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Understanding the Michigan Foreclosure Process

Every state has different home foreclosure laws. Though there are specifics to the Michigan foreclosure process, the general course is the same — if you are unable to make your mortgage or property tax payments, eventually your home will go into foreclosure. If, after a prescribed length of time, you aren’t able to pay back the money you owe to your lender or to the county, your home will be foreclosed on. That means that your lender or county will repossess the home, and then put it back on the market to sell. 

While this can sound frightening, it’s good to know that in Michigan, there are plenty of warning signs when your home is in danger of foreclosure, and you typically have a few options to avoid foreclosure. First, it’s important to understand what type of foreclosure you might be facing:

Michigan Lender Foreclosure

Michigan lender foreclosure refers to the process your mortgage lender follows if you are unable to make your mortgage payments. Your lender is the bank who you make your mortgage payments to. If you stop making mortgage payments, you are at risk of a Michigan lender foreclosure. 

Michigan Tax Delinquent Foreclosure

Michigan tax-delinquent foreclosure happens when you are unable to, or stop paying your property taxes. In Michigan, you pay property taxes yearly, and you are taxed based on the estimated value of your home. 

Understanding the Michigan Foreclosure Process

Since there are two major types of home foreclosure in the state of Michigan, there are also two different foreclosure processes. You’ll need to be aware of the process that fits your situation. If you’re having trouble making mortgage payments, this first process is for you. If you’ve fallen behind on property taxes, the second process on Michigan tax-delinquent foreclosure is applicable to you. Let’s take a look at how the Michigan foreclosure process works:

Michigan Foreclosure Process if You Fall Behind on Mortgage Payments

If you’re worried about making your mortgage payments, it’s important to understand how the foreclosure process can affect you. 

In the state of Michigan, lender foreclosures are non-judicial. That means they are settled out of court. As such, your lender doesn’t need a court order to sell your home at public auction after you’ve been delinquent for 120 days. Here’s generally how you can avoid this type of foreclosure:

  • Days 2-36 after a missed payment. The day after you miss a payment on your mortgage, you are considered in default. At this point, though, not much happens. Most lenders have a 15 or 20-day grace period. If you know you are going to have trouble making payments, now is the time to talk to your lender. 
  • Day 45. If, after 45 days, you haven’t yet talked to your lender, they will send you an official, written notification that you are in default of your loan. They are also required to assign a point of contact or agent to your case, so you have someone specific to call with any questions or negotiations. At this point, they may also send you additional options. 
    • It’s good to remember that lenders generally do not want to foreclose on your home. For them, it’s easier to work out a solution that gets you back on track for your mortgage payments. Keep that in mind, and do your best to get in contact with your lender to see what your options are. 
  • Day 121. After 120 days, your lender is allowed to start the foreclosure process. They will schedule a Sheriff’s sale date and are required to publish the date of the sale for four consecutive weeks before that sale, with details of the debt. At this point, your lender must also post a notice on your property.
  • Sheriff Sale. You can still work something out with your lender until the date of the Sheriff Sale. You may be able to arrange a short sale, accept a cash offer for your home, or work with your lender to find a reasonable repayment plan. After the Sheriff Sale, your home goes into the redemption period. 
  • Redemption Period. In Michigan, homeowners most often have a six month redemption period. If you owe less than ⅓ of your original loan, you may have a 12 month redemption period. During this time, you can live in the property. You can also sell or buy back the property during this time, but you do have to allow whoever purchased the home at the Sheriff Sale to inspect the home during this period upon reasonable notice. 

After the redemption period ends, the foreclosure process is officially complete, and you will have to leave your home. That said, there is a lot of time between when you first miss a mortgage payment and when eviction happens in a Michigan foreclosure, which gives you a bit of time to find a solution that can help you get out from under that home. 

Michigan Foreclosure Process if You Fall Behind on Property Taxes

A property tax foreclosure works much differently. Instead of owing your lender, you owe your county. In Michigan, the property tax foreclosure process takes three years. Because property taxes have priority over any other lien on a property, if you do fall behind on your property taxes, your lender may step in to pay those taxes. That can be problematic, because your lender will then require additional payments from you, to cover the payments they had to make on your property taxes. 

If you miss a property tax payment, it’s good to know that the sooner you pay some or all of that tax, the better. The longer you wait to pay, the more fees will pile up, and eventually, the county requires that you pay back any owed taxes in full, rather than partially. Here’s how the Michigan tax foreclosure process works:

  • March 1. Michigan property taxes are due to the county by February 14. If you have not paid those property taxes, your county will be notified, and your property will be marked delinquent on March 1st. At this time, the county will add a 4% administration fee and a 1% monthly interest rate to the amount you owe. 
  • County Notices. The county will send you three notices before your property is considered forfeited. Those notices are sent out in June, October, and February of the next year. Each will notify you that your property taxes are unpaid. By February, the county is allowed to post notices off delinquent properties in the newspaper. 
  • March 1, Second Year. If you haven’t paid off property taxes by the next March 1, the county considers your property forfeited. At this point, to be able to redeem your property you’ll have to pay back all taxes and accrued fees in one lump payment. You can still live in your home at this point. 
  • Certificate of Forfeiture. In April of the second year, the county will officially record a certificate of forfeiture, stating how much property taxes are owed, and that the homeowner has not paid those taxes. 
  • Show Cause Hearing. At this point, the Foreclosing Governmental Unit (FGU) must schedule a show cause hearing, where you have an opportunity to explain why your home should not be foreclosed on. The FGU is required to notify you of the date of this hearing, and it’s important that you attend. This is one of your last chances to redeem your home before it is foreclosed upon.
  • March 30, Third Year. If you still have unpaid property taxes in the third year, the circuit court has to make a decision on your property. The FGU must have shown proof of your show cause hearings, and the courts will make a decision to foreclose, or not foreclose.
  • March 31. If the courts decide your home should be foreclosed on, or if you did not attend your show cause hearing, this is the date of foreclosure and the date that you must leave the premises. 

From here, the county will work to auction the home in an attempt to recoup the costs they lost on the unpaid property taxes. These auctions are usually held in late July through August. At this point, you cannot redeem your home by paying back those taxes you owe. Your home is considered foreclosed upon. 

The Michigan foreclosure process is long, especially in the case of property tax foreclosure. You have nearly three years to pay those taxes back, which is doable for many homeowners, especially those who opt to sell that home. If you’re not sure what to do, and your home is in danger of foreclosure, it’s important to know that you still have options. You don’t have to wait for your lender or the county to take your home. 

If you’re hoping to avoid a Michigan foreclosure, the team at Hometown Development can help. We purchase properties in any condition, for cash, and we can close in as little as five days, helping you get out from under that foreclosure quickly. Contact us online, or give us a call at 616-379-3090 to see how we can help.

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