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Michigan - state laws on deficiency

Sara mentioned in a previous post that Michigan is a deficiency judgment state. What does that mean?

Personally, I have been laid off and there are no jobs in MI. I am expecting an offer from another state. Renting my current home is not an option. I have a primary loan and a 2nd mortgage with the same lender. We have made all of our payments and plan to call the lender when I have the offer.

Thanks!
(and don't move to MI)

bearboysj's picture
bearboysj | Joined: October 25, 2008 09:57 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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.

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

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

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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 sherrif’s 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.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Since you are out of state, I would offer the bank a [url=http://www.mortgagefit.com/deed-lieu.html]deed in lieu of foreclosure[/url]. 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.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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?

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jerry's picture
jerry | Joined: October 17, 2005 03:24 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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?

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

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

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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.

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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.

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome chinad,

[url=http://www.mortgagefit.com/deed-lieu.html]Deed in lieu of foreclosure[/url] can be a good option to [url=http://www.mortgagefit.com/foreclosure/17ways-avoid.html]avoid foreclosure[/url]. If the lender accepts your deed in lieu of foreclosure, then you won't be liable for the deficient amount resulting from the sale of the property. He will forgive the dues. Depending upon your state laws, you won't have to pay taxes on the forgiven amount as well.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

1. My home is not selling.
2. I do not have enough money to pay my mortage.
3. I have just enough money to buy a very cheap house.
4. I also own a building that cannot be sold due to a poor real estate market.

My Question: Will they place a lien on new house and buildig?

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Tricia!

Welcome to forums!

I've given my suggestions in regards to your query at:
http://www.mortgagefit.com/problems/foreclosure-purchasehome.html#163915

Take a look at it. Hope it helps you.

Sussane

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

does a 1099 MEAN THE BANK FOREGIVES THE EXTRA AMONT OWED IN A SHORT SALE

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi sue!

Welcome to forums!

If you receive a 1099c form from your lender, it will mean that your balance dues have been forgiven by the lender.

Feel free to ask if you've further queries.

Sussane

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I signed an agreement with lending company, Green Tree, giving them title to my manufactured home when I lost my job. this was before I was behind on payments. the agreement stated that this would stop them from further attempts to collect from me. 5 years later, they are contacting me demanding I pay them the difference on what I owed and what they sold the home for. The agreement I signed was notarized and sent to them. Can they do this? I also had a clause in my purchase contract allowing for someone else to assume the mortgage. I had a purchaser but the Lending company refused to accept them stating that they don't do this any more. Was that legal on their part. I'm retired, living on Social Security and in poor health and I don't need this happening at this time of my life.

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi RitaB,

After a foreclosure, the lender can come after you for the deficient balance resulting from the sale of the property. There is nothing illegal in it. You may contact a real estate attorney and take his opinion in this matter.

Thanks

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I recently filed bankruptcy Feb '11 and had to foreclose on my second home. I don't know what's going to happen in regards to my second home as to how it will effect my wife and I. The bank on my second home stated they do not sue for deficiency but they will issue a 1099c. My wife and I do not want to owe the IRS

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sara's picture
sara | Joined: July 5, 2006 03:16 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi ricco,

As the lender will forgive the deficient balance, you will be liable for paying taxes to the IRS for the same. The IRS will consider the forgiven debt as your income. You can set up a payment plan with the IRS and pay them off.

Take care.

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randolu's picture
randolu | Joined: March 28, 2011 04:17 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

I thought our Real Estate Agent told us that they must file within 4 years in the state of Michigan. If it has been 5 years I would think that they are to late.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

If residing in Michigan, how much time does the lender have to go after the borrower for the deficiency? I had read somewhere that lenders have a max of 4 years for the state of MI. Can someone please verify that? I cannot find another source to confirm this information. Thanks.

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi SCS,

Michigan has a redemption period of 1 year. If you're unable to redeem the property within that period of time, then the lender will have 6 years of time to ask you for the deficient balance. All promissory notes in Michigan has a SOL of 6 years.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

If my home was abanded due to foreclosure what happens next. Can I buy another home for cash and have my name on it without the bank putting a lien on my new home. Plan on going bankruptcy after I buy my home but don't know what to do. I am unemployed in Michigan and go from job to job. Flagstar bank does not want to work with nobody. Life is so stressfull!

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

You can buy another home for cash, but your prior lender can place a lien on that property if he gets a judgment against you to recover the deficient balance. And if you go for bankruptcy, the trustee will have the rights to sell off the new free and clear home in order to pay off your other creditors.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

"In Michigan 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 sherrif’s 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." Trying to find out if this is true, don't want to live in fear for the next four years.
Thanks

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

As far as I can understand, what is mentioned above is true in respect to Michigan. Though you were unable to save your home, thankfully, you're not liable for pay any deficient balance.

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