Michigan - state laws on deficiency

A deficiency judgement is a judgement that is against a debtor or borrower whose foreclosure sale did not produce sufficient funds to pay the mortgage balance in full. This judgement can/will be placed on your credit and any subsequent properties you purchase or already own. Typically with a deficiency judgement, until this is paid off you will not be able to purchase another home through a lender.

As of right now, every state except California and Oregon are deficiency law states.

Hi EH!

Welcome to forums

A judgment against a borrower whose foreclosure sale did not produce enough funds to pay the mortgage in full is known as deficiency judgment. The borrower will have to pay the deficient amount resulting from the sale of the property to the lender. Not all states allow deficient judgment against the borrower. However, Michigan is a deficiency judgment state. So if you sell your property and their is a deficient amount resulting from the sale, the lender has all the right to ask you to pay that amount.

Feel free to ask if you have further queries.

Sussane

Most foreclosures in Michigan are by publication, a sale held by the county sheriff, noticed for four consecutive weeks in a local newspaper, almost always the Legal News
Alternatively, there is a judicial foreclosure process, through the Circuit Court for the county in which the property is located, but it takes longer and is more expensive for the mortgage company, so rarely used. In almost all foreclosure by publication the mortgage company bids the amount due on the mortgage, and no one else bids higher. Even if someone does, there would be no deficiency, as the sherrifs deed transferring the property 6 months after the foreclosure sale effectively is for the amount bid. This means, you have lost the home, but you owe nothing.

The lender's are beginning to under bid what is owed at the Sheriff's sale. So, caution is necessary because that means they may be preserving their right to sue borrower's in the future for a deficiency. Borrower's may not even know that this is happening, and it is a legal strategy that they must be aware of to protect themselves from future liablility

In a short sale can you ask the sale be contingent on waiving the deficiency judgement for the seller. That is what my TX real estate agent told me they do in TX?

In regards to the short sale I was speaking about my home in MI. We've been transferred to TX over a year ago. We can't keep paying 2 mortgages. We thus far are not behind on payments but near the end of our money reserve. Something has got to give.

In a short sale, the lender has the right to sue you for the deficiency amount. But you can definitely negotiate with the lender so that either he reduces your payments or forgives them.

since you are out of state, i would offer the bank a deed in lieu of foreclosure. basically you are turning over deed to the house back to the lender. it is cheaper for the bank than a foreclosure; and while it is not perfect it is a step up from foreclosure on your credit report. still a 200 pt hit.

What happens to the 2nd mortgage after a sheriff's sale and the bank bid the amount on the first mortgage? Can they sue for a deficiency judgement? Do they usually do this?

Hi Guest,

I found the same topic discussed in the following page. I hope this will help you:
http://www.mortgagefit.com/problem/deficiency-judgement.html#81434

Thanks,

Jerry

Are there lawyers that specialize in this arena? How do I find one? My issue is very complex and I'm not sure where to turn. In short, my wifes old home is 2 months behind since renters aren't paying. I'm not tied to it on any paper and it's still in her maiden name. We use the annual loss on it as a write of on taxes filed jointly, am I exposed there? She is a stay at home mom with no source of income. If she stops paying and it forcloses, her credit will be trashed but will mine be effected? Can they go after assets in her name and what type? Is there a look back period if we remove her from everything?

Hi im!

Welcome to forums!

As the property and the mortgage is in your wife's name, your credit will not be effected if the property is foreclosed upon. Yes, the lender can go after her assets which may include another property, her savings etc. If you remove her from the other properties now it will be considered as a fraudulent transfer.

Feel free to ask if you have further queries.

Sussane

Dear Michiganders,

How much cash can a lender take from you per month out of paycheck or bank accounts? Do the courts limit lenders and or banks to a set amount that they can come after you for? Can my husband and I know as to whether or not we will have funds to live on?
Thank-you for any input.

Hi estherj,

As far as I know, the court will limit the amount that the lenders can garnish from your bank account or pay check.

I recently lost my job and my mortgage is three months behind. I have been trying to short sale the property and it has been on the market for almost a year. I have had two offers. The bank didn't accept the first one because offer was too low. On the second offer, the buyer pulled out because the short sale process was taking too long and he wanted to move right away. I don't know what to do. I am planning on moving out of state and would like to know if a deed in lieu would be the best option. I live in michigan and wanted to know if the mortgage company will file a judgement against me if I explore a deed in leiu and the bank accepts it.