Relevant Michigan Legislation

As we reported two years ago, in 2009 Michigan made a statutory change to its foreclosure by advertisement law adding a mandatory workout period prior to commencing foreclosure on property that is the principal residence of the mortgagor. If the mortgagor "opts in" to the process, the foreclosure is stopped for 90 days during which time the lender must review the mortgagor for loan modification possibilities. That provision was to sunset in July 2011. It is important to report that given the numerous bills introduced in both Michigan houses to extend this modification period it probably will not sunset, but will be a part of Michigan statutory foreclosures for years to come. We'll keep you updated accordingly.

On the topic of foreclosures, the Michigan legislature recently amended the redemption section of the foreclosure statute that allows the register of deeds in only two counties, Oakland and Macomb, to calculate the amount required to redeem foreclosed properties. This was likely done for political reasons so the two largest counties in the state could try and increase revenues since the counties may charge a flat fee for this service.

Some recent case law should be of interest to lenders holding mortgages in Michigan. In Thomas v Dutkavich, _ Mich App _ (2010), WL 4260094, the court of appeals suggested that until a judgment lien is paid in full, the judgment lien continues against real property after conveyance to a third party even if the entire debtor's equity is paid to the judgment creditor. This ruling may impede the ability of a mortgage lender to accept a deed in lieu of foreclosure or negotiate a short sale since the judgment creditor, despite being junior, would not seem to have much incentive to cooperate in the process and issue a discharge.

For further information, please contact:

Jonathan L. Engman, Esq.
Fabrizio & Brook, P.C.
888 W. Big Beaver Rd., #800
Troy, MI 48084