Title Theory State

• Within a title theory state, the actual title to a property remains in a trust until the borrower makes full payment on the mortgage loan contract. A Michigan property title -- also known as a deed of trust or trust mortgage -- lists the lender and the borrower as owners. In cases where a borrower defaults on the mortgage, the deed of trust allows lenders to repossess, or foreclose, on the property provided the trust includes wording that gives the lender the power of sale. The power of sale allows lenders to auction off a property once a borrower defaults. If a mortgage contract does not contain the power of sale wording, lenders must go through the court system to repossess the property.
  
  

Non-Judicial Foreclosure Process

• As a title theory state, Michigan's primary method for foreclosure uses the non-judicial process when a borrower defaults on his mortgage. Once a borrower defaults, the lender issues a notice known as a foreclosure by advertisement. The foreclosure by advertisement notice begins the process of auctioning off a property, which allows lenders to recoup any unpaid monies on the mortgage loan. In cases where a power of sale clause doesn't appear in the mortgage contract, lenders must follow the judicial foreclosure process. The judicial foreclosure process requires lenders to file a lis pendens, or a complaint, with the court. In effect, the lis pendens becomes a public notice of a property foreclosure. Ultimately, the court must rule in favor of the lender in order for a foreclosure to take place.
  
  

Power of Sale Requirements

• The non-judicial foreclosure process used in Michigan places strict requirements on lenders in cases where a mortgage default occurs. Lenders must follow specific procedures that assign certain time lines for foreclosure notifications, which includes publishing a notice of sale in the newspaper and posting a foreclosure notice on the property. Foreclosure notices must contain all pertinent information regarding the borrower, the mortgage company, the default amount as well as a legal description of the property. Michigan law does not require lenders to notify borrowers of default; however, lenders must adhere to any conditions listed in the mortgage contract regarding borrower notifications.
  
  

Redemption Period

• The state Michigan allows for a redemption period after a property enters the foreclosure process in cases where a mortgage default occurs. Redemption periods give borrowers a chance to reclaim a property by paying lenders the monies owed along with any associated costs. By law, the lender cannot take ownership of the property until the redemption period expires. The length of the redemption period varies based on the terms of the mortgage contract. Redemption periods can run anywhere from 30 days to 1 year depending on the amount owed on the property, the size of the property and whether or not the borrower abandoned the property.