Note: The information contained herein is for general information only and is not legal advice.
StatisticsAccording to the Free Press, Michigan rated fourth in the nation for mortgage foreclosures in September of 2007. Michigan’s economic woes are partly to blame, especially the recession in the auto industry that resulted in layoffs across the state. Of course the factors that are responsible for a rise in mortgage foreclosures across the country are also at work in Michigan, including the prevalence of sub-prime loans. Adjustable-rate and interest-only mortgages also caused many homeowners to get into houses they really can't afford.
Michigan EconomyIn addition to the immediate effect to the homeowners in foreclosure, there are some unavoidable effects for the state:
- During any economic recession, there are always some opportunistic businesses that flourish. During a rash of foreclosures, the obvious industry for growth is real-estate investment. Betting in favor of Michigan’s economic turn around, investors can buy property relatively cheap to either flip or rent. This brings us to the other consequence of a high foreclosure rate: a relative glut of people needing to rent after losing their houses increases business for both landlords and property management companies.
- According to an article in the Daily Tribune on October 29th, 2007, the rise in foreclosures may have a cyclical effect on Michigan as property values drop and property tax revenue dwindles.
The Foreclosure Process in MichiganIn Michigan, there are two different processes by which a lender can foreclose: judicial action or advertisement. For residential property, lenders most often use foreclosure by advertisement, which is contractual in nature and governed in part by the terms within the mortgage document.
A detailed description of this process can be found in the Timeline to Michigan Foreclosures by Advertisement. Generally speaking, a foreclosure by advertisement starts when the homeowner defaults on their loan payments as defined in the mortgage document. The lender can then begin the foreclosure process by setting a date for a foreclosure sale and posting notice in a local newspaper and on the premises. The sale of the property at the foreclosure sale is not the end of the story, however, because the homeowner has a period in which they can recover or "redeem" the property by paying the amount it sold for at auction, together with interest and certain costs.
This out-of-court process can work to a homeowner’s detriment because many homeowners believe a judicial action is required before they can lose their home. As explained above, the foreclosure by advertisement process can begin much more insidiously. Couple this with a reluctance on the homeowner’s part to talk with the lender when no solution is readily apparent, and the foreclosure process can be much further along than a homeowner knows.