosure proceedings are complicated and the right of redemption has specific rules and procedures that must be strictly followed or the property will be lost forever.  The rules slightly vary depending on whether it was a foreclosure by advertisement or a judicial foreclosure.  A skilled lawyer can guide you through the process and ensure that you are taking the right steps to avoid losing your home permanently.

If you or a loved one have questions about the foreclosure process or need legal representation, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC for assistance today.