Claiming Surplus Funds After A Michigan Foreclosure

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Sometimes when homes are foreclosed upon, there are surplus funds that result from the proceeding sheriff’s sale. This happens if the property ended up selling for more than the borrower owed on the mortgage at the time of the sale.

In cases such as these, the question that lingers is who is entitled to those surplus funds? In this situation those funds will go to the borrower, since it is essentially the equity that they have built in the home. When this happens, the borrower will be entitled to recoup the surplus funds even though their home has been taken away from them.

This doesn’t always happen though, as the borrower after the foreclosure has the obligation to take the necessary steps to recoup the surplus funds and there are some instances in which other parties may be entitledto the surplus funds that result from a foreclosure.

Below, we will dive into what happens in these situations, and how to claim surplus funds after a Michigan foreclosure.

Who is Due Surplus Funds from a Foreclosure?

If a property sells at sheriff’s sale for less than what was remaining on the mortgage, a delinquency occurs. This amount of money is essentially written off as a loss for the mortgage company that foreclosed on the property, although the mortgage company does have the right to pursue the borrower for the deficiency balance.

There are times, though, when the property will sell for more than what is left on the mortgage, which results in a surplus. How that surplus is handled depends on the order in which people have claims to the property.

Who Has First Claims to Foreclosure Proceeds?

When a property sells at sheriff’s sale during a foreclosure, the first entity to be paid will be the primary lienholder. In most cases, this is the mortgage company. Their debt must be satisfied first before it’s determined whether there are surplus funds.

Let’s look at two examples, both revolving around a property that sold at sheriff’s sale for $50,000. 

In the first example, the outstanding mortgage remaining at the time of the sale – including fees incurred by the lender – was $85,000. In this case, there will be a deficiency of $35,000. The lender will take a loss in this situation.

In the second example, the outstanding mortgage was $35,000, which means there will be a surplus of $15,000.

These surplus funds will go to the borrower in most cases, unless there are other lienholders on the property. This might occur if another creditor has attached a lien to the property, which could happen if you took out a second mortgage or had a judgment lien from a delinquent credit card bill.

If this is the case, then those lienholders would be paid next before the borrower. Whatever money is left after the liens are satisfied goes to the borrower.

How Are Surplus Funds Handled?

In judicial foreclosures, surplus funds are handled in a very straightforward fashion. Since these foreclosures go through the court system, the judge issues an order that directs who the surplus funds are to be paid to.

This is what happens in cases such as a tax foreclosure, which is a different process than a traditional mortgage foreclosure by advertisement. In 2020, the Michigan Supreme Court ruled in Rafaeli, LLC v Oakland County that any government entity that forecloses on a property must return any surplus funds to whoever the title owner was when the foreclosure happens. 

Later that year, the Michigan Legislature passed a law to amend the General Property Tax Act so that procedures would be in place for any property owner to claim their surplus funds if the property was foreclosed for tax reasons. 

However, a majority of foreclosure cases in Michigan are non-judicial and conducted by means of foreclosure by advertisement. This means that the lender proceeds with the foreclosure without going through the court system, opting instead to schedule a sheriff’s sale with proper advertised notice, as laid out pursuant toMichigan law.

Even in these cases, though, an officer is assigned to handle the proceeds of a foreclosure sale, including any surplus funds. This means that even though a judge won’t be handing down the legal edict in the case, Michigan law allows for the borrower to recoup the surplus funds.

How Can You Claim Surplus Funds After a Michigan Foreclosure?

After the foreclosure proceedings have completed, don’t expect a check to be sent to you automatically if you are due surplus funds. There is action that you will have to take to ensure you get the money that is rightfully yours.

Some jurisdictions may require that you file an official petition with their circuit court. This petition would need to follow whatever rules and regulations the local jurisdiction sets for how to file, when to file and what information and proof needs to be included.

Other jurisdictions might allow you to simply file a written demand to whatever entity that is holding the sheriff’s sale to make your claim to the surplus funds. This is a very important step, as there are deadlines in place as set by Michigan law to when you need to file your claim in order to ensure you get your money.

One of the big benefits to claiming these surplus funds is that you could potentially use it to redeem your property rights and remain the homeowner even after the property has been auctioned off. That’s because Michigan foreclosure law provides in most cases a six-month redemption period following the sheriff’s sale, during which the borrower may redeem the property if they’re able to satisfy the entire outstanding balance owed.

Work with a Trusted and Experience Real Estate Law Firm

If your home is being foreclosed upon or if you are within your redemption period after the foreclosure then, you could have significant surplus funds that are due to you. While Michigan law now prohibits equity theft from taking place, borrowers must take action to ensure they recoup their surplus funds.

It’s not easy to do this on your own, though, as it requires filing legal paperwork and meeting specific deadlines. That’s why if you find yourself in this situation, you should work with the trusted and experienced attorneys at Babi Legal Group.

Our team of legal professionals has a combined 20 years of real estate experience, and can help you get the surplus funds that are rightfully yours. Contact us today to find out how we can serve you.

HOA Foreclosure Vs. Bank Foreclosure

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When most homeowners think of foreclosures, they think of the bank being the entity that initiates that process. While that is the most common form of foreclosure — for when homeowners fall behind on their mortgage payments — it’s not the only form.

In Michigan and some other states, homeowners’ associations and condominium associations can also obtain a lien against your property if you fail to pay their assessment dues. The HOA foreclosure process is similar in many ways to a traditional bank foreclosure, but there are some differences, too.

It’s important to understand what you could be facing if you don’t pay your HOA or COA dues. As such, we’ll outline the process below.

Can an HOA Foreclose on Your Home?

The simple answer to this is that, yes, an HOA or COA has the legal right to foreclose on your home. In Michigan, this is established under The Condominium Act.

The law states that if a homeowner falls behind on their HOA or COA assessments, the association may take legal action against the homeowner. This action can include obtaining a lien on the property and, eventually, foreclosing on the home if it makes sense to them.

In this regard, an HOA or COA acts similarly to a taxing entity such as the town, county and state in which you reside. By purchasing a home or unit that has an HOA, you have agreed to pay the assessment fees on a predetermined schedule — just as you have agreed to pay your mortgage to your bank and your property taxes to the local governments.

If you fail to pay these fees, then the HOA has a right to take legal action.

How Can an HOA Foreclose on Your Home?

If you’re behind on your HOA assessment fees, the association has the right to foreclose on your home. They can’t begin to take action in this regard until you’re delinquent for 30 days, though. This is slightly different from the bank, which can consider you delinquent on your mortgage payments if you’re one day past due.

It’s important to note that an HOA has the ability to foreclose on your home even if you’re current with your mortgage payment. The same holds true for government taxing entities: If you’re current with your mortgage but behind on your tax payments, those entities can foreclose, too.

The first step that an HOA will take in the foreclosure process is to serve a lien notice to the homeowner. The association will need to record the lien on the property with the county in which the property is located. Notice of this lien then must be sent to the homeowner at least 10 days before they’re able to proceed with the foreclosure process.

In this aspect, an HOA foreclosure can move faster than a bank foreclosure in Michigan — even though an HOA foreclosure process can’t start as quickly as a bank foreclosure can.

What the lien does is serve as a public notice that the HOA has a monetary claim to the property.

How an HOA Foreclosure Proceeds

Once the HOA foreclosure process begins, it will proceed the same as a bank foreclosure will. The HOA must set up a date for a sheriff’s sale and advertise in a local publication that date for four consecutive weeks.

Then, the home will be sold at auction during the sheriff’s sale, at which the HOA has a right to bid on the home. No matter who the new owner of the home is following the sheriff’s sale, the homeowner will still have a redemption period of six months

This redemption period provides the homeowner the chance to reclaim the home in question if they’re able to pay back all of their delinquent HOA assessment dues, plus any extra fees, interest charges and attorneys’ fees associated with it.

The only exception to this timeline is if the homeowner abandons the home in the process. If they do, then the redemption period is shortened to one month.

If the homeowner doesn’t redeem the property within this timeframe, then the new owner will officially take possession of the property and be allowed to do with it what they want.

Will an HOA Actually Foreclose on Your Home?

Just because an HOA has the legal right to foreclose on your home doesn’t mean they actually will. The challenge for HOAs in regard to foreclosures is what’s known as lien priority. This is what determines how all liens on a property are handled during the foreclosure process.

The lien priority will determine which entity gets paid first after a foreclosure sale is complete. Most liens will follow a rule known as “first in time, first in right.” This says that whatever lien is first recorded is the one that has a higher priority than others for payouts.

This means that the first lienholder will get their money first. If there are any proceeds left after that, they will go to any subsequent lienholder. It’s possible, then, that secondary lienholders may not get paid at all.

In Michigan, an HOA lien will serve as first priority to all others, except for federal or state tax liens or a first mortgage. In other words, if the homeowner has a mortgage on the home, the bank will receive what it’s due before the HOA would receive any money.

Because of this, some HOAs will pursue judicial foreclosures. That’s because their goal in a foreclosure is to collect their past dues — not to necessarily take ownership of a property. This would allow them to receive a court judgment on the property, which could lead to garnishment of wages so they can recoup their money.

Work with a Trusted HOA Foreclosure Lawyer

Michigan law can be quite complicated when it comes to HOA foreclosure vs. bank foreclosure. So, if your HOA is threatening legal action against you because you’re past due on assessment fees, it’s important to have experienced attorneys on your side.

The lawyers at Babi Legal Group have a combined 20 years of real estate experience that they use to represent homeowners who are in situations just like this. Contact us today to learn more about how we can help you.

What To Do If Bank Changed Locks Before A Foreclosure

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When banks initiate the foreclosure process for failure to make payments, they must follow specific requirements as outlined by the state in which the property is located. These requirements are guidelines that tell the bank what it has to do, when it has to do it and what it has to do to complete the step.

 

During the entire foreclosure process, the borrower still retains rights in all states. Banks can’t simply seize the home, evict the borrowers and sell the home to someone else whenever they want. They must follow the process the state outlines in its foreclosure rules and regulations.

 

There are times, though, when banks may try to fast-track the process so they can evict a borrower quickly to regain their asset and unload it to someone else. When this occurs, they may change the locks on the home to ensure that the borrower doesn’t have access to the property anymore.

 

But, what can you do if the bank has changed the locks before they’ve reached the proper stages of the foreclosure process? We’ll examine borrowers’ foreclosure rights in Michigan below.

 

Can the Bank Change Your Locks?

Eventually, the bank has the right to change the locks on your home during a foreclosure. But, in Michigan, this can’t happen until the borrower officially abandons the home. When this happens, the bank has the right to change your locks so that it can protect what’s now their asset.

 

A borrower can be determined to abandon the home three ways – if they choose to leave the property voluntarily, if they agree to a “Cash for Keys” deal, or if they’ve been evicted.

 

The first of those three options is simple to understand. It happens when you decide to leave the home on your own to find other housing. In this situation, the bank simply changes the locks to prevent unauthorized people from accessing it as they take control of it and try to sell it.

 

The other two options are a little more complicated.

 

Cash for Keys

In a “Cash for Keys” agreement, the bank will provide the borrower with cash in exchange for leaving the home before the redemption period has ended. This allows the bank to attempt to sell the home without having to wait the typical six-month redemption period before they can proceed, allows the new owner to take possession of the home after a sheriff’s sale and/or eliminates the need for a costly eviction process.

 

In exchange for this courtesy, the bank will pay the borrower an agreed-upon sum. The amount of money is usually negotiable on a case-by-case basis.  This money will help the borrower pay for the up-front moving costs, to find new housing, or pay for other expenses.

 

Eviction

If the bank and the homeowner can’t come to an agreement on abandoning the home, then the bank has the right to proceed with an eviction. In Michigan, this is an official court process that can’t even begin until the redemption period is over.

 

In order to evict a borrower from a home, the bank must file a complaint and summons with the local district court. If the home has been sold to a new owner at sheriff’s sale, then the new owner must file this paperwork with the court after the redemption period has expired.  If the eviction is filed during the redemption, then the eviction will be dismissed..

 

Once this happens, the borrower receives a notice that an eviction has been filed. It’ll include a timeline for when a hearing will take place, and when you must respond if you wish to. 

 

If a court were to order an eviction after the hearing, then the borrower typically has as many as 10 days to vacate the home. If there is a new owner of the home, you could always work out an arrangement for a longer period if you need to. 

 

Should you attempt to stay in the home beyond that date, the court can order the local sheriff to force the eviction and physically remove you and all your belongings.

 

When Can a Foreclosure Eviction Happen in Michigan?

 

In Michigan, an eviction as part of a foreclosure cannot proceed until after the redemption period has ended – and the redemption period won’t even start until after the home has been sold at a sheriff’s sale.

 

What’s more, a sheriff’s sale can’t even be scheduled until 120 days after the borrower first missed their payment. Even then, the sheriff’s sale date must be published for four weeks before it is held.

 

Here is the typical timeline for foreclosures in Michigan …

 

Days 1-120

Borrowers are considered delinquent on their payments if they miss their payment by one day. During the early stages following the delinquency, the bank will notify the borrower that they are late – with live contact – and provide options for making good.

 

On Day 45, the lender has to assign one contact point for the homeowner and also provide them a written notice that they’re delinquent on their mortgage, along with options for loss mitigation.

 

From that point until Day 121, borrowers are able to work with the lender to work out options for making up for the delinquency. 

 

Day 121-Four More Weeks

At Day 121, if the borrower and lender are unable to come to an agreement, the lender is able to start the foreclosure process. In Michigan, this can be done in two ways: either through foreclosure by advertisement or judicial foreclosure. 

 

Before the sale is allowed to be held, if foreclosure is being sought by advertisement, a notice must be published in a county newspaper for four weeks in a row. Notice of the sale also has to get posted on the property itself within two weeks of the first notice of publication.

 

Six More Months

After the sheriff’s sale has finished, the foreclosure enters what’s known as the Redemption Period. In most cases, this lasts six months in Michigan.

 

During this time, borrowers have various options depending on their situation.  Borrowers have the right to redeem the property by paying the entire amount paid at the foreclosure sale, plus interest and fees, to redeem the property. If they’re able to do so, they will take back ownership of the home.  The borrower also has the right to sell their home through a traditional sale such as the Multi-Listing Service to obtain fair market value for the home.  This can be risky as the borrower is limited on the time frame to actually sell the property.  Finally, if the borrower believes the foreclosure was done improperly they can file a suit and petition the court to set-aside the sale and force the lender to start over or workout an alternative resolution.

 

Only after all of this time has passed can the lender even begin the eviction process.

 

Work with an Experienced Law Firm if the Bank Has Changed the Locks

As you can see above, a bank can’t simply change the locks before a foreclosure in Michigan. They must follow set processes and procedures that will take months to complete. At the very least, it will take nearly 150 days from the time of the first missed payment for the bank to even hold a sheriff’s sale. Even then, the borrower will have six more months to redeem the property.

 

The lender can then only start the eviction process  after that point. Remember, the only time a bank can change the locks on a property in foreclosure is after the borrower has abandoned the home.

 

If the bank has changed your locks before they’re allowed to in a foreclosure, it’s important you work with an experienced law firm that can protect your rights. Babi Legal Group has more than 20 years of combined real estate experience, and can help you defend yourself against a bank that has changed the locks on you during foreclosure.


Contact us today to learn more. 

What Is Foreclosure Lis Pendens?

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The foreclosure process can take a while in most states. In Michigan, mortgage companies can’t even begin the foreclosure process until a borrower is at least 120 days past due on their payments. 

Even then, a sheriff’s sale can’t be held for at least four weeks after the foreclosure notice is posted on the home’s front door.

In other words, foreclosures don’t happen overnight, no matter what state you’re in. 

When a mortgage company intends to foreclose on a property, they need to make sure that their asset is protected in the meantime, and that the public also knows it’s happening. To do this, the lender will file either what’s known as a lis pendens or notice of default, depending on the type of foreclosure being pursued and what state you are in.

Here are some more details about what a lis pendens is and how it applies in foreclosures.

What Does Lis Pendens Mean in Foreclosure?

Lis pendens is a Latin phrase that essentially means “suit pending.” In this sense, it’s a public notice that lenders will initiate when they begin the foreclosure process.

The idea behind a lis pendens is to notify the public that there is a lawsuit pending on the property in question. It puts a mark on the property’s title so that it won’t be sold easily. 

By filing a lis pendens, a lender will be making it very difficult for the borrower to sell the home, since buyers typically aren’t interested in acquiring properties that have clouded or bad marks on the title.

Lis pendens are filed directly with the recorder’s office in the county in which the home is located, typically known as the register of deeds office. It’s a public record file that notifies anyone who wishes to research the title history and determine the condition of title on a property .

This type of document can actually be used in a number of situations in which there is a dispute on a property, including in divorces, when a will is being contested, when a contract is being disputed and when the homeowner hasn’t paid property taxes.

When is a Lis Pendens Filed in Foreclosures?

A lis pendens is typically filed in all judicial foreclosures. This type of process requires the lender to start the judicial foreclosure process by filing an official lawsuit with the county in which the property is located.  However, a lis pendens is not required to be filed when foreclosing by advertisement.

Along with the actual lawsuit, the lis pendens notice will be filed with the recorder’s office. The states that require lis pendens to be filed say that it must accompany the actual foreclosure complaint.

This is where a lis pendens in foreclosure differs from other disputes. In a divorce, for instance, a lis pendens is allowed to be filed on a property, but it’s not a requirement. 

Contained in a typical lis pendens is a full description of the property in question, as well as the described nature of the exact claim against it. 

In all, 22 states require judicial foreclosures and the lis pendens that go along with it. While Michigan does have judicial foreclosures, they are not very common. Instead, most foreclosures in the state of Michigan are non-judicial foreclosures by advertisement and require a notice with a slightly different name.

For non-judicial foreclosures, lenders have to record what’s known as a notice of default. This notice will take the place of a lis pendens, but serves a very similar purpose. It, too, is a notice that informs the public of pending action against a property, and it also has to be filed with the recorder’s office in the county in which the property is located.

Unlike a lis pendens, though, a notice of default will usually contain very specific information that outlines the details about the loan that’s in default.

Once the notice of default or lis pendens is filed, the property in question is considered to be in what’s called the pre-foreclosure phase. This phase will last until that property is finally sold.

Details of Lis Pendens and Foreclosure in Michigan

As mentioned before, a lis pendens or notice of default can’t be filed by the lender until the borrower is at least 120 days behind on their monthly mortgage payment. Up until that time, the lender is required to take certain steps to notify the borrower of the missed payment and options for making it right.

The first written notification of delinquency happens on Day 45 after the missed payment, at which time the lender has to assign the homeowner a single point of contact for the case, as well as their options for loss mitigation. 

Once Day 121 hits, the lender is free to file the lis pendens (in judicial foreclosures) or notice of default (in non-judicial foreclosures).

From that point, a Sheriff’s Sale will be held to sell the property to the highest bidder. However, this cannot occur until public notice of the upcoming Sheriff’s Sale has been advertised weekly for four weeks leading up to the date of the sale.

Even after the property is sold at Sheriff’s Sale, homeowners in Michigan enter what’s known as the redemption period, which commonly lasts six months. During this time, the homeowner can redeem the property by paying the entire foreclosure sale amount, by refinancing their mortgage, and selling their property on the fair market.

Know Your Rights in a Lis Pendens Foreclosure

Lis pendens sounds like a fancy legal term, but all it means, essentially, is that a suit is pending. In the case of a property foreclosure, it notifies the public that a lender has started foreclosure proceedings against a homeowner who is in default of payment.

If you are facing a lis pendens or notice of default foreclosure in Michigan, it’s important to know what your rights are. The simple filing of either of these notices doesn’t mean you have to give up your home. In fact, there’s still plenty you can do to resurrect the situation.

That’s why it’s important that you know your rights and the steps you need to take to protect yourself. At Babi Legal Group, we have been helping homeowners like you for over 15 years to solve real estate disputes such as foreclosures.

Contact us today to find out how we can help you.

Foreclosure on Discharged Mortgage

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When individuals are facing economic struggles, they may proceed with filing for bankruptcy protection to get them back on the right foot. If these individuals are homeowners, the process gets a little more complicated.

Chapter 7 bankruptcy allows individuals to not include their home and associated mortgage in the bankruptcy proceedings, provided they are current on the loan obligation and have the ability to pay for the mortgage to remain in the home. It’s also possible for the individual to include the home and mortgage in the bankruptcy proceedings, which could result in the mortgage being discharged along with other debts.

Unfortunately, this process can be complicated and confusing. Some individuals may believe that when they’re mortgage is discharged, they are no longer financially responsible for paying it. And while that’s technically true, it doesn’t mean the borrower gets the home free and clear of the mortgage and that the mortgage company won’t foreclose on the home.

Below is an explanation of what typically happens when a lender forecloses on a discharged mortgage.

How Chapter 7 Bankruptcy Works

Through Chapter 7 bankruptcy, individuals can have their debts wiped out (i.e., discharged), if they meet various bankruptcy criteria as well as the economic standards set by the state they live in. The process will go through the bankruptcy court system, which will have to approve the bankruptcy.

Individuals will have to list all of their outstanding debts that they have  in bankruptcy. The Chapter 7 bankruptcy proceeding will conclude with the courts discharging the debts that are included — assuming the bankruptcy is approved, of course and the debts that the borrower (i.e., the Debtor) will keep by reaffirming in bankruptcy .

A bankruptcy discharge removes the individual’s responsibility from paying the debt in the future, essentially wiping out the amount they owe. The creditors in this case are often left empty-handed, though the bankruptcy Trustee may use the individual’s assets if unprotected in the bankruptcy to distribute to the creditors to make them as whole as possible.

In this sense, Chapter 7 bankruptcy provides individuals with the opportunity for a financial fresh start. However, it doesn’t provide them with assets free and clear of any debt obligation.

How Bankruptcy Affects Mortgages

As mentioned, if the mortgage is discharged through bankruptcy, the homeowner will no longer be responsible for the mortgage debt. This doesn’t mean that they have a free home to live in, though.

The bankruptcy will only eliminate the mortgage debt. What it doesn’t do is clear the lien on the property. 

All mortgages consist of two sections.

The first part is the promissory note, which is the personal assurance from the homeowner that they’ll repay the money they are borrowing. This is what ends up being discharged during a bankruptcy.

The second part is the actual mortgage itself, or the deed of trust. This is what puts a lien on the property. The lien remains on the property until the home owner pays off the mortgage.

The bankruptcy proceedings don’t discharge the second part, meaning that the lender still holds the lien on the property. Because of this, they still hold a legal right to foreclose on the property to reclaim their asset.

Will Foreclosure Always Follow a Discharged Mortgage?

Surprisingly, lenders won’t always foreclosure on a home after the mortgage has been discharged through bankruptcy. If the homeowner is able to remain current on mortgage payments, and if they don’t have much equity in the home, then the lender may decide it’s not worth their time or effort to foreclose and can continue to accept payments.  However, this does not prevent the mortgage company from foreclosing at any time they may deem it necessary.

In essence, the lender could decide to allow a homeowner in this situation to remain in the home, as long as they keep paying the mortgage. Since there isn’t much equity in the home, the lender might make out better by collecting monthly mortgage payments rather than trying to take ownership of the home.

However, if the homeowner doesn’t make mortgage payments, or if they have a lot of equity in the property, the lender would be more likely to foreclose on it. That’s because they could reclaim a most if not all of the money they were owedwhen the mortgage was discharged during bankruptcy.

How Foreclosure on a Discharged Mortgage Works

Even though the mortgage debt has been wiped out by the bankruptcy, a lender simply can’t kick an individual out of the home. They’ll still technically remain the owners of the home until the lender completes the legal process of foreclosing on the home.

That’s because foreclosure is the legal process that’s necessary for the lender to reclaim ownership of their property. Until this process is complete, the homeowner will remain the legal owner of the property. Foreclosure will formally remove their name from the home and transfer it to the bank, giving them legal rights to the home itself and the ability to re-sell it.

There are very specific steps that all mortgage companies must take to foreclose on a home. Each state has its own rules and regulations for this, and these don’t change just because the mortgage has been discharged in a bankruptcy. 

In other words, a lender can’t simply show up at the property, kick the homeowner out and change the locks. They need to follow the same legal proceedings that are set out by the state in which the property is located.

Work with a Trusted Law Firm

 

Even if your mortgage has been discharged through a bankruptcy proceeding, you still hold rights to the property until the mortgage company completes the foreclosure process. Many homeowners may not know this, and mortgage companies may try to take advantage of them as they’re in a vulnerable position — forcing them out of the home before they have to.

It’s important to know your rights if you are facing foreclosure on a discharged mortgage. Working with a trusted law firm such as Babi Legal Group will help you avoid being taken advantage of.

At Babi Legal Group, we have more than 20 years of real estate experience, as well as more than 15 years in business law, criminal, bankruptcy, debt collection and debt settlement experience. Our attorneys have the knowledge about what rights you have in this situation, and we ensure all of our clients are always protected.

Contact us today to find out how we can help you.

What Is Writ Of Assistance In A Foreclosure?

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When homeowners fail to meet the requirements of their mortgage, lenders will often proceed with a foreclosure to reclaim their property. This is done because the property itself is what’s used as the collateral to secure the loan.

Until the borrower pays the loan off, the collateral — the property in this case — remains an asset they can seek to recover to pay the outstanding balance owed. The lender then has the right to foreclose on the property when the borrower doesn’t pay the agreed-upon mortgage.

While there are different processes and requirements that are set by each individual state, the end goal of foreclosure is the same — to reclaim the unpaid balance owed through the collateralized property.

Despite a formal foreclosure process taking place, there are sometimes when the lender will need help to remove former owners from the property once a sheriff’s sale has gone through. This is done through what’s called a writ of assistance.

Let’s dive deeper into how this works.

The Foreclosure Process in Michigan

In Michigan, majority of mortgage payments are due on the first of the month, and are considered delinquent as of the second, unless a grace period is offered. Lenders are able to assess late charges for any late or missed payment, though they are required by state law to make a live contact with a borrower to discuss options they have for loss mitigation.

If the payment hasn’t been made by Day 45, the lender will assign a point of contact for the borrower and provide them with written delinquency notification as well as their options for loss mitigation.

In most instances, from this point until Day 121, borrowers are able to work with lenders directly on these options, which could include partial payments or a modification of the loan. 

The foreclosure process can start on Day 121 if the borrower hasn’t made the proper payment or come to an agreement with the lender. At this point, the lender will schedule a date for a sheriff’s sale, which must be published in a local newspaper four weeks in a row. The date of the sale will also be posted on the property itself two weeks after the first publication date.

The Redemption Period

Michigan foreclosures allow for what’s known as a Redemption period. This starts on the day of the sheriff’s sale and runs for six months after it, in most cases. The redemption period can last up to 12 months if the amount that’s outstanding on the mortgage is two-thirds of the total amount of the original loan or less.

The redemption period for farming property also can be as much as 12 months. 

During this period, the borrower is allowed to remain living in the property without having to make any payments. They should maintain the utilities and insurance on the property as well as be responsible for maintaining the quality and upkeep of the property.

The homeowner has to allow the person or entity who purchases the property at sheriff’s sale to inspect the property during this period.  Failure to allow the required inspection can result in a Court reducing the allowed redemption period.

They also have the opportunity to redeem the property by paying whatever amount is bid at sheriff’s sale, plus any fees and interest.

Evictions after the Redemption Period

Once the redemption period ends, the borrower must vacate the property. If they haven’t done so voluntarily by this period, the new owner will likely seek a summons for eviction, which would be held in the District Court the property is located in. 

If the purchaser at foreclosure is successful in the eviction they will receive an order for possession of the property, then the court will set a date at which the local sheriff to remove the borrower from the property if the borrower doesn’t voluntarily vacate on their own. This is done by an official document called a writ of assistance or an order of eviction.

What is a Writ of Assistance?

A writ of assistance is an official order issued by a court that directs one party to deliver or convey a property, and transfer a deed, right of ownership or document to another party. In the case of a foreclosure, the writ of assistance essentially serves as an official eviction from a property.

The writ of assistance will outline what the homeowner needs to do and by when. Usually, this will simply include a date by which they need to completely remove themselves and their possessions from the property.

The document will also include language that explains what will happen if this isn’t done voluntarily. In Michigan, this means that the local sheriff will show up to the property on the specified date and escort the person off the property and throw out all the personal property in dumpsters that are brought to the property on the day of the eviction.

The sheriff will essentially serve as the overseer, ensuring that the person vacates the property and removes their personal property, and that the locks are changed by a registered locksmith to ensure the new owner is the only one who can access it. 

Foreclosures in Rental Properties

When the property being foreclosed on is a rental with tenants on premises, the rules aren’t as straightforward. A writ of assistance can’t simply be issued once the redemption period ends.

How long tenants are able to remain in the rental property, and the other rights they have, depend on a number of factors, including when their lease was signed and how long it lasts for. Some tenants may even be able to make some money in return for vacating the property voluntarily, in what’s known as a cash-for-keys deal.

Know Your Rights in a Foreclosure

If you’re going through a foreclosure in Michigan, it’s very important to know what rights you have. Some lenders will try to force you out of a property — or take the property from you — before you legally have to leave. It’s also key to know when you will be able to reclaim the property through, and what you have to follow to do so.

If you are facing a writ of assistance in a foreclosure in Michigan, you want to work with an experienced law firm that can help guide you through the process. Babi Legal Group has been helping homeowners in these situations for many years now.

The attorneys at the practice have 20 years of combined experience in real estate, with more than 10 years of experience in business, criminal, debt collection and debt settlement law.

Contact us today for assistance if you’re facing a foreclosure in Michigan.

The Role Of The Allonge In Foreclosure

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Many people throughout the country obtain a mortgage to finance the purchase price of their home. Unless you have the cash to pay for the home outright — or other means of borrowing money — you will likely go the route of choosing one of the popular mortgage types that lenders make available.

No matter what type of mortgage you obtain, and no matter which company you obtain it from, the mortgage itself is a document you will sign that essentially promises that you’ll pay back the money you are borrowing and secures the obligation against your real property. The mortgage outlines the terms of the repayment plan, including the length, the number of payments, the interest rate and type, and the monthly payment plan.

If you don’t pay according to the terms of your mortgage, the lender holds the right to foreclose on the property, which allows them to take possession of it and cancel the loan without any recourse to you.

It’s possible that the lender you originally obtained the mortgage from will sell the promissory note to another company or investor, who will then be the one responsible for collecting payment. This new entity will also hold rights to foreclosure for non-payment — as long as the paperwork is done properly.

The most common way that this transfer of note is done is through what’s known as an allonge. What the allonge says, whether it was used properly and how it was done all plays a vital role in how a potential foreclosure may proceed.

Below, we explain in greater detail the role of the allonge in foreclosure.

How Home Purchases Work

When a person needs to borrow money to finance the purchase price of a home, they’ll typically turn to financial institutions that have specific loan programs in place for that.

During the home closing process, there are two major documents borrowers will need to sign. The first is the promissory note, which is a document that promises that you will repay your loan on the agreed-upon terms.

The second depending on the state you reside in, is either the Deed of Trust or a mortgage. These are what secures the promissory notes against your real property. 

While these documents go hand-in-hand — and are terms that are often incorrectly interchanged — they serve different legal purposes.

The promissory note gives the owner the ability to collect money on the home loan.  The mortgage, or Deed of Trust, will give the owner the power to take any legal action regarding the property if necessary, which includes foreclosure proceedings.

What Happens When Mortgages Are Sold

There are a variety of reasons why your original lender may sell your mortgage to a new lender. From the borrower’s perspective, the only thing that should change when their mortgage is sold is that they’ll make their payments to a new company. The new owner of the mortgage is not allowed to change the original terms of the mortgage, as that is set in stone at the signing table.

For mortgages to be legally transferred between two owners, an Assignment of Mortgage (“AoM”) must be completed. In addition to transferring the power to collect money from the original lender to the new lender, the AoM will transfer the ability for the new lender to take legal action to foreclose on the property.

When an AoM takes place, generally an allonge will be attached to the promissory note. The allonge is an additional piece of paper that gets attached to the promissory note allowing for the collection of the debt

The Problem with Allonges

Allonges have been around for centuries. They derive from French law and were traditionally attached to bills of exchange when there wasn’t enough room on the original document for the additional signatures.

While they are certainly valid legal documents, there are some concerns today about how they are applied and added to mortgage contracts. Allonges are only intended to be utilized when there isn’t enough space on the original promissory note for a “wet” endorsement to fit. 

However, with AoMs becoming more commonplace over the last 20 years, some banks began to use allonges improperly. Once this was completed, they used the allonges to allege ownership of a note, which they then used to foreclose on a home.

There have been many legal challenges to the use of allonges in foreclosure cases, with varying results for both sides. 

Are Allonges Legal?

The short answer is that allonges are indeed legal. However, like any other legal document, there are rules and regulations parties must follow to ensure they are legal. 

First, allonges are only to be used in the above-stated cases — when there’s simply no more room to attach additional signatures. Second, allonges are supposed to be “wet” endorsements, or signed by hand. Third, the party purchasing the mortgage is supposed to be in possession of the original promissory note when they’re doing so.

What’s more, all AoMs have to be recorded at the county where the property is located, and the valid allonge must be attached at that time of recording.

The entity purchasing the promissory note also has to follow certain state-specific rules and regulations for how they must be filed, where they must be filed and in what timeframe they must be filed. If all of these are not followed then the AoM can be deemed invalid and, in turn, their rights to foreclosure according to the allonge are invalidated as well.

Work with an Experienced Foreclosure Attorney

If your mortgage has been sold and the new owner of your promissory note is trying to foreclose on your property, you may have some legal recourse. What that recourse is will depend on a number of factors, including whether they attached an allonge to the promissory note and if it was done legally.

Cases like these are not easy for individual borrowers to fight on their own. It’s times like these that you need the help of an experienced foreclosure law firm like Babi Legal Group.

Our attorneys have 20 years of experience in real estate, and are well-versed in all of Michigan’s rules and regulations as they pertain to mortgages and allonges.

Contact us today to learn more about how we can help you. 

What is a Vendor Lien?

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When someone purchases real or personal property, they typically will do so either in cash, on a credit card or as part of a larger loan such as a mortgage. If a secured loan is used to finance the purchase price, then the actual property itself is used as collateral.

The most common example of this is a mortgage on real estate or a secured loan on a vehicle. Most people don’t have the financial means to purchase a home outright in cash. So, they turn to financial institutions to get a mortgage. The financial institution that provides the loan to the homeowner lends them the money needed to complete the purchase, takes a security interest against the home, and the borrower must pay back the money on a monthly basis in return.

Sometimes, though, borrowers can’t qualify for a traditional mortgage, so they look for alternative funding sources. In these situations, the seller may put a vendor’s lien on the property to protect the asset. Yet, vendor’s liens can also be used in other circumstances that involve personal property.

Below is a full explanation of what a vendor’s lien is, and how it works in a few different applications.

What’s a Vendor Lien?

Vendor’s liens serve as a claim for the seller on some type of personal property. The lien is a legal document that will give the seller the ability to repossess the property in question if certain conditions are met.

In most cases, the seller would try to repossess the personal property if the buyer doesn’t make payments according to the agreed-upon terms. If the seller does repossess the property, they would have a right to either hold onto it or sell it to someone else.

What Can Be Secured Through a Vendor Lien?

A vendor lien can technically be placed onto any personal property that’s being paid for by a loan. This could apply to real estate, an appliance for your house or a vehicle.

Each state has its own rules and regulations for what types of property may be secure through a vendor lien. Most commonly, though, they are applied to real estate, jewelers, storage facilities, vehicle repair shops, and financial institutions or banks.

In all of these cases, if the borrower or customer fails to make payment on the money they owe, the person or entity that holds the vendor lien will be able to repossess the property.

So, for example, if you fail to pay a repair bill on your car and the auto mechanic has a vendor lien on your vehicle, they’d be able to at least attempt to take possession of your vehicle.

What is the Purpose of a Vendor Lien?

The obvious answer is that a vendor lien is a tool that lenders of any kind can use to take back property if payment for that property isn’t made by the borrower. So, in the above case with the auto mechanic, the shop would be able to use the vehicle itself as leverage to dissuade the owner of the vehicle from not paying the bill.

But, a vendor lien goes much deeper than that. It prevents the borrower from either transferring the title or selling that property until they are able to clear the title. In this case, the seller will be the rightful owner of the property in question up until the borrower pays off the property completely.

How a Vendor Lien Works for Real Estate

Not every homeowner is able to qualify for a mortgage. When this happens, they may not have a lot of options for obtaining the necessary financing to pay for the home.

In some cases, the seller of the home would be willing to be the lender. Instead of the buyer using money they got from a mortgage company to pay for the home, they would make monthly payments directly to the seller to satisfy the sales price.

A contract would be drawn up that lays out the terms of the sale — just like a mortgage. In that contract would typically be a vendor lien, which would protect the seller’s interest.

It could technically prevent the buyer from selling the home again to another person before they fully pay off the loan. There might be language in the vendor lien, though, they would say this would be OK as long as the holding of the vendor lien approved of the sale.

The vendor lien would serve as the official document in this out-of-the-ordinary home sale transaction, and it would allow the seller to begin the foreclosure process if the buyer doesn’t make the scheduled payments or falls behind. 

How a Vendor Lien Gets Discharged

After all payments are made in the contract, the borrower won’t owe any more money, and the vendor lien will be completely satisfied. Some contracts may include language that says the vendor lien will be automatically discharged when this happens.

Even so, it’s in the best interest of the borrower to get a signed, written document that serves as evidence that the borrower has satisfied the vendor lien and it’s paid off. That way, the holder of the vendor lien can’t make a claim to the property in the future.

This is very important to borrowers for another major reason — vendor liens will typically be reported on a borrower’s credit report. As such, the mere presence of a vendor lien could affect a borrower’s credit score for as long as it’s still on their record.

When the borrower is able to prove that they have satisfied the vendor lien and it gets discharged, it should be removed from their credit report as well, which will typically result in their credit score increasing.

Vendor liens can be rather complicated depending on the type of property you’re trying to secure. Since a vendor lien can be attached to a written contract agreed to by two private parties — and not a mortgage company, for instance — it’s important that if you’re entering into a contract that has one, you understand everything it means.

The Difference Between an Execution Sale and a Foreclosure Sale

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Properties can be repossessed by banks or other creditors under certain clearly-defined circumstances, which vary from state to state. While the processes of repossession and re-sale differ from one type to the next, the general premise for these repossessions being initiated is unpaid debt.

Two of the most common forms of re-sale for repossessed properties are execution sales and foreclosure sales. While the two operate fairly similarly, there are many differences — including how the process starts, how it proceeds and how it ends.

Below, we’ll define what an execution sale and a foreclosure sale is, as well as point out the major differences between them.

What is an Execution Sale?

An execution sale is also commonly referred to as a sheriff’s sale. These sales auction off properties that have been repossessed due to unpaid debt or other obligations. 

An execution sale can only be conducted after a court has issued what’s known as a writ of execution. That’s why execution sales are often referred to as being court ordered.

During an execution sale, a public auction will occur at a public place, such as the courthouse steps of the municipality in which the property is located. It’s also managed by law enforcement officials in the local municipality, which is why they’re called sheriff’s sales.

Before an execution sale is held, it will be advertised at various online sites and in some local newspapers, with a specific date, time and location for the auction. Any member of the public can attend the auction and bid on the property.

The auction itself proceeds like any other, with the highest bidder becoming the new owner of the property once payment has been satisfied. Generally speaking, the highest bidder will have to pay in cash or have funding already secured before paying for such a property.

These types of sales are rare in Michigan as most creditors and courts follow the foreclosure process, which allows the borrower a redemption interest in the home after foreclosure.

What is a Foreclosure Sale?

As mentioned earlier, some foreclosures will end in execution sales, though not all will. Sometimes, the mortgage company will follow specific procedures that are laid out in their state to obtain possession of a home and then sell it. This is called a non-judicial foreclosure, since it happens outside of court.

Each state has a slightly different rules and regulations for how foreclosure proceedings must occur, and the mortgage company must follow those procedures exactly to finalize the foreclosure.

Every mortgage is referred to as a secured loan, since it uses the actual property as collateral. When the borrower isn’t able to repay the mortgage per the terms of the loan, then the lender has the right to start foreclosure proceedings to repossess the property.

When Can a Lender Foreclose on a Property?

Generally speaking, a lender tries to avoid the foreclosure proceedings. That’s because foreclosures can be expensive, and forces lenders to become property owners, which is outside of their core competency.

When a borrower misses a payment, they’ll typically receive a missed payment notice. Once they miss a second payment, they might be sent a demand letter that advises the borrower of the dangers of continuing to miss payments. The letter may also offer payment arrangements.

Notices of default may be sent in many cases once the borrower has missed payments for 90 days, and this is when the foreclosure process will typically start in earnest. There are different notification timelines and steps the lender must take to satisfy the foreclosure criteria.

There are 22 states where the normal process includes judicial foreclosure, which requires the lender to seek relief from the court system. The other 28 states can use non-judicial foreclosure. This provides a quicker process for the lender to foreclose on the home and re-sell it at auction.

Similarities 

Both execution sales and foreclosure sales are processes that are taken to allow creditors to reclaim unpaid debt quickly. They are completed when a borrower doesn’t pay an obligation that they are legally required to repay — such as mortgage or tax bill.

Both sales will transfer the ownership of the property, and they are typically done at an auction format. Some foreclosure sales actually may end up as execution sales, which are referred to as judicial foreclosures.

Differences

Non-judicial foreclosures can be carried out in 28 states without the need for court intervention. Execution sales, by contrast, can only be conducted once a court has made a judgment that forces the sale.

Because execution sales are ordered by the court, there isn’t much a borrower can do to stop them. In essence, one of the only options a borrower might have to stop an execution sale is to appeal the decision or satisfy the court’s demands.

Non-judicial foreclosure proceedings provide the lender with a shorter timeframe to take possession of the property and sell it at auction. At the same time, the lender will often try to work with the borrower to allow them to avoid foreclosure along the way.

There’s a reinstatement period during the foreclosure process, during which the borrower may catch up with what they owe, find outside financing to satisfy the outstanding amount, obtain a short refinance and have a portion of the loan forgiven, or even obtain special forbearance in the case of a temporary hardship.

In non-judicial foreclosures, the borrower has more options to keep ownership of the property going forward, while they have little control during an execution sale. 

Michigan State Cannabis License Approval vs. City/Municipality Cannabis License Approval

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Cannabis has become big business in Michigan in a very short period of time. While the Michigan Regulation and Taxation of Marijuana Act was passed in 2018, the first sale of recreational marijuana didn’t take place in the state until December of 2019. 

In the first full year of recreational marijuana sale in 2020, overall sales totaled more than $950 million. One year later, that number exceeded $1 billion for 2021, the Marijuana Regulatory Agency reported.

It’s clear that cannabis has become big business in Michigan, and it’s expected to grow at considerable rates in coming years, too. This fact is attracting a lot of people to the industry who are looking to cash in on what is a completely new industry.

If you want to get in on the cannabis sales game, there are rules and regulations you must follow. Below, we’ll discuss cannabis license approval at both the state and municipality level.

Types of Licenses Available

Michigan state law provides for a few different licenses related to cannabis. So, the first step in getting license approval is to figure out which license you want to apply for. 

There are various six different categories of licenses to which you can apply. These include …

  • Grower (Class A): The licensing fee of $1,2004,000 will allow businesses to grow as much as 5100 plants. They can be sold to processors or retail cannabis stores.
  • Grower (Class B): The licensing fee of $6,000 will allow businesses to grow as much as 1,000 plants.
  • Grower (Class C): The licensing fee of $24,000 will allow businesses to grow as much as 1,500 plants.
  • Microbusiness: The licensing fee of $8,000 allows owners to grow as much as 150 plants, then process what they grow and finally sell it directly to legal adults. It’s a way to vertically integrate a cannabis business in Michigan.
  • Consumption establishment: A licensing fee of $1,000 allows people to operate social clubs that welcome people to use marijuana while inside. In most cases, the clubs are restricted to people who are at least 21 years old, and the establishment typically can’t sell alcohol or food.
  • Event organizer: A licensing fee of $1,000 allows organizers to hold temporary events revolved around marijuana. Some of these events have entrants who compete for various prizes, while others are conferences.
  • Temporary event: For a fee, people who hold an event organizer license may hold an event that allows for the consumption and sale of cannabis products. Every day the event is held, the licensee must pay a $500 fee. If cannabis will be sold, then the fee goes up by another $500 per day, plus $500 for every person who’s authorized to sell there.
  • Testing facility: The licensing fee of $25,000 allows for people to open cannabis testing facilities specifically for recreational usage.
  • Marijuana Processor: The licensing fee of $24,000 will allow businesses to process marijuana into its various allowed bi-products such as an oil or edible.
  • Marijuana Retailer: The licensing fee of $15,000 will allow businesses to sell all allowed marijuana products.
  • Marijuana Secure Transporter: The licensing fee of $15,000 will allow the license holder to transport marijuana to other state approved businesses.

One thing to note is that Michigan changed its state law in regard to marijuana licensing. In early 2022, the state dropped a requirement that a licensee must first hold a medical marijuana license to apply for a recreational usage license. Now, prospective license holders can apply directly to receive a recreational license.

How to Get a Michigan State Cannabis License?

Applying for and receiving a Michigan state cannabis license is essentially a two-step process.

Step one is the pre-qualification process. A $6,000 fee must be paid to the State of Michigan Marijuana Regulatory Agency to start the process.

Pre-qualification involves submitting an application to Michigan’s Department of Licensing and Regulatory Affairs. Once that is done, officials from LARA will conduct a background check on all applicants for the license, including both the primary applicant and any supplemental applicant.

If you are approved in pre-qualification, you’ll be allowed to search for a facility where your business will operate. The facility must be fully secured before the second step can be started, which includes applying for the full state cannabis license.

During this step, MRA officials conduct an inspection of your facility. They’ll also examine local laws and regulations, your company’s financial statements and prospectus and information about your employees.

If all goes well, you’ll be approved for a Michigan state cannabis license. To formally get your license, you’ll have to pay the initial licensing fee, which will vary according to the type of cannabis business you’re opening. You also must pay a renewal fee each year to keep the license active.

How to Get a Municipality Cannabis License in Michigan?

Step two in the process of gaining approval for a Michigan state cannabis license is finding and securing a facility for your business. You won’t be able to just choose whatever facility is up for sale or rent, though.

Michigan’s cannabis law allows local municipalities to set their own rules in regard to businesses in the marijuana industry. Some municipalities only allow certain types of cannabis businesses — either medical or recreational, for instance. Others allow all types of cannabis businesses, while some don’t allow any at all.

Generally speaking, if a municipality has laws that allow recreational marijuana facilities to operate, they probably also allow medical marijuana facilities to operate there, too.

The same is not necessarily true the other way around. For example, Acme Township in Grand Traverse County allows for medical marijuana facilities but not recreational marijuana facilities. 

State Laws in Regard to Municipal Licenses

Michigan state law set the parameters for what municipalities were allowed to do in regard to providing for the operation of cannabis businesses within their borders.

First and foremost, the state put it in each municipality’s hands to decide whether they wanted to “opt in” to allowing processors, secure transporters, provisioning centers, growers and/or safety compliance centers to be located there. If a municipality decides to opt in, they must pass an ordinance that not only permits but regulates the facilities.

Municipalities do have some freedom in terms of what they can include in the ordinance, such as:

  • Type: They can authorize multiple types of cannabis facilities or only one.
  • Number: They can limit how many facilities can operate there, and how many of each specific type of facility.
  • Fee: They can charge an additional $5,000 fee to every person receiving a cannabis license.
  • Supplemental ordinances: They can enact additional ordinances that are related to the cannabis businesses, such as zoning regulations that prohibit facilities to be located within a certain distance from a school, for instance.

What municipalities don’t have the freedom to do is set regulations or rules regarding either the pricing or purity of the cannabis being processed/sold in their municipality. They also cannot implement laws and regulations that conflict or interfere with state-level regulations in regard to the licensing of cannabis facilities.

Each municipality may have their own unique application process for receiving a license. So, make sure you contact the local government of the municipality. in which you wish to operate a cannabis facility to get more information.