Advice of Rights on Residential Mortgage Foreclosure Michigan

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Thursday, 02 September 2010 18:25

Under recent legislation, Michigan has adopted provisions for preliminary notice to debtors when a residential mortgage is foreclosed.  The bank is required to give 14 prior days notice of available credit counseling services.  More importantly the bank provides notices that the owner has a right to consult an attorney and that the attorney (or other agent) can demand a face to face meeting with the bank.  This must occur.

Once the demand is made the foreclosure is set off for at least 90 days.  The parties are required to negotiate in good for an adjustment of the mortgage.

Most interestingly the act does not say what is to happen if an agreement can not be reached.  If the homeowner does not like the bank's position the homeowner can sue in court and ask for a "judicial foreclosure".  If the bank is unsure as to the status of the negotiations, the bank may elect to proceed to judicial foreclosure.  Again, the statute does not suggest that the circuit court can cram down a principal reduction, but the act clearly implies that is the intent.

Therefore we suggest two different points of view:

1.    If you are a homeowner, give serious consideration to the advice of rights that you receive.  If you elect to demand a face to face conference then be prepared to bring your tax returns, financial statements and other evidence showing that you need to have your payment reduced.  Set forth a basis for a court to later conclude that you made a good faith attempt to reduce your mortgage payment and that you could save the property if the mortgage payment was reduced.  If you employ an attorney, discuss all aspects of the case with the attorney, since you may later find yourself having to explain your position to a local circuit court judge.

2.    If you are a bank naturally you attempt to negotiate in good faith.  In this area the bank will want to consider its ultimate position if it had to take the property back as "REO" real estate and its analysis under FAS114.  If a preliminary analysis would lead the bank to conclude that the property is worth less than the loan after expenses of foreclosure and delay or loss of income, the bank may wish to negotiate a reduction of principal payment.

Conclusion:

Get it in writing.  The new statute provides that the renegotiation must be in writing.  From the bank stand point there should be a waiver of all causes of action by the home owner in consideration of a postponement of foreclosure, principal reduction, or other forbearance, from either parties point of view the agreement needs to be comprehensive, at arms length and sufficiently comprehensive to withstand any subsequent judicial challenge.

If you have questions about mortgage foreclosure in Michigan, contact our attorneys today at 734.475.8671.

 

 

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