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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 ... – PowerPoint PPT presentation

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Title: Michigan: An In-depth Look at Mortgage Foreclosures

Michigan An In-depth Look at Mortgage
  • Presented by
  • Douglas G. Smith
  • Associate Sr. Underwriter
  • Michigan State Counsel

Requirements for Advertisement Foreclosure
  • Default in a condition of the mortgage. Sec.
  • No action or proceeding instituted in a court of
  • 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
  • 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
  • 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
  • Failure to provide notice to borrower enables
    borrower to bring an action in circuit court to
    enjoin the foreclosure. Sec. 3205a (5)
  • 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
  • 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
  • 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
  • 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
  • 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

The Foreclosure Sale
  • The sheriffs 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
  • The purchasers deed (Sheriffs Deed) is void if
    the mortgagor, the mortgagors 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
  • Affidavit of Purchaser (Designee Affidavit)

Redemption of Premises
  • If the purchaser at Sheriffs 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 periods
  • 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
  • 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.

Section 3241 provisions
  • 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
  • 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
  • If foreclosure proceedings have been commenced
    against residential property not exceeding 4
    units, abandonment is conclusively presumed if
    the following are met
  • 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
  • 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
  • This section is the procedure used most often by
    lenders as abandonment is usually determined
    after advertisement has begun.

Non-Military Service Affidavit
  • 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
  • The mortgagee shall record a Non-Military
    Affidavit averring that the borrower is not
    serving in the Military.

Federal Government
  • Foreclosure of property that is encumbered by a
    junior federal tax lien will extinguish the tax
    lien if
  • 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
  • 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
  • Sheriffs 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
  • Affidavit of Purchaser (Designee Affidavit)
  • Affidavit of Mailing to United States, if
  • Affidavit of Mailing to Condominium Association,
    if applicable
  • Affidavit of Abandonment, if applicable.

Mortgage Foreclosures and Condominium Association
  • 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
  • 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
  • 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
  • Stewart Bulletin SLS2010023

REO Sales From the Foreclosing Lender to New
  • Before insuring such a sale, follow the
    identified steps of the Bulletin which, in
    Michigan, are
  • Verify that all foreclosure requirements under
    state law and our guidelines have been met check
  • 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
  • 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
  • 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 doug.smith_at_stewart.com
  • A recording of this webinar can be found on
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